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Condominium Losses Become Lawyers' Gain

November 15, 1998

* "Threat of Suits Curbs Condo Construction" [Oct. 6] is very correct in that the present law in California discourages the building of condominiums and other projects with common areas and homeowner associations, the main reason being that these homeowner groups have as much as 10 years to find construction defects and sue developers, architects, engineers and contractors.

Therefore, building condominiums and townhouses has become very expensive, because of the high costs of insurance and expensive litigation, which ultimately are passed on to the consumer. The consumer gets little or nothing in return.

As much as 50% of any financial settlement goes to attorneys and so-called "experts" who find defects. An attorney who specializes in this field will often solicit business from homeowners associations by telling these groups that they will make money at no cost to the association group. Therefore, there will be no competition and a shortage of entry-level housing will be created.

Finally, for small developers, builders, architects, etc., the present system is very unjust because they are unable to get insurance at any price. Consequently future building of condos/townhouses will be by large developers who can be self-insured and financially indemnify the subcontractors.

I am surprised the press has not covered this issue more extensively, in order to inform and benefit the consumer. It is obvious that any developer's costs are going to be passed on to the consumer (higher insurance costs, attorneys' fees, etc.).

Additionally, a shortage of condominiums will obviously increase the cost of condominium housing.

In the contracting field it is customary to be responsible for defects for 12 months after completion. Most states in the United States have such a law, except California. The existing law (10 years) was passed through very strong lobbying by trial lawyers of California who spent hundreds of thousands of dollars to get it passed.


General partner

Goldrich & Kest Industries

Culver City

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