When community association board members hire a transition attorney for their condominium or homeowners association, they may not know exactly what to look for. They may not know much about transition to begin with, or may not know the right questions to ask in order to find the right transition attorney. If your association is looking for a transition attorney, or you are reconsidering the one you have, the following may help you to identify the right transition attorney.
Your transition attorney will not be afraid to go to trial and should have plenty of trial experience.
Not all transition cases need to go to trial. Many transitions will settle on satisfactory terms without the expense of trial. However, when a sponsor is negotiating with association attorneys, it is clear which are experienced litigators and which ones rarely or never go to trial. If a sponsor knows an association attorney is unlikely to take a case to trial, the sponsor may believe the attorney will settle cheap. That means the association might be leaving money on the table.
On the other hand, if a sponsor knows an association attorney has significant trial experience and would take a case to trial if necessary, that sponsor may weigh the costs of trial and the potential of a large verdict and agree on a generous settlement. That means more money for the association to remediate deficiencies. And, of course, if you do end up at trial, your association would need an experienced litigator. Ask your transition attorney about his or her trial experience, trial verdicts, and settlements at trial and decide if that experience is right for your association’s transition.
Your transition attorney will understand the importance of insurance in a transition case.
New Jersey allows builders and contractors to create limited liability companies to conduct business in the state. This means that most sponsors, contractors, and design professionals conduct their construction work through corporate entities designed to shield them from personal liability for damages caused by their negligence. As a result, the prime source of recovery dollars in construction defect cases is the insurance policies that these sponsors, contractors, and design professionals have in place to cover their companies in the event they are sued.
Accordingly, the transition attorney would need to fully understand how insurance coverage works for construction defect claims. An attorney who does not understand which types of damages insurance policies cover in a construction suit and which types of damages they do not cover, will cause an association to waste considerable amounts of money pursuing claims that may never be paid. Ask your transition attorney about the insurance policies relevant to your matter and how they will help your association.
Your transition attorney will have competent general counsel and collection counsel to support transition efforts.
Transition cases can involve numerous issues which may not be the specialty of your litigation attorney. An association in transition may require a special assessment or bank loan. These issues often require a detailed review of the association’s governing documents and legal opinion to understand the requirements and procedures; resolutions may be required for special assessments or a loan and closing counsel is required for a loan. Associations with sponsors which still own units but do not pay maintenance fees will require diligent and competent collection counsel able to think of aggressive and creative ways to coerce payment. Also, unit owners who cannot pay transition special assessments or increased assessments will need to be addressed. Ask to meet an attorney’s general counsel/collection counsel to help determine their breadth of expertise.
Your transition attorney will not waste time (or money) pursuing claims that do not make financial sense.
If your association is considering litigation over construction issues in your community, it is extremely important to choose a transition attorney with knowledge about the costs and risks associated with such a suit. That attorney will have the experience necessary to explain the concept of risk-reward, as it applies to every one of the association’s claims, so that your board can make an informed choice on whether or not to pursue litigation.
By way of example, your community may have a significant problem with dying trees or shrubs installed by the sponsor. The cost to replace all of the dying landscaping may be upwards of $80,000, an amount your unit owners feel is worth suing over. An experienced transition attorney, however, would explain to your community that you would need an expert to investigate the cause of the problem and render a report suitable for trial at a potential cost of $20,000 to $30,000, or more. The attorney would also explain that attorneys’ fees for pursuing the landscaping claim could be another $30,000 to $40,000. The board and unit owners would then have a choice: 1) to spend $50,000 to $70,000, or more, to litigate for two to three years to collect $80,000.00; or 2) to simply fix the problem themselves.
Unfortunately, many transition attorneys do not have that kind of fully informed discussion with their clients prior to charging off to court. Ask your transition attorney about the numbers to ensure your case makes financial sense.
Your transition attorney will offer various payment options, including contingency.
As a board is evaluating deficiencies in its community, an hourly fee arrangement makes sense. If it’s an easy transition that does not require litigation, an hourly arrangement will continue to be appropriate. However, if your community has significant deficiencies and the sponsor and its contractors are not addressing them satisfactorily, a board may need to make the decision to litigate. Not every association can afford to fund litigation on an hourly basis, since large litigation cases can cost millions of dollars in attorneys’ fees and expert expenses.
Without other payment options, a board must make the difficult decision to not pursue litigation and remediate deficiencies using common funds (money the association still doesn’t have). The right transition attorney will provide various payment options. That might mean hourly, contingency (the attorney gets paid when the association gets paid), or some combination of the two. Ask your transition attorney about options for payment.
Your transition attorney will understand the statute of limitations and statute of repose.
This would seem to be an obvious competency test for transition attorneys. However, if your transition attorney is telling you that either of these dates have anything to do with the date of homeowner control, you may need a second opinion – quick. The six-year statute of limitations will start to run once you know or should have known of a deficiency.
Depending on circumstances, this date can be well before the date of homeowner control. In any event, the statute of limitations is capped by the ten-year statute of repose which (typically) starts to run upon the issuance of a certificate of occupancy or a temporary certificate of occupancy. Failing to settle or file a claim before these dates could be catastrophic for your association’s transition case. Ask your transition attorney for a timetable of these important dates.
If you have any questions about the issues discussed in this article, please feel free to reach out to the authors, Mary Barrett, Esq., and J. Randy Sawyer, Esq..
Stark & Stark offers Boot Camps for Board members on a wide variety of topics including transition. Learn while enjoying lunch, dinner or happy hour at a convenient location near you. If your Board is interested in learning more about transition or any other topic, please contact us for upcoming dates or to customize a Boot Camp for your Board.
