Levin and Stein | Attorneys at Law

The Oregon Condominium Act Enforcing Statutory Warranties Of Quality
by Richard H. Levin, Attorney

Defective construction can have a serious impact on a condominium project and a serious financial impact on the owners of units in that project. Of particular concern is water intrusion, although there are various other problems that can also have an important impact on unit owners.

Because the Pacific Northwest is an area which is subject to substantial annual rainfall, if a project is not constructed in a manner that avoids water intrusion, there can be serious damage not only to the unit interiors but also to structural components within the exterior building envelope as a result of exposure to water intrusion over time.

The most obvious effect of water intrusion over a sustained period of time is staining of unit interior surfaces, typically drywall, and the eventual deterioration of such surfaces.

However, the full extent of damage resulting from water intrusion goes well beyond damage to drywall surfaces within unit interiors. Extensive water intrusion will almost inevitably result in the deterioration of wood framing within a building envelope as a result of dryrot. When this occurs, the structural integrity of a building is compromised, and walls, ceilings and floors can start to sag, and in extreme cases, can pose a threat of physical collapse.

Also, extensive water intrusion almost inevitably leads to the growth of mold and fungus. In addition to being foul smelling, and unsightly, there is evidence that some forms of mold and fungus can create a threat to the health of occupants of buildings that have a serious mold or fungus problem, especially if the spores of such mold or fungus become airborne. The extent of potential impact of such conditions on unit occupants depends on a variety of factors, including the age and general health of the person exposed to the spores, the state of that person’s immune system, and the sensitivity of the person in question to exposure to allergy-producing spores.

Since water intrusion and other consequences of defective construction can have a serious impact on a condominium Association and on the owners of units within the Association, defective construction cannot be ignored. Thus, an Association must take appropriate action to ensure that a Declarant either corrects defects in construction or is required to compensate the Association for the cost of such corrective work. And since the Board of Directors is normally charged with the responsibility for acting on behalf of the Association, dealing with construction defects usually becomes the responsibility of the Association’s Board of Directors. It is therefore crucial that an Association’s board take prompt action to determine whether there are significant defects in the construction of the condominium and that the Board take timely and appropriate action against a Declarant in the event that defective construction is discovered.

In discharging its responsibilities to the Association and its unit owners, a Board needs to take the appropriate steps to ensure that it understands an Association’s rights in the event of defective construction, to ensure that it becomes aware of defects while the Association still has rights against the Declarant if defects are discovered, and to ensure that the Association has protected those rights by appropriate action.

Thus, while it is important that an Association become aware of its rights, it is also necessary that an Association take effective action to preserve those rights. It is easy for a Board to incorrectly assume that a particular condition is the result of inadequate maintenance, or that even if it is a defect, that it can be easily and inexpensively corrected. Therefore, when a Board becomes aware of a problem, steps should be taken to determine if it is a maintenance issue or involves a deficiency in the original construction. And if it is a deficiency in construction, the Board should take steps to determine what needs to be done to correct the defect and what it will cost to do so.

Also, a Board should not assume that if there are significant defects, that these defects will be obvious, or easily apparent to unit owners or to the Board. It is quite common for defective construction to remain hidden for a period of years, with ongoing deterioration within the building envelope that does not become known to unit occupants or to the Association’s board until long after an Association’s rights have been lost. So a Board should initiate a thorough investigation of the construction quality of the condominium, and in particular, of conditions that could result in hidden water intrusion problems, while the Association still has warranty rights under the Oregon Condominium Act to compel Declarant to correct defects or to compensate the Association for the cost of such correction.

Under the Oregon Condominium Act, in the case of new construction, a Declarant is required by statute to warrant that all components of the newly constructed units and common elements have been properly constructed. Therefore, defects in any of the components of the units or common elements are a breach of this statutory warranty under ORS 100.185.

An Association has the legal right to take action against the Declarant for breach of this statutory warranty as a result of defects in any of the components of the units or common elements. However, in order to preserve the right to take such legal action, written notice must be delivered to Declarant specifying defects in units and limited use common elements, such as unit balconies and decks, within one year after possession of the unit in question has been delivered to the first buyer.

With respect to defects in common areas, in order to preserve its rights, an Association must give written notice to the Declarant specifying defects in the common areas within three years. In a single phase project this means within three years from the sale of the first unit in the project. For multi-phase projects, this means, as to common area defects in the first phase, within three years from sale of the first unit in that phase, and as to later phases, within three years from the initial conveyance of title of the first unit sold, or completion of the construction of the defective common element, whichever is later.

Assuming the Association has protected its rights by giving the Declarant the appropriate written notice of defects within the time provided by the Oregon Condominium Act, the Association must also take legal action against the Declarant within two years after the period within which such notice was required to be given. Otherwise, it loses its ability to enforce its rights under the Oregon Condominium Act for breach of the Act’s statutory warranty against defective construction.

To summarize, as its first order of business following transfer of Association control from Declarant to unit owners, an Association’s Board should commission a thorough study of at least the building envelope, by an architect, engineer or contractor that has experience in the investigation of the construction quality of multi-family residential housing. Home inspection services typically do not have the expertise to perform such an in-depth investigation, and that is why we recommend that an architect or engineer, or a contractor with substantial experience in the renovation of defectively constructed projects be retained.

Following this investigation, if significant defects are disclosed, prompt written notice of these defects should be delivered to Declarant.

If these defects are not corrected to the satisfaction of the Association’s consultants, legal action should be filed before the statute of limitations applicable to an action for breach of the statutory warranty of quality has expired.

Mr. Levin is the senior partner in Levin & Stein, a law firm which has represented dozens of condominium associations in the Pacific Northwest in the resolution of construction defect claims against Declarants. He can be reached at (503) 224-3763 or Rlevin@condo.com