News
Denver condo-complex HOA wins judgment for defects.The 40 Madison Homeowners Association in Cherry Creek has been awarded a $4 million judgment in Denver District Court to pay for construction defects at the 27-unit condominium complex. The judgment, which will be paid by Madison Garden LLC, J&N Management and Len Goldberg, addresses construction defects involving water damage that resulted from improperly installed windows, roofs, decks and stucco. Several of the decks collapsed because of water intrusion and structural problems. The homeowners association was represented by Chris Rhody of the McKenzie, Rhody & Hearn law firm. CAI Law ReporterFebruary 2009Federal Law and Legislation: The Fair Housing Act does not protect against religious persecution when it concerns a neutral law applied across the board, even if it disrupts religious beliefs.
Recently, McKenzie Rhody & Hearn (MRH) won an important ruling in the Colorado Supreme CourtRecently, McKenzie Rhody & Hearn (MRH) won an important ruling in the Colorado Supreme Court that protects the rights of homeowners associations and individual homeowners to pursue claims for construction defects. 1. The HOA did not have “standing” (also known as the legal right) to bring claims for defects in the individual units because it did not own that property; and 2. The HOA’s claims for negligence against the contractors should be dismissed under a legal doctrine called the “economic loss rule”, which requires certain claims to be based on breach of contract. The Colorado Common Interest Ownership Act (CCIOA) Provides HOAs Standing To Bring Claims For Construciton Defects In Individual Units. Prior to Yacht Club II, defendants in construction defects cases argued that HOAs could not pursue claims for defects in individual units. This created potentially fatal problems for associations trying to recover for defects in basement slabs, foundations, windows and other components defined as individual interests in the HOA’s governing documents. Now that the Supreme Court has upheld HOAs’ rights to pursue these types of claims on behalf of their members, HOAs have the ability to protect their members’ legal rights for claims of defective construction in every aspect of their communities. Colorado Homeowners Associations Have Direct Claims For Negligence Against All Developers And Contractors Who Constructed Their Projects. The economic loss rule requires a plaintiff to file its claims based on contract damages, instead of negligence damages, when a contract is present in the relationship between the parties. Applying such a limit to residential construction defect claims could seriously impair an HOA’s ability to recover the full amount of damages necessary to make repairs to its community, potentially necessitating special assessments by the HOA. Recognizing these inequities, the Court in Yacht Club II stated that, “the economic loss rule does not apply to negligent construction claims against homebuilders because homebuilders have an independent duty of care to act without negligence in the construction of homes.” As a result of this holding, HOAs and individual homeowners are not subject to the restrictions of the economic loss rule and can therefore fully pursue their construction defect claims. Both of the rulings coming out of Yacht Club II will go a long way in protecting the legal rights of HOAs and individual homeowners in construction defect claims relating to their homes and communities.
McKenzie Rhody & Hearn, LLC Announce Hiring of Jeff HigginsDirector of Client Services — January 5, 2009Denver, CO – The law firm of McKenzie Rhody & Hearn have announced the hiring of Jeff Higgins as Director of Client Services. In his position, Higgins will be responsible for client development and community outreach. Higgins has worked in the Homeowners Association (HOA) industry, for the past six years. He has held leadership positions with both the Rocky Mountain Chapter of Community Associations Institute (CAI) and the Southern Colorado Chapter for many years. He is currently the President of the Southern Colorado Chapter and is on the Board of Directors of the Rocky Mountain Chapter. “Providing our clients with superior service is of the utmost importance to us,” said Cass McKenzie, partner, McKenzie Rhody & Hearn. “Jeff’s experience in the industry will enable him to make an immediate impact and help us better serve our valued clients as we continue to grow our business.”
Excerpt from “Builders Pay the Price”Rocky Mountain News 7-29-2008
When Sue Small paid about $175,000 for her townhome in the Central Park development in Aurora in 2003, she was thrilled. "I was looking at a lot of single- family homes, but I kept going back and decided I should just buy it," she recalled. "It has a lovely layout. It is very warm and homey." But her dream soon turned into a nightmare. The front porch started to settle and sag, roof columns were separating and her front window leaked so much it was like a waterfall inside her home during a heavy rain. Improper drainage was causing flooding in many of the basements in the 74-unit complex. "I let out a shriek," she said. "I literally jumped up from my desk. Now we will have the money to get this fixed right." In March, a jury had awarded the association slightly more than $5 million, but earlier this month the settlement was amended to $8 million, said Rhody, of McKenzie Rhody & Hearn. Industry officials contend they had trouble hiring qualified subcontractors, which is playing a big role in recent cases alleging shoddy construction. Rhody said that his victory against Central Park Town homes LLC and general contractor Fairfield Construction Co. sends a message to builders. "The case shows that Colorado juries take construction defects very seriously," Rhody said. "It also means builders can expect similar judgments if they fail to follow the standard of care during the construction process." Said Rob Nanfelt, of the Colorado Association of Home Builders, "I think that was probably a pretty fair assessment of what had been going on."
HOAs Claim Victory in Arbitration Case—The Colorado Supreme Court last month quietly let stand a Court of Appeals decision that homeowner associations cannot be forced into arbitration by builders and general contractors. It's a huge victory for homeowner associations in Colorado, said Christopher Rhody, the attorney representing the Eagle Ridge Condominium Association in a lawsuit over construction defects. There are an estimated 16,000 HOAs in Colorado, according to the Rocky Mountain chapter of the Community Associations Institute, an HOA trade group. "This is an important victory for homeowners and homeowner associations," said Rhody, a partner with the law firm McKenzie, Rhody & Hearn. "What it does is allow them to have their day in court." Rhody said Metropolitan Builders Inc., which constructed the 60-condominium project in the Grant Ranch subdivision in the southwest metro area, put binding arbitration language into the initial HOA bylaws before ground was broken. Those rules said any disputes between the builder and the HOA had to be resolved in binding arbitration. But in 2002, when the HOA believed the condominiums had a variety of construction defects, the association voted to do away with the binding arbitration language, Rhody said. The contractor, however, argued the bylaws couldn't be changed without its permission, Rhody said. "The association wanted to tell their story to a jury," Rhody said. "A jury of 12 is often a fairer form to hear their side than in front of a single arbitrator, who is usually chosen by the builder." In addition, he argued it is "inherently unfair for builders to shield themselves from liability for shoddy construction before the houses are even built." He said the Court of Appeals' decision, which the Supreme Court let stand, "holds home builders responsible for their actions." Alleged problems at Eagle Ridge were related to soil movement and water intrusion, Rhody said. Similar cases have resulted in settlements of more than $1 million, he said. An executive at Metropolitan Homes couldn't be reached, and its law firm didn't return calls. Roger Reinhardt, executive director of the Home Builders Association of Metropolitan Denver, on Monday said that while he isn't familiar with the facts of the Eagle Ridge case, in general he thinks arbitration is a better method for solving disputes than going to trial. "This flies in the face of what responsible business people do," Reinhardt said. "Developers and builders try to provide for equitable relief for all sides. Binding arbitration is a logical, reasonable, economical and expeditious way of resolving disputes." Rhody said that while he's won every battle so far, the case isn't over. "We're back in district court where it all started," he said. rebchookj@RockyMountainNews.com or 303-892-5207
Homeowners' ability to sue subcontractors stirs debate— July 13, 2005A Colorado Supreme Court decision provides a major victory to homeowners by allowing them to sue subcontractors for construction defects caused by negligence, said Denver attorney Cass McKenzie, who won the case. But Ryan Williams, one of the many attorneys on the other side, said the ruling will "have a pretty profound negative impact" on the home-building industry. He said the decision will ultimately drive some subcontractors out of business and increase insurance costs for framers, plumbers, electricians, carpenters and other subcontractors. Those costs will be passed on to buyers, said Wiliams, a lawyer at Messner & Reeves, which represented one of the subcontractors in the case, A.C. Excavating. The subcontractors were sued by the Yacht Club II Homeowners Association, which charged that the subcontractors were responsible for a host of building defects. In the decision, handed down on June 26, the court ruled that subcontractors, as well as builders, "owe homeowners a duty of care, independent of any contractual obligations, to act without negligence in the construction of homes." This is important because builders don't actually build homes, said McKenzie, principal of McKenzie Rhody & Hearn, a law firm that specializes in residential defect litigation. Instead, builders subcontract the work to framers, carpenters, electricians, plumbers and others. Homeowners typically not only don't have contracts with the subcontractors, but they played no role in negotiating the contract between the builder and the subcontractors, McKenzie said. McKenzie said with this ruling, the court rejected what is known as the "economic loss rule," which generally limits homeowners' remedies to those specified in limited warranties or contracts between the builders and the subcontractors. Those contracts typically provide limited remedies to homeowners, he said. The court also ruled that homeowner associations can bring negligence suits on behalf of the homeowners, McKenzie said. "So if you have 100 condo units in a project, you don't need to file 100 individual suits, or file a class-action lawsuit," he said, because the association can file one suit on behalf of all of the owners. Dennis Polk, a partner with Holley, Albertson & Polk, in Golden, who has represented builders and homeowners in construction defect cases, said he doesn't think the decision will have a huge impact. "On a scale of one to 10, with 10 being revolutionary and one being 'so what?' I'd give it a four. But it is good lawyering," he said. Polk said the decision won't mean more lawsuits will be filed. But he said the three or four firms in the Denver area that specialize in construction defect litigation, will "jump on this as a model" and start going after the subcontractors, in addition to builders. However, he said that usually when a builder loses a construction defect case, its insurance company already goes after subcontractors. By John Rebchook, Rocky Mountain News July 13, 2005
About McKenzie Rhody & Hearn The partners at McKenzie Rhody & Hearn have over 50 years of combined experience in the area of construction defect litigation. That experience includes representing hundreds of homeowners associations and thousands of individual homeowners affected by defects in their townhomes, condominiums, lofts, high-rises and single-family homes. Their clients are located throughout Colorado, including Fort Collins, the metro Denver area, Colorado Springs and the mountain communities. McKenzie Rhody & Hearn is experienced in every type of construction defect claim. The firm is also a leader in precedent-setting legal decisions that have significantly increased homeowners’ rights. Through their successes in the Colorado Supreme Court and Court of Appeals, they have obtained important victories protecting homeowners’ rights to their day in court and allowing them to fully prosecute their construction defect claims. They also actively defend homeowners’ rights through their presence in the state legislature. For more information on McKenzie Rhody & Hearn, please visit www.mrhllc.com. |