Attack of the HOAs: Architects Succumbed

GodzillaHOA. It’s not a Native American word. Nor is it the term sprinkled generously throughout certain gangster rap albums. It stands for Home Owners Association, or Howeowners Association if you leave out the “O” (but no one leaves out the “O”). And, there are a lot of them. By some estimates, there are over 310,000 HOAs in the United States, and over 9 million Californians live in developments with a HOA.

HOAs, which are also known as common interest developments (CIDs), are the legal entities which oversee certain residential communities after they are built by a developer. The role of a HOA is to manage the community, in particular, common areas jointly used by the homeowners (e.g., roadways, sidewalks, community parks, etc.), but their authority can extend to the homeowners’ use of their individual properties (e.g., exterior color schemes, landscaping requirements, limitations on additions and renovations, etc.) depending on the terms contained in the Covenants, Conditions and Restrictions (CC&Rs) recorded in the real property records for each property. HOAs, which are usually governed by a board composed of the homeowners, typically charge each homeowner a monthly fee which is used by the HOA for maintenance and improvement of the development.

In California, HOAs are subject to the Davis-Stirling Common Interest Development Act (Civil Code sections 1350 et seq.), and litigation involving HOAs suing developers, contractors and others for construction defects has become a cottage industry. In response, in 2002, the California State Legislature enacted what has commonly been referred to as SB 800 or the “Right to Repair Act” (Civil Code sections 895 et seq.), which is intended to provide for speedier resolution of construction defect claims in newly constructed residential housing.

Architects and other design professionals have, for the most part, not found themselves in the cross-hairs of HOA litigation. That is, until now. In Beacon Residential Community Association v. Skidmore Owings & Merrill LLP, Case No. A134542 (December 13, 2012), the California Court of Appeals for the First District, reversing a lower court’s finding that design professionals cannot be sued unless they exercised “control” in the construction process (i.e., “a role beyond that of providing design recommendations to the owner”), held that HOAs can sue design professionals for construction defects under SB 800 and under common law rules of negligence.

In Beacon, Skidmore, Owings & Merrill, LLP (“SOM”) and HKS, Inc. (“HKS”) provided architectural and engineering services, as well as construction administration and construction contract management services, for the Beacon Residential Condominiums in San Francisco, California. Beacon Residential Community Association (“BRCA”), the HOA for the development, sued SOM, HKS and others for construction defects. One of the defects claimed by BRCA was that SOM and HKS approved the substitution of less costly windows and improperly designed the units with inadequate ventilation, which resulted in “solar heat gain” which made the units “uninhabitable, unhealthy, and unsafe during certain periods due to excessively high temperatures.” SOM and HKS challenged BRCA’s complaint on the ground that because they had no “control” in the construction process that they owed no duty of care to BRCA, and, therefore, could not be liable to the HOA. The trial court agreed and entered judgment in favor of SOM and HKS, stating:

The allegations do not show that [SOM and HKS] went beyond the typical role of the architect, which is to make recommendations to the owner. Even if [SOM and HKS] initiated the substitutions, changes, and other elements of design that [BRCA] alleges to be the cause of serious defects, so long as the final decision rested with the owner, there is no duty by [SOM and HKS] to the future condominium owners, in the Court’s view.

The Court of Appeals, however, did not hold that same view. “The issue, as we view it, is not whether a design professional owes a duty of care to these purchasers, but the scope of that duty,” explained the Court. “An architect who plans and supervises construction work . . . is under a duty to exercise ordinary care in the course thereof for the protection of any person who foreseeable and with reasonable certainty may be injured by his failure to do so . . .” The Court, then analyzing various factors considered by courts when determining whether a party can be liable for common law negligence, held that because SOM and HKS’ work was intended to ultimately benefit the homeowners; because it was foreseeable that their work would affect the homeowners; and, that, because as architects, they were in a better position to discern defects than the homeowners, that SOM and HKS could be held liable for common law negligence.

Furthermore, explained the Court, because SB 800 specifically provides that a “general contractor, subcontractor, material supplier individual product manufacturer or design professional, shall . . . be liable for” violations of the performance standards contained in SB 800, and because SB 800 specifically identifies elsewhere that design professionals are subject to the Right Repair Act, that “[t]he plain language of Senate Bill 800 provides that a design professional who ‘as a result of a negligent act or omission’ causes, in whole or in part, a violation of the standards set forth in [SB 800] may be liable to the ultimate purchasers for damages.”

Finally, and this hurts, the Court held that SOM and HKS could not avoid liability simply by language in its contract providing that “[a]rchitect is solely responsible to Owner [the developer] and not to such condominium associations or purchasers for performance of Architect’s obligations under this Agreement.” “While a duty of care arising from contract may perhaps be contractually limited,” explained the Court, “a duty of care imposed by law cannot simply be disclaimed.”

So, architects beware, or at least be aware.  Potential liability for the work you do may extend not just to the party you have an agreement with, but others as well.

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