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California Supreme Court Rules on Liability for Design Flaws in Condominium Building Project

Legal News GavelCalifornia real estate development involves numerous potential risks, ranging from lost money on an investment to legal liability for injuries caused by hazards or defects. Determining who is liable for an injury often requires an extensive examination of ownership and any improvements made to the property. The owner of a piece of real estate might be liable for an injury caused by a hazard on their property under the theory of premises liability. Injuries—both personal injuries and financial losses—could also be a result of negligence by someone hired to work on the property. In 2014, the California Supreme Court ruled on a dispute between a homeowners association (HOA) for a San Francisco condominium project and two architectural firms involved in designing the project. The plaintiff alleged, on behalf of all of the homeowners, that negligent architectural designs led to defects that “made the condominium units uninhabitable and unsafe during certain periods due to high temperatures.” Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP, 59 Cal.4th 568, 572 (2014). The court ruled in the plaintiff HOA’s favor.

One of the fastest growing forms of residential property is the “common-interest development,” in which separately owned residential units share common areas such as elevator lobbies, fitness centers, and pools. Developers create HOAs as private nonprofit organizations to handle the management and maintenance of common areas. An HOA has a legal duty, under premises liability law, to maintain common areas that are reasonably free of defects or hazards, and to warn residents, their guests, and others of known hazards on the premises. The Beacon case, in contrast, was about duties owed to an HOA with regard to defects on the property.

The plaintiff in Beacon was the HOA created for a 595-unit residential condominium project in San Francisco. The developer hired the defendants to “provide architectural and engineering services.” Beacon, 59 Cal.4th at 571. The defendants were aware “that the finished construction would be sold as condominiums.” Id. The plaintiff’s lawsuit alleged negligent design, which caused “several defects, including extensive water infiltration, inadequate fire separations, structural cracks, and other safety hazards.” Id. at 572. The allegation of uninhabitability during summer months arose from “solar heat gain” caused by a lack of ventilation and substandard windows. Id.

The court ruled for the plaintiff and found the defendants liable for negligent design. Even though no privity of contract existed between the parties—the architects performed their services before the HOA existed and took no direct part in the actual construction of the project—the court found the defendants liable to the plaintiff based on a common-law duty of care and the California Right-to-Repair Act (RRA).

Since the defendants knew that the project would eventually be sold as individual condominium units, they could be held “liable to the intended beneficiary” of the project. Id. at 574, citing Biakanja v. Irving, 49 Cal. 2d 647 (1958). The RRA allows certain residential property owners to file suit for “damages arising out of, or related to deficiencies in the…design…[of] original construction intended to be sold as an individual dwelling unit.” Cal. Civ. Code § 896. This includes “design professionals” as well as contractors, and the court found that this term applies to architects. Beacon at 577, citing Cal. Civ. Code §§ 936, 937.

For more than 40 years, business and construction litigation lawyer James G. Schwartz has advocated on behalf of Bay Area businesses and property owners in transactional matters and litigation. Contact us today online or at (925) 463-1073 to schedule a free and confidential consultation to see how our team can assist you.

More Blog Posts:

Liability of California Homeowners Associations for Injuries to Residents and Others, Pleasanton Business & Commercial Law Blog, January 8, 2018

California HOAs Deal with Water Shortages and State Environmental Regulations, Pleasanton Business & Commercial Law Blog, June 30, 2016

Homeowner Association Law Update – Recent Court Decision and Changes to Davis-Stirling Common Interest Development Act, Pleasanton Business & Commercial Law Blog, November 27, 2013