In recent years, we have been going to more association meetings where boards are telling their owners about recently discovered construction defects. The defects are often hidden for years, whether it be water slowly saturating the studs and sheathing in the walls and then eventually manifesting in the form of wet drywall in a unit, issues arising because of inadequate or insufficient installation of pavement or concrete, hidden drainage issues, or other latent issues. Associations never have enough money on hand to cover those hidden defects, so boards have made the difficult decision to levy special assessments or take out loans for over a million dollars, sometimes for millions of dollars, to cover those unexpected repairs.

     When substantial construction defects are discovered, boards and owners always ask the same questions. They ask, why do we have to pay for this? Shouldn’t the developer/contractor have to pay for these repairs? Unfortunately, the answer is often that developers/contractors do not have to pay to repair their defective work because generally all construction-related claims are barred 10 years from the date of “substantial completion of an improvement to real property” under Ohio’s statute of repose (ORC 2305.131). As it relates to community associations, “substantial completion” generally means the date the declaration was recorded for each phase or the date the declaration was recorded that added the common element at issue to the community. The statute of repose is very harsh, as it bars all construction-related claims even if the issues are not known or reasonably discovered until after the 10-year period lapses. Claims could be barred sooner if the statute of limitations for a construction-related claim expires.

     For new communities, developers control the association for a portion of that 10-year period, that period of time counts toward the 10-year statute of repose, and, in our experience, developers will not do proper investigations or repair defects that become known to them during their control of the association. For condominiums, developers can control the association for up to 3 years (for 1-phase condominiums) and 5 years for expandable condominiums (meaning, multiphase condominiums). See ORC 5311.08(D)(1). Condominium developers sometimes hold on to control of the association for more the 3- or 5-year time limit under the mistaken belief that they do not have to turn over control until they sell condominium ownership interests to which 75% of the undivided interests in the common elements appertain, which gives owner-controlled associations even less time to become aware of hidden defects.

     For HOAs, developer control of the association is not subject to the rigid time limits like those in the Ohio Condominium Act. The Planned Community Act generally refers to the declaration to determine how long the developer can control the association. The only limit is set forth in ORC 5312.03(C)(1), which provides, “[t]he period of declarant control shall terminate not later than the time at which all of the lots have been transferred to owners.” Accordingly, developers may be able to, and sometimes do, hold on to control of HOAs for more than 10 years. HOAs generally have fewer common elements to maintain than condominium associations, so the impact of construction defects in HOAs is often not as severe as those that affect condominiums.

     With so many association clients affected by hidden and substantial construction defects and so many owners having to unfairly pay to repair those defects, we have constantly asked ourselves how can this issue be avoided? Here is the answer we have come up with: if your community is less than 10 years old or if your community has phases that are less than 10 years old (again, based on when the declaration is recorded for each phase), then we recommend that you do the following even if you are not aware of any construction-related issues occurring in your community: (1) retain an engineer or architect with experience in performing forensic investigations; (2) have the engineer or architect perform a visual inspection of the common elements to identify areas for limited, but targeted, destructive testing, of each phase that is less than 10 years old; (3) retain a contractor to work alongside of the engineer or architect for the destructive testing; and (4) invite the developer/contractors to attend and observe the destructive testing to preserve any claims related to issues that may be observed during the testing.

     If your community is over 10 years old, we recommend engaging an engineer or architect and performing targeted destructive testing if you have a pattern, or suspected pattern, of defects. Although the association may not have recourse against the developer/contractor after 10 years, associations have a duty to repair and restore the common elements. In condominiums, associations must promptly repair and restore the common elements under R.C. 5311.14(A). In HOAs, associations must reasonably repair and maintain the common elements under R.C. 5312.08(A). Further, the longer that issues persist, the worse the resulting damage will be and, in turn, the more expensive it will be to make the necessary repairs.

     In short, identifying and addressing construction defects is a difficult, expensive, and time-consuming process that can lead to devastating results if not done timely or appropriately. If you have any questions related to construction defects or how to perform a proper investigation, do not hesitate to contact one of our attorneys at Williams & Strohm, LLC (614) 228-0207.