How the Developer Divided and Conquered the Association and Saved 1.5 Million Dollars
By: Robert M. Meisner
Having been a consultant/attorney for condominium associations for over 25 years, it never ceases to amaze me how successful a developer can be to divide and conquer a condominium association in terms of undermining the association’s ability to successfully prosecute a claim against the developer. While we have been generally successful over the years in pursuing developers for construction defects and deficiencies, the difficulty encountered by an association in successfully prosecuting this type of lawsuit is often magnified by the fact that the developer utilizes the expenses if litigation, including legal fees and architectural and engineering fees, to traumatize the co-owners through scare tactics and the like, to either throw out the board and its counsel or otherwise seek to thwart the pursuit of the claim against the developer thereby undermining the ability of the Association to successfully prosecute the case and/or reach a reasonable settlement.
Co-owners fail to recognize that the directors of their association have a fiduciary duty to operate in the best interests of the Association and not merely concern themselves with their short-term interests. On most occasions the members of the Association do not and cannot have the benefit of reviewing all of the facts and legal opinions, which the Board has available to it to make its decisions regarding developer litigation.
Greed, self-interest, shortsightedness, naivety and stupidity all combine in certain instances to create an atmosphere whereby the Board of Directors is under siege by its members if it even contemplates litigation. Even when litigation is started, the developer may try to prosecute this case by scare tactics, intimidation, threats and other efforts regarding money to divide and conquer the board and its consultants including its attorney.
Who ends up winning? Ultimately the developer. The association loses, the co-owners lose, and the rights of the association has to rightfully pursue a claim against the developer has been jeopardized, perhaps in the millions of dollars. Claims are successfully pursued in California – why not here?
Homeowners must be more enlightened about the long-range responsibilities of maintaining a condominium association. They should recognize from a standpoint of negotiating that the association must do so from a position of strength. The economic power of the association, which is represented by the individual co-owners combining to share the costs of litigation, should not be jeopardized by foolhardiness and shortsightedness. Developers must recognize that the Association has the staying power to pursue a just and righteous claim will be pursued. Fickleness and naivety must be supplanted by insight and proper planning. Associations and their members must be prepared for the onslaught of the developer and its surrogates. More communication with the co-owners is necessary. Only then will associations be able to successfully pursue developers for legitimate construction defects and deficiency claims.