Developer claims

What makes a claim against the developer different

The developer, often called the declarant in your governing documents, is the entity that built the community and typically controlled the association's board before turnover to owner control. A claim against the developer covers the same design and workmanship problems as any other construction defect, but it starts from a different position: the developer chose the original contractors, wrote the specifications, and often sat on the board itself while construction was happening.

Some states define this kind of claim broadly enough to fold the developer in with any other responsible party. Colorado's Common Interest Ownership Act treats a suit against the developer the same way it treats a suit against a contractor or design professional, all captured under the term "construction professional."

"[a construction defect action] means any civil action or arbitration proceeding for damages, indemnity, subrogation, or contribution brought against a construction professional to assert a claim."

Source: Colorado Revised Statutes, section 38-33.3-303.5, Colorado General Assembly, mirrored by FindLaw

Whether your state defines a construction defect action this broadly, and whether it treats a developer differently from a contractor at all, varies. Check your state's common interest ownership statute or ask your association's attorney.

The board's own conflict of interest

During the developer-control period, some or all of your directors may have been appointed by the developer itself. That creates an obvious tension: the same board that would decide whether to investigate or pursue a defect claim may include people the developer put there. The law resolves that tension in the association's favor, not the developer's.

"Developer-appointed board members are required to exercise the care required of fiduciaries of the unit owners" and "owe fiduciary duties to both the association and its members when acting in their official capacities."

Source: Owner Association Board Member Duties and Liabilities, Part 1, Colorado Lawyer, Colorado Bar Association

A director who was appointed by the developer does not get to vote in the developer's interest once a defect surfaces. Their fiduciary duty runs to the association and its members, full stop.

Before the board can sue

Filing a claim against the developer is not something a board can decide alone everywhere. In Colorado, the board cannot even institute a construction defect action against the developer until owners holding a majority of the association's votes have approved it, and the board must separately notify every unit owner and every construction professional it intends to sue.

"Before an executive board institutes a construction defect action, they must mail or deliver written notice of the anticipated commencement of the construction defect action to each unit owner at the owner's last-known address described in the association's records and to the last-known address of each construction professional against whom a construction defect action is proposed."

Source: What CCIOA Says About Construction Defect Actions, Colorado Division of Real Estate

The same Colorado statute also flags a consequence boards tend to overlook: until the defects are repaired or the claim is resolved, sellers of units in the community might owe buyers a duty to disclose the known, unrepaired defects, and an open claim can depress what every unit in the association is worth in the meantime. That is one more reason to move deliberately rather than sitting on a known problem.

Whether a member vote is required, what notice must go to owners and to the developer, and what a seller must disclose while a claim is open all vary by state. Confirm the rule in your own state before the board takes any public step toward a developer claim.