Attorneydiction.com,- While the cause of June’s Champlain Towers South condominiums collapse in Surfside, Florida is still under investigation, many experts believe that it could have been avoided had its homeowners’ 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 owners’ 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 intrusion—a suspected culprit in the Florida collapse—is an especially pernicious enemy.
The formation, management, powers, and operation of condominiums in South Carolina are governed by the state’s 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.
“Over time, everything deteriorates,” Wylie said. “Eventually, 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.”
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 elements—generally, exterior areas from below ground to the roof.
In South Carolina, homeowner associations are corporations. The state’s 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 won’t 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.
“HOA boards are not construction professionals … but directors are protected if they rely on professionals,” Wylie said.
The rule not only protects directors, but exposes them to liability if they violate their duties of care or loyalty.
In 2016, the state’s Supreme Court ruled in Fisher v. Shipyard Village Council that the rule applies even where a board’s 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 1983—the year after the building was completed. According to the high court, evidence shows that the board received “many calls” 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 Shipyard’s 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.
“So, there’s this incentive to do as little as possible to keep their annual or monthly dues down,” Gibson said. “Sometimes they will put a Band-Aid on the problem but it doesn’t address the fundamental issue.”
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.
“They should not allow deferred maintenance to accumulate and get to a point where it can cause catastrophic problems,” 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.
“I tell my boards to get their buildings inspected every three five years … that way the liability is minimized because they’ve done what they’re supposed to do—they’ve acted in good faith they’ve relied upon professionals, and you don’t have some collapse or a giant expense that pops up and surprises everybody.”
Wylie believes the tragedy in Florida can at least serve as a life-saving lesson for others.
“I think now that unit owners—those who would complain about dues going up—will understand now why they’re doing it,” Wylie said.