This is part 3 of Randy Sawyer's 16 Part series on UCIOA. You can read Parts 1 and 2 here.
Section 87, subsection (c)
Subsection (c) of Section 87 of UCIOA gives the Sponsor the right to conduct inspections and destructive testing in connection with any claimed construction defect in the community. The language of this subsection, quoted in full below, has a number of glaring problems:
§87(c) - Upon receipt of the declarant's reply, the association shall, to the extent practicable, make available for inspection and testing by declarant or its agents, all common areas, interiors of applicable individual units and the documents identified in the notice. All inspections and testing, including testing that may cause physical damage to the subject property, shall be at declarant's sole cost and expense, shall be performed during the business week unless the association and declarant agree otherwise, and shall be completed within 60 days from the date of the declarant's reply. The declarant may conduct destructive testing if the association has conducted prior destructive testing related to the defects specified in the association's notice or the parties mutually agree to destructive testing. "Destructive testing" shall mean any act causing substantial physical change in the condition of the premises which would necessitate a repair to restore the premises to the condition that existed prior to the testing. The testing shall be performed to determine the existence, type, extent, or cause of a defect in the design or construction of the development. Acts of repair or maintenance by the association shall not constitute destructive testing. Upon completion of any testing, declarant shall restore the property to the condition that existed immediately prior to the testing.
Problem #1 – The language of subsection (c) is vague - “the association shall, to the extent practicable, make available for inspection and testing by declarant or its agents, all common areas, interiors of applicable individual units and the documents identified in the notice.”
This portion of the provision is sure to cause significant litigation as to its meaning. What exactly does the phrase “to the extent practicable” mean? An Association, despite making every possible effort to allow the developer to inspect those parts of the Association’s property that are the subject of its claims, could find itself being dragged into Court by the Developer for allegedly not making the property available “to the extent practicable.” This could result in costs to the Association that will waste valuable resources.
Problem #2 – Subsection (c) potentially allows the destruction of evidence - “The declarant may conduct destructive testing if the association has conducted prior destructive testing related to the defects specified in the association's notice or the parties mutually agree to destructive testing.”
This language discusses “destructive testing.” Subsection (c), however, completely ignores the effects, if any, of the doctrine of spoliation of evidence. The doctrine of spoliation of evidence generally provides that a party seeking to assert claims against another party cannot destroy or alter the evidence supporting the claim before giving all potentially responsible parties an opportunity to inspect the evidence in order to defend themselves against the claims. Here, the developer is given permission to conduct destructive testing, however there is no provision requiring the developer to place the subcontractors, manufacturers and design professionals it used to build the project on notice of the testing. At this stage, the developer would know the identities of those parties and the Association, more likely than not, would not have that information. Under these procedures, the Association runs the risk of a defense being asserted in later litigation by these parties who will argue that the developer destroyed evidence when it conducted invasive testing, but did not place them on notice so that they could preserve evidence in advance of that testing to defend their interests.
Another major problem arising from the “destructive testing” allowed by the statute is that there is no requirement that the developer place its insurance carrier on notice of the testing activities. In fact, there is no requirement anywhere in the statute that the developer place its insurance carrier on notice of the Association’s claims at all. The same holds true of the developer’s subcontractors’, manufacturers’ or design professionals’ insurance carriers - there is no requirement that the developer place them on notice of any claims or testing either. The developer will have likely been named as an additional insured on some of these parties’ insurance policies. The developer, therefore, will know who the applicable insurance carriers are for the project. If these carriers are not given proper notice, they will likely later disclaim coverage under their policy language, arguing that the developer and the named insureds, such as the developer’s subcontractors, violated the notice requirements of the policy, which typically require that the insured put the carrier on notice of any known claims immediately or within a short time period such as 90 days.
Problem #3 – More vague language - “Upon completion of any testing, declarant shall restore the property to the condition that existed immediately prior to the testing.”
This language is sure to result in significant litigation. Anyone in the construction defect litigation field will admit, and in fact common sense dictates, that once an existing condition on a condominium structure is disturbed, be it the roof, the windows, the siding, etc., it is impossible to restore that part of the structure “to the condition that existed immediately prior to the testing.” This language does nothing more than give the unit owners in a condominium who are unhappy with the appearance of repairs to test cuts and other invasive testing that is necessary for litigation purposes a weapon to pester the Association with demands and even lawsuits over whether the Association failed to ensure that the developer properly repaired invasive testing “to the condition that existed immediately prior to the testing.”
Problem #4 - The Association has no control over repairs by the developer. The language of Subsection (c) of Section 87 provides that the developer must “repair” any invasive testing it conducts. However, the statute gives no control whatsoever to the Association as to what those repairs should be, whether those repairs are sufficient or, once performed, whether the repairs were adequate. The statute provides the Association with no avenue of redress in the event that the developer’s repair is poorly done, or for that matter not done at all.
Problem #5 – More vague language - “Acts of repair or maintenance by the association shall not constitute destructive testing.”
This language of subsection (c) to the extent it talks about “acts of repair or maintenance by the association” is undefined and unclear. What acts would constitute repair or maintenance under this language? What if repairs were necessary to a roof in a condominium and the Association, to ensure the maintenance was done properly, decided to have an expert present to observe the repairs? Does that convert the repairs to destructive testing? What if the expert happens to observe something during the repair that informs the Association of a claim against the Sponsor for the first time. Is the evidence not usable? It is clear that this language will also engender disputes and considerable litigation to flesh out its meaning, litigation that will result in considerable financial burdens to community associations.