Court to consider who has to pay for fixes to roads, drainage: HOA or developer?

Article Courtesy of The Orlando Sentinel

By Mary Shanklin

Published December 5, 2011

Flawed roads and drainage systems in a Winter Garden subdivision — and the question of who should be responsible for fixing them — will be considered this week by the Florida Supreme Court.

The potholes and pits dotting Lakeview Reserve's roads and lawns prompted homeowners there to sue the builder/developer in 2007. But the case has also drawn the attention of the state's homebuilders and community associations, which have signed on as interested bystanders.

While a lower court concluded that the problems weren't the developer's concern, Florida's 5th District Court of Appeal decided last year that the developer should be held responsible. The state's high court is now scheduled to take it up Tuesday.

The Florida Home Builders Association is concerned that, if the Supreme Court upholds the appellate-level decision, builders could be forced to fix a subdivision's problematic streets and common areas even though engineering firms and other contractors designed, constructed and inspected them.

"In the home, if something breaks, the builder has to fix it," said David Carter, president of the builders' trade group, which has filed briefs in the case. "But now, with all the entities that are involved, there's an effort to push the blame and responsibility to the builder/developer [for things outside the house] when there are other professionals who have responsibility for what they designed, inspected and certified."

If the Supreme Court sides with Lakeview Reserve's homeowners, homebuilders warn, they may have to raise prices to recover bigger insurance payments and other costs necessary to protect themselves from common-area problems — some of which can surface long after a subdivision has opened and the developer has moved on.

Homeowners groups are similarly anxious about this week's hearing, which isn't likely to produce a decision for months.

Altamonte Springs lawyer Patrick Howell, who represents the Lakeview Reserve Homeowners Association, said the case is important for all HOAs in the state because it will determine whether homeowners get stuck with expensive assessments to fix common-area problems for which the developer, contractors or subcontractors should be held responsible. Such concerns are what prompted two statewide groups, the Community Association Institute and Community Association Leadership Lobby Inc., to file briefs in the case.

"If the court overturns the appellate decision, it imperils homeowner associations and creates a liability and question mark in general," said Howell, who works for the law firm Taylor & Carls. "If there is a defect with a common area, the only way to get that fixed will be to go to the owners and pass a special assessment."

Howell described Lakeview Reserve as a working-class community of about 160 houses built in 2005-06 on land off State Road 50. The homeowner association sued the subdivision's builder/developer, Maronda Homes Inc., and subcontractor T.D. Thomson Construction Co. after underground drainage pipes failed and filled with dirt, which contributed to road- and yard-buckling sinkholes, he said.

Homeowners each signed a contract with the builder/developer when they bought their houses and expect the company to deliver habitable housing, Howell said. They should be able to seek legal relief from the company that sold them their homes and lots if they cannot safely access their property because of problems with the subdivision's common areas.

The lower court sided with Maronda and T.D. Thomson about two years ago, but the appellate court concluded that the long-held concept of "buyer beware" applies only when buyers are in a position to fully understand what it is they are purchasing — and a neighborhood's stormwater drainage and road work, the court said, go beyond what a typical buyer should have to scrutinize when buying a house.

"We believe this ruling is in keeping with Florida's strong public policy of protecting consumers in a situation where they must rely on the expertise of the builder/developer for proper construction of these complex structures, where they are in an inferior position to inspect the work and to correct the defects in the construction phase, and where the defects are not readily discernible to the average homeowner," the appeals court stated in its opinion.

If the state Supreme Court upholds that ruling, Florida's homebuilding industry says it would turn to the state Legislature for some kind of protection against liability for defects in a development's common areas.

Lakeview Reserve Homeowners' Ass. vs. Maronda Homes Inc.