For this weeks Guest Post Friday post here at Musings, we welcome back John Tarley. John is the managing partner for the firm and leads the firm’s business and litigation practices. A large part of the firm’s practice involves the representation of homeowners’ associations. In his spare time, John teaches as an adjunct at the William & Mary Law School, serves as the 9th Judicial Circuit’s representative on the Virginia State Bar Council where he serves as Vice-Chair of the Budget and Finance Committee, is a faculty member for the Virginia State Bar’s Professionalism Course, and is the editor of the Tarley Robinson blog and the @TarleyRobinson twitter account.
When either a commercial or residential condominium development nears the time of automatic transition, the developer and the owners face many challenges. The developer, or “Declarant,” must transfer responsibility for management, enforcement of the Condominium Instruments, and finances, amongst other responsibilities, to the new owner-controlled Board of Directors. With the pending departure of the Declarant, owners can become concerned about possible construction defects with the common elements. This blog post discusses the process and responsibilities under the statutory warranties provided by the Virginia Condominium Act.
What is the warranty?
Va. Code § 55-79.79 requires the Declarant to warrant “all of the common elements for two years.” There are two issues to analyze within that requirement: a) does the alleged defect relate to a “unit” or to the “common elements;” and b) is the alleged defect a “structural defect,” which is a defect that reduces the stability or safety of the structure below accepted standards or restricts the normal intended use of all of part of the structure.
Who can enforce the warranty on common elements?
By statute, and confirmed by the Virginia Supreme Court, only the unit owners association can bring a claim for alleged structural defects in the common elements and limited common elements. In Kuznicki v. Mason, unit owners sued other unit owners for alleged defects in the limited common elements. The Court stated clearly, “Standing to institute claims or actions concerning common elements, including limited common elements, is restricted to condominium unit owners’ associations.”
However, a Fairfax Circuit Court decision, Millisor v. Anchor Point Ventures, LLC, opened the door for unit owners to bring a claim for structural defects in the common elements, in certain circumstances. If the condominium is still under Declarant control, the Court opined that a unit owner could bring a Va. Code § 55-79.79 claim for damages to common elements.
Is the problem a “structural defect?”
“Structural Defects” are defined broadly. However, the identification of a structural defect is crucial as the Supreme Court noted in Luria v. Board of Directors of Westbriar Condominium Unit Owners Association. The case involved a different issue, but the Court stated that problems that could be remedied by “repairs such as caulking and flashing” were more like “punch list items,” rather than “structural defects” as defined in Va. Code § 55-79.79.
Requirement of written notice of structural defects
Assuming that a problem qualifies as a “structural defect,” the statute requires the Declarant to be given an opportunity to correct the alleged structural defects. A written notice must be sent to the Declarant at least six months prior to filing a lawsuit. Because a lawsuit cannot be filed within this six-month period, the notice acts to toll the statute of limitations period for a period not to exceed 6 months.
Time period for filing suit
Finally, if all attempts at negotiation have failed, it may be necessary for the condominium association to file suit. Any action for this breach of warranty must be commenced within five years after the commencement date of the warranty. The commencement date of the warranty requires an analysis of the condominium instruments, and the transfer dates for units that have been purchased.
Although the process seems pretty straightforward, timing adds a level of stress and uncertainty. The Declarant is winding down construction, unit owners are beginning the important task of transitioning to their management responsibilities, time deadlines are approaching, and concerns about being “stuck” with huge repair bills loom in the background. It is crucial for unit owners and developers to engage early with attorneys experienced in common interest communities (also referred to as HOAs or condo associations) for advice and guidance on these issues.