It’s that moment that no homeowner wants to have. You just returned from vacation and were in the midst of stowing the suitcases under the house in your crawlspace. As you were exiting the crawlspace, something caught your eye—a wet spot on the concrete slab floor. It wasn’t a puddle, but it was clearly moisture.

Hoping for something minor, you began to poke around. During your search, you discovered that a portion of insulation in between the floor boards was soaked. While you removed what you thought was the problem, you saw a water leak dripping down a vertical pipe in between your walls.

Unfortunately, every homeowner will have to deal with a situation like this at one time or another. Fortunately, we have insurance for these very situations, however, knowing what to do and how to handle this situation will make a world of difference to both your mental health and to your wallet.


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Having construction work or renovations done on your home is certainly an exciting, but undoubtedly stressful time. In fact, the process from selecting a suitable (and experienced) contractor to completion of the project can be downright daunting at times. As a homeowner myself, who coincidentally is going through this very process as we speak, I know the difficulties of sifting through countless potential contractors, negotiating prices, and coordinating schedules and the like. As daunting as it may seem, there are certain steps a homeowner can take at the outset that will mitigate potential pitfalls during construction, ensure your project is constructed properly, mitigate construction disputes, and alleviate unnecessary stress.

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The November 16, 2016 issue of the Wall Street Journal ran an article about Celebration, Florida, which is the master-planned community built by The Walt Disney Company in 1996. The title of the article summarized the state of affairs in Celebration as follows: “There Is Little Celebration in the Town Disney Built: Mold, leaks, rot are hurting the 1990s utopia; ‘they’re harassing my team.’” My initial thought was that if this can happen to a community built by the world’s most famous mouse, it is little wonder that a large portion of my practice involves representing community associations in lawsuits against developers and architects for construction and design deficiencies.

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Stark & Stark Shareholders Randy Sawyer and Andrew Podolski have successfully settled the Lakeside at North Haledon Condominium construction defect case for $7.4 Million.

The case involved serious design and construction defect claims which caused damage to common elements from water infiltration through and around stucco, manufactured stone veneer (MSV) and other exterior cladding systems, plus roofs, windows and balconies. This is an impressive result because the case involved challenging insurance coverage issues related to policy exclusions for synthetic stucco trim and the lack of proof of consequential damage to sheathing and framing.


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Stark & Stark Shareholders Thomas J. Pryor and Donald B. Brenner have successfully settled the Bay View Condominium construction defect case for $3.1M. Shareholder Randy Sawyer, along with Associates Gene Markin, John Prisco, and Tara Speer were all part of the team effort that achieved this settlement.

The case involved design and construction defect claims which caused damage to common elements from water infiltration through and around brick and other exterior cladding systems, plus roofs, windows and a plaza over a parking garage. Stark & Stark is particularly proud of this result because the case involved challenging insurance coverage issues related to the lack of proof of consequential damage to sheathing and framing.


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For a newer community association board that has recently undergone transition from developer to unit owner control, there is significant temptation to accept a quick, lump sum settlement from the developer to “settle” any remaining punch list items. New board members are often in active and frequent communication with the developer, including any developer-appointed (non-unit owner) representatives who are still sitting on the board. In addition, developers are often willing to work with associations up to and during transition to resolve any outstanding construction issues. With a seemingly cooperative developer on the one hand, and the immense costs posed by litigation on the other, boards frequently adopt a “take what we can get” approach to resolving outstanding issues with a developer rather than digging in and using the threat of litigation to leverage a better settlement. At best, this approach will most likely result in the association leaving money on the table; at worst, it will cost unit owners tens of thousands in future special assessments.

When a developer sells 75% of the units in a condominium or home owner association development, majority control of the association board is turned over to unit owners from the developer (who, up until this point, had its own representatives controlling the board). During this process, known as Transition, a developer’s primary concern is to pave the way to selling off the remaining units, obtain releases of its performance bonds and, most importantly, get the association to sign a litigation release that will prevent the association from ever suing the developer in the future. In order to get a litigation release, the developer will often offer a seemingly large sum of money. Often, the amount the developer offers actually exceeds the cost to fix any open punch list items that have yet to be completed. This seemingly generous offer by the developer is designed to tempt the board into quickly releasing the developer from any future claims.


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Stark & Stark’s nationally recognized Construction Litigation group has scored some recent victories, advocating for community association and condo community clients while negotiating two major settlements in complex construction defect litigation claims for nearly $10 Million.

Most recently, the group skillfully negotiated a settlement on behalf of a Condominium Association in excess of $5.75 Million for a complex construction defect case against more than 45 defendants involving damages from water infiltration to 188 condominium units spread over 26 buildings. Stark & Stark Shareholder Andrew Podolski took the case from inception, developed and implemented the strategy, and otherwise put the case together for a jury trial. Trial was scheduled to begin on May 23, and was expected to run more than 2 months. The ramp up of trial prep activity and the looming trial date ultimately brought the defendants to the table for rigorous settlement negotiations. Drew was ably assisted in the litigation of the case by Associate John Prisco, who took some of the depositions, helped plow through a mountain of discovery materials, and did outstanding work on numerous motions and assisted with trial preparation.


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Community associations are often given common elements in transition that incur damage from design and/or construction deficiencies. Associations typically have limited funds. Even those with ample financial resources are usually governed by Boards whose members are keenly aware of the fact that the Association’s funds are trust monies that need to be carefully managed and

You hire an architect to prepare plans for the construction of a new home and a developer to execute those plans and physically construct the home. The plans require the testing of the underlying soil to confirm that the bearing capacity of the soil is adequate to support the weight of the structure. The builder, despite being contractually obligated to build the home in accordance with the plans and specifications, does not test the soil.

As a result, after the structure is erected, you notice substantial cracking and differential settlement throughout the house. The builder assures you this is just “a normal part of the settling process.” You later find out that a substantial portion of the house was constructed on soil with a bearing capacity that is considerably less than what is required, and the house is slowly sliding down a hill and uninhabitable. You bring suit against the developer for breach of contract. Can you also claim a violation of the Consumer Fraud Act and seek triple damages and attorneys’ fees?


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Generally speaking, a contractor’s commercial general liability (“CGL”) policy is designed to cover personal injury or property damage caused by an accident resulting from the contractor’s work. The policy is not meant to be a guarantee of the contractor’s work and therefore does not cover damages to the work itself – instead, these are known as “business risk” damages. The concept that is inherent in every agreement for the performance of construction work is the risk that the work will be done improperly.

By selecting a particular contractor, the owner has to make a business judgment as to the qualifications and reliability of the selected contractor, and therefore assumes the risk that the work will be done incorrectly. If the work is done improperly and needs to be corrected, the contractor, and ultimately the owner, bears the burden of repairing or fixing that faulty work. The contractor’s insurance is not a performance bond guaranteeing the work; instead, the commercial general liability insurance is designed to cover any unexpected damages that arise from the contractor’s work, such as damage to other property caused by the faulty work.

Consider a roofer hired to install a new roof on a building. Once completed, the roof is the roofing contractor’s “work.” If the roofer installs the wrong type of shingles, but does everything else correctly, the only “damage” to speak of would be to the roof shingles themselves, i.e. the roofer’s work. The cost of replacing the shingles is therefore that “business risk” not covered by insurance.


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