Condo Media - March 2014 - 50

by Nena Groskind

LEGISLATIVE UPDATE

Review of CAI Amicus Briefs
Decisions Will Affect Owners' and Associations' Rights

ike the fog described in a T.S.
Eliot poem, legal trends sometimes "creep in on little cat
feet," starting with a single decision in a single court that spreads from
coast to coast, as the reasoning used by
one court is adopted by courts in other
jurisdictions. For that reason, CAI
monitors litigation in state and federal
courts all over the country.
CAI's Amicus Curiae Advisory
Group files "friend-of-the-court briefs"
in cases that could affect the rights of
community associations and condominium owners either in a particular
state or more broadly. The committee's
docket this year included several cases
that resonated well beyond the jurisdictions in which the cases arose.
Wyman v. Ayer Properties originated
in Massachusetts when an appeals court
held that the "economic loss" rule did
not apply to construction defect claims
in a community association. This longestablished legal rule holds that plaintiffs
in a tort action (unlike breach of contract claims) can recover damages only
for actual property damage or personal
injury; they can't recover for construction or design flaws unless those deficiencies cause secondary damage.
Both sides in this case appealed the
decision to the Massachusetts Supreme
Judicial Court, which has accepted it
for review. The contractor is arguing
that the economic loss rule should
preclude a damage award for structural
problems for which he was responsible.
The association (happy with that part
of the appellate decision) has challenged the formula the court used to
assess damages, basing its calculation
on what the repairs would have cost
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Condo Media * March 2014

when the construction was completed
rather than on the cost of the repairs
today.
The CAI amicus brief urges the
court to uphold the appellate decision (rejecting the application of the
economic loss rule to condominiums)
and to reject the damages formula the
appeals court used. "Assessing damages premised upon costs at the time
of the negligent act does not properly
compensate a property owner who is
confronted with making repairs in
present-day dollars," the brief notes.
Chase Bank v. Chase Plaza Condominium Association. This potentially
window-rattling decision by a Washington, D.C., court challenges the underpinnings of the community association's
priority lien. The court ruled that
while a community association had the
authority to foreclose on its priority lien,
the subsequent sale of the property was
invalid, because the property was not
sold subject still to the first mortgage
lien. In other words, the court ruled
that the foreclosure sale did not extinguish the first mortgage lien.
That interpretation is inconsistent
with the purpose of the priority lien
(ensuring the ability of community
associations to collect delinquent payments from owners) and contrary to
court interpretations of it, says Stephen
Marcus, a partner in Marcus, Errico,
Emmer & Brooks and a member of
CAI's Amicus Committee. "To say that
the first lien survives the foreclosure of
a priority lien makes the priority lien
meaningless."
Villas at the Boulders Association v.
Lennar Corp. targets a question many

community associations have confronted or will in the future: When does
the "statute of repose" start to run on
a construction defect claim? Associations filing these suits face two deadlines: The statute of limitations, which
requires the filing within a specified
period (three years after the construction is completed or within three
years of when the defect is discovered
in Massachusetts); and the statute of
repose, which sets a firm filing deadline
(six years in Massachusetts) after the
completion of the project. The question raised in this suit: What happens
to the statute of repose in a phased
development?
In this suit, a Colorado District
Court agreed with the community association that the repose clock begins
to run with the issuance of a certificate of occupancy for the final building in the last phase. But the developer is arguing on appeal that there

Condo Media - March 2014

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