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Iowa

Protect valuable property rights in the event of construction defects and the resulting damage to your condominium or townhome project.

An Overview of the Survivor’s Guide to Construction Defect Resolution in Iowa

EVALUATING CONSTRUCTION QUALITY

The Association’s Responsibilities

Typically, an association has the duty to maintain common areas even though the association may have no ownership interest in the common areas. Sometimes associations have the duty to maintain portions of a project, such as building exteriors, even where the area in question is not part of the common area.

Even if the association has no duty to maintain a damaged part of the project, such as unit interiors, the association may be liable for the cost of repairing that damage if it was caused by a defect in an area the association does have a duty to maintain.

Failure to take legal action against a developer within the time provided by law, where legal action should have been taken, may result in personal liability of association directors responsible for the association’s failure to take timely action.

Top 10 Construction Defects

Among the defects often found in residential projects are poor flashing, window defects, inadequate  ventilation of crawl spaces and attics, improperly sloped roofs, decks and balconies, improperly installed plumbing systems, excessive sound transmission between units, poorly installed waterproofing, and inadequate soil preparation.

Why Construction Defects Are So Common

In many situations, the builder’s objective is to complete the project as quickly as possible and to “pass inspection” by the building department. If the defect isn’t caught by the building inspector, it often doesn’t get corrected. And building inspectors may miss or ignore a lot of defects.  That is why the fact that construction may have been approved by the City or County does not ensure that the construction is Code compliant or done in a good and workmanlike manner.

Why There is a Need for Professional Evaluation of a Project’s Construction

Frequently, defects remain hidden inside a building envelope for many years.  Often, the result is that by the time they are discovered, substantial damage already has occurred and the rights of an association and its unit owners may already have expired.

To avoid this unfortunate situation, a board should hire a qualified professional to evaluate the construction quality of the project while the enforcement period for any statutory or other rights is still in effect.

The evaluation should be made by an engineer or architect or by a contractor with specialized training and experience in evaluating construction quality.  This person should be selected by the Board and not by the developer.  And the evaluation should include a look inside the building envelope to see how well the building envelope system is doing in keeping water out and in getting water that has entered into the building envelope to exit the building.

A Board should not make its decision on who to hire to perform the evaluation based solely on cost.  Most qualified professionals charge about the same hourly rate.  A lower bid may mean lower qualifications or a less thorough investigation and an insufficiently detailed report of findings.

ASSOCIATION RIGHTS

Express Warranties

Express warranties are warranties voluntarily and specifically provided by a developer in its sales agreements. They are of some value, but their value is often limited. The reason is that express warranties are typically of limited duration, and the unit owner or association is usually required to take formal action to enforce the warranty before the warranty runs out.  Often the warranty period is only one year.  But serious defects may remain hidden and not become obvious until several years after unit sales.  Thus, by the time an association Board realizes there is a problem, express warranty rights may already have run out.

Implied warranty

The Iowa Supreme Court has created an implied warranty that a newly constructed dwelling has been built in a good and workmanlike manner.  It is unclear whether a developer can eliminate that implied warranty by disclaiming any implied warranty.  Nor is it clear what conditions the court will impose on the developer before it will enforce the disclaimer.

A claimant must give the developer notice of the warranty breach within a reasonable time after the breach was or should have been discovered.  The claimant must also take legal action within five years after the defect and its cause was or should have been discovered.  In no event may an action be brought more than fifteen years after completion of the dwelling.

Consumer Frauds Act

If a developer sold a dwelling on or after July 1, 2009, and the developer failed to disclose defects the developer should have known about, an association and/or its unit owners may have a claim for violating the Consumer Frauds  Act.  However, an action based on a violation of the Act must be filed within two years after discovery of the violation.  If the claimant prevails in an action under the Act, the claimant is entitled to an attorney fee award.

Association Standing to Sue

No specific statute expressly authorizes an association to sue for construction defects.  However, in many states an association is allowed to sue for defects in common areas it has a duty to maintain.  Thus, if association standing to sue for common area defects or defects in other components the association has the duty to maintain is challenged by the developer, an Iowa court is likely to reject that challenge.  However, that outcome cannot be guaranteed.  So an association seeking to take legal action on behalf of unit owners would be well advised to obtain unit owner assignments of their right to sue.

DISPUTE RESOLUTION PROCESS

Mediation

Most lawsuits are resolved by mediation sometime after suit is filed. In a mediation, the mediator acts as a “facilitator”, but has no authority to decide anything.  However, a skillful mediator is usually successful in persuading the parties to come to an agreement that resolves the case.

What If the Developer Goes Out of Business?

Developer entities frequently go out of business. However, their insurers rarely do so. If the developer had liability insurance, any insurance coverage for the developer’s liability would still apply even though the developer may no longer be in business.

What If the Developer Goes Bankrupt?

A developer’s bankruptcy will impact how a claim against that developer will be resolved.  However, a developer’s bankruptcy usually does not affect an insurer’s liability arising out of a claim covered by that insurer’s policy naming the developer as an insured.

Claims Against a Dissolved Declarant.

If a developer is an LLC and dissolves,  an action must be filed against that developer before the statute of limitations runs out, or within five years after publication of a notice of dissolution, whichever is earlier.  If a developer is a corporation, the deadline is three years after publication of a notice of dissolution, or the applicable statute of limitations, whichever is earlier.

CONCLUSION

An association and its unit owners may have strong implied warranty claims based on defects in construction.  However, there are time limits within which those rights must be exercised by taking appropriate legal action.  If an association has the substantial construction defect claim but is unable to afford hiring legal counsel on an hourly basis, the association should consider hiring counsel who is willing to represent it on a contingent fee basis.

  • Contact Us

    Levin Law Group LLP

    Richard Levin
    Director of Client Relations
    rlevin@levinlawgroupllp.com

    5550 Wild Rose Lane, Suite 400
    West Glen Town Center
    West Des Moines, Iowa 50266
    Phone: 877-786-9990
    Fax: 877-676-5406