Many Condo Boards and Their Members Likely Face Legal Liability; Board Members Have a Fiduciary Legal Duty to Take Reasonable Care
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Condo Boards Face Legal Liability
WASHINGTON, D.C. (July 6, 2021) - As part of the aftermath of the collapse of the Champlain Towers South building, and the subsequent discovery of possible defects and dangers in other buildings, condo boards - and even their individual members - may face law suits even if their buildings never actually tumble down, warns public interest law professor John Banzhaf. Already, the Champlain Towers South condo association has been placed into receivership.
Professor Banzhaf is famous for developing winning civil law suits - including over $12 million from McDonald's over its french fries, and against Spiro Agnew to recover the money he took in bribes - and has been called "a Driving Force Behind the Lawsuits That Have Cost Tobacco Companies Billions of Dollars," "a King of Class Action Lawsuits," "The Law Professor Who Masterminded Litigation Against the Tobacco Industry," and an "Entrepreneur of Litigation, [and] a Trial Lawyer's Trial Lawyer."
While it is too early to say definitively what caused the Surfside, Florida, building to suddenly collapse, it does seem clear that lack of maintenance was at least one of the causes; and the law recognizes that a given accident may have several causes; all of which can then be held liable as a legal cause of the harm claimed, explains the law professor.
Thus, any failure to maintain a similar building would almost certainly create reasonable fear about a second tragedy, as the Miami Herald recently documented regarding several other Florida buildings. For example:
- CRESTVIEW TOWERS CONDOMINIUM - The building was closed, and its more than 390 residents were evacuated after an audit and building inspection report outlined unsafe structural and electrical conditions.
- MAISON GRANDE CONDOMINIUM - A worried resident has take photographs of damages and problems, similar to those taken of the collapsed building, and a structural engineer who reviewed the pictures said he could see cracks in the concrete, rusted rebar, and water penetration.
- STANLEY AXELROD TOWERS - This older building was due for its 40-year recertification in 2016 but it was never done. In the meantime, it has been issued three citations, including an Unsafe Structure citation in 2015.
- ISOLA BRICKELL KEY CONDOMINIUMS - Its residents have reported that their basement floods, there are cracks in the concrete, and in the metal supports now holding up the ceiling of the garage.
Possible Fall In The Value Of Condominium Units
This reasonable fear - not only of a total building collapse, but also of being struck by falling debris, damage to cars parked in an underground garage, miscellaneous water damage, or just being trapped for a time inside a unit - might cause those in some apartments, including rental tenants, to move out.
It could also slash the resale and/or rental value of condominium units, and lead to repairs and assessments for owners; assessments which are much higher than they would have been if repairs had been made promptly once signs of serious problems were first noticed.
Home owner association [HOA] members have a fiduciary legal duty, as well as a duty of care, to the individual owners, whether that owner occupies an apartment, rents it for revenue, or simply holds it for appreciation.
To meet the duty of care, HOA board members must be sure that the decisions they make are informed, and that they acted in a prudent and reasonable manner; basically by exercising sound business judgment.
Where they lack the requisite skill and knowledge to make informed judgements - e.g., when and to what extent repairs and maintenance may be necessary, the degree of danger various problems may present, etc. - they may, of course, rely on the opinions of independent experts.
But it also then follows that they cannot simply ignore warnings from such independent experts and substitute their own judgment, especially in situations in which a recommended action is expensive and might not seem to be pressing, at least to a lay person with no construction or building knowledge and experience, explains Banzhaf.
Worries about such law suits related to different buildings, especially other older buildings in Florida, are very real, and are already having significant impacts.
For example, lawyers in the area report a growing number of calls from concerned condo owners, including those who live in their units, and those who rent them out and are worried more about the financial consequences.
As another example, insurance companies have reportedly sent letters to owners of condominiums 40 years and older in South Florida, asking for proof that their buildings have passed all inspections.
In other words, says Banzhaf, the insurers are nervously seeking re-certification of the buildings.
If satisfactory proof is not provided, the insurer reportedly can cancel the policy with a 45-day notice, or choose not to renew the insurance policy at all.
Banzhaf notes that Miami-Dade and Broward counties are the only Florida counties which require aging high-rise buildings to be reinspected after they reach 40 years of age.
That leaves many building - especially those subject to the same environmental conditions (e.g., salt water, soil problems, etc.) - uninspected, says Banzhaf, since about half of all Florida residents live in a property with a condominium or home owners association, and there are more than 50,000 community associations in the state.
Insurance May Not Be Cover Losses
Even if policies remain in effect, losses may not be covered by insurance in certain situations, especially if a board knew of a problem but failed to act on it promptly.
While many HOA officers and directors are covered by $1-million insurance policies, this may not be enough in some circumstances, so plaintiffs could seek to collect from the directors' personal assets, particularly if the owners are wealthy, says the professor.
At the very least, he notes that insurance rates related to buildings in Florida, and perhaps also elsewhere, are almost certainly going to increase substantially as result of this building collapse.
This is a major problem in Florida because, as one expert put it, "the No. 1 budget issue for every condo is their insurance."
So, while the focus remains on those who died in the tragedy, and on preventing any further lose of life in other buildings, some attention must also be paid to the legal and financial consequences of this building collapse, the professor maintains.
