Lawyers get rich, homeowners get screwed

Edgewater Isle North and South each filed a construction defects lawsuit: South in 1991, North in 1994. Each unit at Edgewater Isle North was required to pay an additional $125 a month to fund litigation (i.e., to pay lawyers). This expense was to last 24 months when the very nice board gave the owners a break on the last $125 each unit was to fork over. Merry Christmas. But let's do the math anyway.

 $125  per unit
x   224   units
$28,000 per month 

 $28,000  per month
x   23  months
$644,000 total

Edgewater Isle North homeowners shelled out well over one-half of one million dollars, and never received an accounting of it. Where did it go? (Are the lawyers driving new cars?)

After Edgewater Isle (North)'s construction defects lawsuit was settled in May 1998, remedial construction work took place from 2000 - 2001 on all buildings except for Building 18. That building was saved for the end, a big mistake as that's where the expensive problems were. The board of directors blew through the settlement funds, and homeowners were assessed A SECOND TIME to make up for a shortfall to complete the biggest problem.

The reconstruction was done by G B Group out of Gilroy, California.

 

 

Associations don't disclose this lawsuit to buyers

1925 Vista Cay during demolitionWith the recent number of on-the-market ("for sale") condos at Edgewater Isle, a question popped up: what happens when the Associations do not adequately disclose information to buyers?

In the 1990s, both Edgewater Isle South and North associations had construction defects litigation against the builders. California Civil Code §1375.1 (now §6100) provides how the associations are to provide information to owners regarding that litigation. That statute reads:

California Civil Code §6100

(a) As soon as is reasonably practicable after the association and the builder have entered into a settlement agreement or the matter has otherwise been resolved regarding alleged defects in the common areas, alleged defects in the separate interests that the association is obligated to maintain or repair, or alleged defects in the separate interests that arise out of, or are integrally related to, defects in the common areas or separate interests that the association is obligated to maintain or repair, where the defects giving rise to the dispute have not been corrected, the association shall, in writing, inform only the members of the association whose names appear on the records of the association that the matter has been resolved, by settlement agreement or other means, and disclose all of the following:

(1) A general description of the defects that the association reasonably believes, as of the date of the disclosure, will be corrected or replaced.

(2) A good faith estimate, as of the date of the disclosure, of when the association believes that the defects identified in paragraph (1) will be corrected or replaced. The association may state that the estimate may be modified.

(3) The status of the claims for defects in the design or construction of the common interest development that were not identified in paragraph (1) whether expressed in a preliminary list of defects sent to each member of the association or otherwise claimed and disclosed to the members of the association.

(b) Nothing in this section shall preclude an association from amending the disclosures required pursuant to subdivision (a), and any amendments shall supersede any prior conflicting information disclosed to the members of the association and shall retain any privilege attached to the original disclosures.

(c) Disclosure of the information required pursuant to subdivision (a) or authorized by subdivision (b) shall not waive any privilege attached to the information. (d) For the purposes of the disclosures required pursuant to this section, the term "defects" shall be defined to include any damage resulting from defects.

Edgewater Isle North homeowners never received such a statement. But you better believe the association will be sure to give you the disclosure saying you can't have a potted plant on the balcony. Maybe someone can tell us where it says there is a time limit on this disclosure. The form that is completed by the associations' property management company (which the seller pays a fee directly to the management company for the completion of that form) looks like this (below) and does not mention a time limit:

PRDS request for HOA documents

Why is the management company not providing a statement regarding past litigation involving the developers of these associations? It is specifically called out, and the management companies know or should know of such things.

Each of the associations listed a long list of construction defects in their lawsuits. Only some of the items stated in the lawsuits were fixed during each association's reconstruction. The remaining unfixed problems tend to be swept away as "the owner's problem" as the years go by. Except homeowners may be better off to tell the association that the present-day damage is actually a result of the undisclosed defects they alleged in their own lawsuit.

Sellers and buyers are both ill-served by this shoddy disclosure practice.

Buyers may want to search court records for information on such cases.

 

10 Years On.....

Over 10 years ago, Edgewater Isle Homeowners Association (North) went through construction defect litigation and the resulting reconstruction after that.

staircase to Building 18 at Edgewater Isle

 

 


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