Construction Defects

What counts as a defect, and why the label matters

Industry practice defines a construction defect broadly: a deficiency in a building's design or construction that causes a failure, shortens its service life, or leaves it performing below standard.

"Any deficiency in the design or construction of a building, structure, or development that leads to a failure, a reduction in service life, or substandard performance."

Source: Construction Defect Investigations: A Glossary for Attorneys, Knott Laboratory, LLC

California is the only state in this evidence base that writes a detailed statutory list of what counts, inside its Right to Repair Act. Most states have no equivalent list, so check whether your state defines a defect by statute or leaves it to case law.

The first question to ask about any specific defect is whether it is a design defect or a workmanship defect, because the answer usually points to a different responsible party and a different insurance policy.

"A design error means the drawings themselves were wrong, a beam undersized, a connection detail that never accounted for real loading." "A workmanship error means the drawings were fine, but whoever built it didn't follow them, whether from lack of training, time pressure, or just cutting a corner."

Source: Common Construction Defects, Prema Consulting Group LLC

A design defect usually implicates the architect or engineer's professional liability. A workmanship defect usually implicates the contractor's insurance, most of which specifically excludes the contractor's own bad work. See Design defect vs workmanship defect and Insurance considerations.

The sequence your bylaws cannot override

Where a state has enacted a right to repair or notice of claim statute, that statute sets a mandatory sequence before an association may sue: written notice to the builder or contractor, then a window for inspection, and sometimes a mandated repair offer.

This evidence base confirmed four different regimes, California, Nevada, Colorado, and Texas, each with its own notice period and its own consequence for skipping the step. Ask counsel whether your state has an equivalent statute before doing anything that could alter a defect's physical condition. See Preserving evidence.

Layered on top of that sequence is a deadline that catches boards by surprise. A statute of repose is not the same thing as a statute of limitations.

"A statute of repose bars the bringing of a suit after a set period of time, regardless of whether an injury occurred, or a claim has accrued."

Source: Understanding the Difference Between Statutes of Limitations and Statutes of Repose, Matthiesen, Wickert & Lehrer, S.C.

A statute of limitations can be tolled by delayed discovery of the problem. A statute of repose cannot: it runs from a fixed event, typically substantial completion or issuance of a certificate of occupancy, and bars the claim on that schedule no matter when the defect was found. Confirmed periods in this evidence base range from roughly 2 to 15 years depending on the state and the claim type. Confirm your own state's period with counsel rather than assuming a number.

What boards get wrong

Three assumptions cause the most damage, because they lead a board to act before checking.

"The clock starts when we find the problem." Not for a statute of repose, as above. It matters most on a warranty claim, where the underlying warranty period and the repose period can run on different clocks. See Warranty claims.

"Our master policy will pay to fix it." Usually not.

"The HOA's own master insurance policy may cover some defect-related damage, but many policies exclude construction defects or include significant limitations."

Source: Construction Defect Claims and Insurance Defense: What Community Associations Need to Know, KSN Law Firm

Property policies, including an association's master policy, commonly exclude the cost of correcting the defective construction itself and pay only for damage the defect later causes. See Insurance considerations.

"A big settlement means the building gets fixed." Not necessarily. Litigation costs can leave an association with far less than the identified repair cost, and a settlement check is not the same thing as a repaired building. See Settlement considerations and Repair-before-litigation decisions.