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Why would a developer build a cooperative instead of a condominium building?

A developer probably would not make such a decision. Most cooperatives are not developed from the ground up. Nearly all cooperatives in California were created by converting apartments or mobile home rental parks to cooperatives.

Developers convert apartments and mobile home rental parks to cooperatives instead of condominiums because the properties don't meet the building standards for condominiums, but notwithstanding, it is still profitable for the developer to convert to a cooperative.

All things being equal, condominiums are generally worth 20% to 40% more than a cooperative and are much easier to sell. In addition, more attractive loans (interest rates and terms) are available for condominiums.

Sometimes, it is possible to convert a cooperative to a condominium. While such opportunities are fairly rare, it is almost always financially beneficial for the members of a cooperative to convert if it is possible. Top


One of the members of our homeowner association in Palmdale refuses to pay her monthly assessments because the developer has not made repairs to the interior of her individual home. The developer is still in control of the association. What should the board do?

The board must enforce the established delinquency policy and should assume no responsibility in assisting the owner in her dispute with the developer. An owner's dispute with the developer is not an effective defense to the payment of assessments. Top


Our homeowner association has serious water intrusion problems in the common areas. We have attempted several times to obtain a set of plans from the developer without success. What should we do?

Sections 19850 and 19851 of the California Health and Safety Code require that every city or county maintain a copy of the plans for every common interest development during the life of the building(s) for which the building department has issued a permit.

These plans and specifications are open for inspection and may be copied, with some limitations.

Your association board should also contact an attorney who specializes in construction defects as soon as possible. The "statutes of limitation" extinguish the legal rights of the association after the passage of time, as set forth in the various statutes. Top


As a condominium developer, I would like to point out that the present law in California discourages the building of condominiums and other developments with homeowner associations. The primary reason is that homeowner associations have up to ten years to find construction defects and sue developers, architects, engineers and contractors.

Consequently, building homes that are included in homeowner associations has become very expensive due to the high cost of insurance and expensive litigation which ultimately is passed on to the consumer.

As much as 50% of any financial settlement goes to trial attorneys and so called "experts" who find defects. Attorneys who specialize in this field often solicit business from home owner associations by telling these groups that they will make money at no cost to the homeowners.

For small developers the current system is very unjust because we are unable to get insurance except at very high costs. To me it is quite obvious that these costs are being passed onto the consumer.

In the contracting field it is customary for the contractor to be responsible for defects for twelve months after completion. Most states in the United States have such a law, except California. The existing law (10 years) was passed as a result of strong lobbying by trial lawyers in California who spent hundred of thousands of dollars to get the law passed.

What is your response?

First let me point out that the ten years within which homeowner associations can sue a developer applies only to hidden defects. These are defects that a person could not reasonably discover such as the failure of a developer to insert fire blocks inside walls. Defects that are reasonably discoverable have a limitation of three or four years depending on the claim.

Lawyers specializing in protecting consumers would never advise homeowner associations that they can make money suing developers. Even if an association prevails in court on every issue, the association must pay expert fees, legal fees and other costs which are rarely fully recoverable. The fact is that defective construction costs homeowners money. Homeowners don't make money when their building is defective.

You claim that the system is unfair and against developers. This is not true. In fact, the Building Industry Association strongly supported the recently enacted California Civil Code section 6000. This law is the most pro developer law ever approved by the legislature in the history of the state. It makes suing a developer for construction defects more difficult, more time consuming and more expensive.

You state that the cost of litigation is increasing the cost of housing which is the fault of trial lawyers. The fact is, if developers built buildings without material defects or voluntarily repaired defects, there would be no need for litigation. Defects are the cause of litigation, not lawyers.

When someone dies in a fire because fire blocks were left out of buildings or buildings slide down a slope because of defective soil preparation, a trial lawyer is the only person an association of homeowners can count on to protect their rights. Top

Permission to reprint our HOA Questions and Answers is granted provided Michael T. Chulak & Associates (MTCLaw.com) is credited as the source.


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