Attorneydiction.com,- While the cause of Juneās Champlain Towers South condominiums collapse in Surfside, Florida is still under investigation, many experts believe that it could have been avoided had its homeownersā association not ignored or downplayed repeated warnings that the building was structurally damaged and deteriorating.
Incidents of this magnitude are extremely rare in the United States, and South Carolina has fortunately never experienced a tragedy of this sort. But construction defect litigation is commonplace, and often aimed at ownersā boards and associations that are similarly accused of grossly underestimating the severity of building defects or intentionally delaying repairs.
Everything falls apart
Over the years, the state has seen its share of deck and bridge failures and weakened structures that have led more typically to property damage than to loss of life. Electrical problems and shoddy building materials are commonly listed in lawsuits, and water intrusionāa suspected culprit in the Florida collapseāis an especially pernicious enemy.
The formation, management, powers, and operation of condominiums in South Carolina are governed by the stateās Horizontal Property Act, passed in 1962. Myrtle Beach construction attorney Bobby Wylie noted that many of the buildings governed by the act are more than half a century old. As brutal and corrosive as the beach environment can be, structures across the state are at risk of the elements.
āOver time, everything deteriorates,ā Wylie said. āEventually, nails are going to rust and snap off, and a balcony is going to collapse. Water gets into concrete, seeps down to the reinforcing bar and it rusts and expands ⦠and pops the concrete loose.ā
In parts of Florida, buildings must be inspected and recertified when they turn 40 years old, and every 10 years thereafter. South Carolina has no such mandate.
While homeowners are responsible for issues within the walls of their dwelling, associations are required to maintain and repair common elementsāgenerally, exterior areas from below ground to the roof.
In South Carolina, homeowner associations are corporations. The stateās business judgment rule affords boards of directors great latitude in running their businesses. The rule is not an absolute shield from liability, but courts generally wonāt intervene unless an association operates with corruption, bad faith, incompetence, or outside of its authority.
Directors are presumed to have acted in good faith and in the best interest of the shareholders, the rule holds, and are required to make reasonably well-informed business decisions. The standard requires prudence, not perfection.
āHOA boards are not construction professionals ⦠but directors are protected if they rely on professionals,ā Wylie said.
Some accountability
The rule not only protects directors, but exposes them to liability if they violate their duties of care or loyalty.
In 2016, the stateās Supreme Court ruled in Fisher v. Shipyard Village Council that the rule applies even where a boardās conduct is governed by a master deed, bylaws, and the Horizontal Property Act.
In Fisher, the council allegedly failed to maintain its building and repair issues dating back to 1983āthe year after the building was completed. According to the high court, evidence shows that the board received āmany callsā about the issue and knew about leaks for years.
Apparently, outside agencies hired to investigate the defects in 2002 and 2003 reported water intrusion, rotten wood framing, and numerous issues with windows, glass doors, and stucco. Owners filed suit after the board tried to levy a multimillion-dollar assessment to Shipyardās residents and the trial court found that the board breached its duty to investigate.
This is not an outlier, attorneys say. One of the reasons potential issues are allowed to fester is because owners fail to assess enough over time for major repairs. Allen Gibson of Womble Bond Dickinson in Charleston said that some boards are reluctant to increase dues or create special assessments on their neighbors.
āSo, thereās this incentive to do as little as possible to keep their annual or monthly dues down,ā Gibson said. āSometimes they will put a Band-Aid on the problem but it doesnāt address the fundamental issue.ā
Plan and prepare
The consensus among those in the know is that going beyond the legal requirements can be the key to reducing danger and liability. Associations are encouraged to undertake studies on assessments and maintenance, and have in place formal, written plans that lay out years in advance what might go wrong and the cost of making it right.
Gibson said high-rise associations, particularly, should plan for regular inspections to identify issues and address maintenance problems as they arise.
āThey should not allow deferred maintenance to accumulate and get to a point where it can cause catastrophic problems,ā Gibson said.
Since the Florida collapse, Wylie said that associations have sought his advice. That advice is simple: Be proactive. Hire consultants to determine the lifespan of building materials and what it will cost to maintain them. Get comfortable with spending money. Create reserves.
āI tell my boards to get their buildings inspected every three five years ⦠that way the liability is minimized because theyāve done what theyāre supposed to doātheyāve acted in good faith theyāve relied upon professionals, and you donāt have some collapse or a giant expense that pops up and surprises everybody.ā
Wylie believes the tragedy in Florida can at least serve as a life-saving lesson for others.
āI think now that unit ownersāthose who would complain about dues going upāwill understand now why theyāre doing it,ā Wylie said.