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Caveat Emptor — a Latin phrase that simply means “Let the Buyer Beware.”
In most situations, this is a reasonable standard by which we live.
However, there are times when the buyer doesn’t possess the knowledge to
properly determine whether he or she is getting a fair shake. And a fair
shake is all most people are looking for when buying a new home. Isn’t
it reasonable to assume that you’re going to get what you pay for?
Most
people buying a condominium in a newly built or recently converted older
building (formerly an apartment building or loft) have a reasonable
expectation that their new home will be defect-free. Single family home
buyers usually hire an engineer or building inspector to ensure that
their house does not have unknown structural and other defects that the
untrained eye can’t see until it’s too late. Prospective home-owners of
condominiums and the Board as a fiduciary of the association should
exercise the same due diligence.
What kind of defects might be lurking out there? What kinds of defective
situations can a community association run into? A case in point — An
empty-nest couple in their fifties finally buys their dream home in a
large, recently built townhome development. The developer has just
completed construction and has “turned over” control of the association
to the newly elected Board of Directors. Their home looks beautiful.
However, the developer failed to use a primer when painting the wood
trim around the windows, garage, fascia, and doors. After only two
years, the association finds itself repainting the homes far sooner than
anyone ever thought due to paint peeling, and our once happy couple is
now facing a 0 special assessment including the replacement of some
rotted wood trim boards. What was thought to be trouble-free living
suddenly becomes nearly a full-time job for the Board of Directors;
appeasing homeowners, interviewing contractors and attempting to get the
developer to correct this defect common to many of the homes.
Just a few more examples to watch out for: inadequate attic ventilation
resulting in a shorter roof life than normal, lack of proper caulking,
improper installation of exterior wall flashing, faulty mechanical
systems, structural defects, and improper application of materials. What
can community association boards do to protect their association from
unknown construction defects when association control turns over from
the developer to the initial homeowner board? Home-owner boards are
increasingly hiring engineering firms to conduct what is known as a
“transition study.”
A Physical Exam of the Association Community association boards
are fiduciaries of the association and, as such, are responsible for the
maintaining association property and financial well being of the
association. A transition study conducted shortly after developer
turnover gives the commonly owned property a clean bill of health or
identifies defects in design, materials or workmanship. The transition
study is designed to independently evaluate the design, methods and
materials of construction observed in the common elements. It is an
objective, independent analysis that accurately identifies a building’s
condition based on a non-invasive, non-destructive, visual inspection.
The advantage to homeowners is comfort in knowing their home conforms to
construction industry standards, and was built as designed. If there are
problems, the study enables the association to seek repairs or
retribution from the developer before too many years pass and the
developer is nowhere to be found.
The benefit to board members is that they’ll meet their fiduciary
responsibility. Any claims of mismanagement by present or future
homeowners are dispelled because the Board exercised sound business
judgment and planned responsibly with independent expert advice.
What’s in the Transition Study Report? The transition study
should include:
• A detailed, narrative report documenting the nature of the problem in
each defective common element segregated as either a design or
construction defect;
• A complete inventory of all defective common elements subject to
repair or replacement conveniently listed as separate identifiable
items;
• Repair or replacement costs of property components as a result of
these defects;
• A determination, if necessary, of repair or replacement costs for each
defective common element and when those costs will be incurred; and
• Recommended timing of repairs or replacements of the defective common
elements.
In sum, the transition study provides the board with an inventory of
defective common elements and the cost to repair or replace as a result
of their current condition. In other words, a punch list of items in
need of repair and their cost.
The transition study helps the association homeowners meet their
objective — to live in a community association and have the same
expectations that any home buyer has, a home and association that
conforms to construction industry standards whose common elements will
require repair and replacement at a time one should reasonably expect.
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