By Deborah Goonan, Independent American Communities
Owners of relatively new homes in Daybreak Townhome 1 Owners Association (South Jordan, Utah) have recently learned it is going to cost more than $60,000 per home to repair extensive structural damage caused by water infiltration. Although the townhouses are less than a decade old, homeowners report a long list of problems with leaky windows and roofs, damaged siding, and lack of insulation.
The news comes as a shock to many homeowners, who are reportedly concerned that assessment increases will make their homes unaffordable.
The HOA has filed a lawsuit against Holmes Homes and Hamlet Homes, but the Association cannot wait for the outcome of that litigation before they begin making repairs.
HOA in Daybreak files lawsuit against homebuilders
By Ashley Moser | Posted Mar 21st, 2017 @ 11:48pm
SOUTH JORDAN — Leaky roofs, leaky windows and damage to insulation: just some of the problems homeowners in a Daybreak neighborhood are dealing with. Now the HOA has decided to sue the builders of the nearly 10-year-old homes.
Kori and Mason Emerson were among the first to move into their Daybreak neighborhood back in 2009.
“It felt like a neighborhood. And there’s a gazillion kids, which is great too,” Kori Emerson said.
Six years after moving in, the couple started to notice some problems with their three-bedroom townhouse off of Topview Road.
“Roofs were starting to leak. There was a lack of insulation,” Kori Emerson said. “Even the windows were not sealed correctly.”
“[The siding] is falling apart down here,” Mason Emerson said, “and ours is light compared to others.”
The Emersons went to their HOA with the complaints and found they were not alone.
The Daybreak Townhome 1 Owners Association did individual assessments and found issues with construction of the townhomes and attached homes. At a community meeting at Eastlake Elementary School Tuesday, board members told residents the cost to repair damage to all 389 units would be nearly $23 million.
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Shoddy construction and poor workmanship are common complaints in new construction, and nationwide, there have been many recent reports of defects in homes less than 10 years old, particularly in condominium and townhouse communities.
When faced with construction defects, homeowners and condominium associations and individual homeowners, often face stressful challenges. The parties responsible for damages – developers, construction companies, architecture and design professionals – may vigorously fight to avoid liability for the cost of repairs and damage to property and personal belongings.
In recent years, there has been a trend of builders requiring – in sales contracts and Declarations (Covenants and Restrictions for the Association) – the exclusive use of Binding Arbitration to settle construction defect disputes.
In some states, the statute of limitations lasts only a few years beyond the turnover of control of the Association from the Developer to the homeowners. By the time the Association figures out something is wrong, it may be too late to file a legal complaint, and impossible to recover money damages to help pay for needed repairs.
Even if a case is brought to trail, with or without a jury, the legal process can last several years and cost hundreds of thousands of dollars in legal fees. And the HOA may never fully recover its legal costs or the amount needed to cover the costs of repair and reconstruction.
And when those defects occur in common property or in maintenance-provided associations, homeowners must inevitably pay higher HOA assessments.
But a new home that seems to be affordable at the time of original purchase can become a financial nightmare when an owner can no longer afford to pay higher and higher assessments.
What happens if an owner can no longer keep up with assessments?
Some owners attempt to sell their homes, but many have difficulty finding a willing buyer, once the buyer is made aware of construction defects. Lenders are reluctant to provide a mortgage for homes in association-governed communities involved in defect litigation. Cash buyers, if any can be found, are apt to make low-ball offers.
Homeowners who are unable to sell their properties, and who continue to fall behind on their assessments, face a significant risk of lien and foreclosure by their Associations to collect delinquent assessments. In addition to past due assessments, the HOA commonly adds late fees, interest, attorney fees, and collection costs that can add thousands of dollars to the debt owed.
To add insult to injury, the Association may even characterize non-paying homeowners as “deadbeats.”
Homes that sell at HOA foreclosure auctions tend to attract low bidders, especially if assessments are high and construction defect litigation is pending. The sale price of the home may not cover the balance due on a first mortgage, meaning that the owners are forced to move out of their home, but may continue to be responsible for the balance of their mortgage. Defaulting on a mortgage loan creates additional problems for homeowners, often leading to bank foreclosure or personal bankruptcy.
Even if an owner has paid cash for the home or no longer has a mortgage, the HOA can still foreclose to collect its assessments and fees. This situation is particularly troublesome for retirees living on a fixed income. An HOA foreclosure in this case wipes out much of the home’s equity, and, essentially, a homeowner’s life savings.
The entire nightmare is due to no fault of the homeowner, who could not ever imagine that their brand new dream home would leak like a sieve and rot from the outside in, and increasing their cost of ownership by thousands of dollars per year.