An international developer considering condominium projects in Washington should be abreast of the potential risks and liabilities arising from the Washington Condominium Act (“WCA”), which provides a broad array of warranty protections for condominium purchasers. The WCA has given rise to a significant increase in the number of construction defect lawsuits — a deterrent to
Recently, Division One of the Washington Court of Appeals issued an opinion providing guidance regarding the scope of Washington’s frivolous lien statute and the subtle intricacies of preparing and filing a construction lien against a condominium project. This article provides a high-level overview of how to file a lien against a condominium project in Washington…
A 2018 legal case in New York arose over the disposition of a collection of run-down warehouses in Long Island City, Queens, New York, which graffiti artists began to use as a canvas for their work after the buildings went undeveloped by the owner for many years. When the owner announced that he would demolish…
The condominium embodies a missing price point in Seattle’s real estate market. As a result, we have noticed an uptick in the number of developers seeking legal advice regarding the potential risks associated with condominiums. In my first article for the Daily Journal of Commerce, I provide an update on Washington’s condominium laws, a…
The apartment business is booming right now. Unfortunately, construction defects persist as well, particularly in garden-style and wood-framed construction. Most developers are savvy enough to maintain a good insurance program, but many do not understand (until too late) that the policies they bought may not cover the risk of construction defects.
As an owner-developer, neither your property insurance policy (including your builder’s risk policy) nor your general liability policy is likely to protect you from the cost of repairing defects to property you own. Most likely, your property policy has an exclusion for any damages caused by defects in construction or design. And your liability policy has exclusions for property damage to any property you currently “own, rent, or occupy.” (See exclusion J(1) below.)
Even more surprising to some is another exclusion that prevents coverage for property damage to property that you “sell, give away or abandon” (known as the “alienated property exclusion”). (See exclusion J(2) below) This means that for projects you develop, occupy (i.e., rent) and sell, you likely have no coverage during your occupancy of that project or after you sell (whether to unit owners through a condo conversion or to another apartment owner).
j. Damage to Property
“Property damage” to:
(1) Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another’s property;
(2) Premises you sell, give away or abandon, if the “property damage” arises out of any part of those premises;
Upon learning of this unfortunate situation, many developers ask: What good is the policy if it doesn’t cover me when I own the project and it doesn’t cover me after I sell it? Good question. The insurer’s response is that the policy only covers damage to other people’s property (like the project next door), not damage to your own property or the property you once occupied and sold. Strangely, if you sell the project before you occupy it, coverage is more likely.
Solutions? There are steps you can take to minimize your risk: