Does the Association own the Claim?

It is important to determine who has “standing” to bring a claim when an Association is dealing with construction defects. Standing is a legal term that asks “who owns the claim?” For guidance, an Association will need to look in a few different places. These places will generally include the following:

  1. Civil Code Section 5980
  2. The Association’s CC&Rs
  3. The Condominium Plan
  4. Reciprocal Easement Agreement

Let’s start with Civil Code Section 5980. It is part of the Davis-Sterling Act and applies to Associations. Civil Code Section 5980 states:

An association has standing to institute, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings in its own name as the real party in interest and without joining with it the members, in matters pertaining to the following:

(a) Enforcement of the governing documents.

(b) Damage to the common area.

(c) Damage to a separate interest that the association is obligated to maintain or repair.

(d) Damage to a separate interest that arises out of, or is integrally related to, damage to the common area or a separate interest that the association is obligated to maintain or repair.

As you can see, subsection (b) provides that if there is “damage” to the common area, the Association has standing to sue. In addition, subsection (c) provides that if the Association is obligated to maintain or repair a “separate” interest, the Association has standing to sue too. What is more difficult to work with is subsection (d) which provides that if the damage to the separate interest is “integrally related” to damage to the common area. Generally, this means that something in the common area caused damage to the separate interest.

An example would be a roof leak that damages the interior ceiling of a separate interest unit. Another example is a window that leaks causing damage to the interior. Windows often times though are defined as “separate interest” in the Association’s CC&Rs. The problem with this definition is that windows are integrated into the common area. In order to fix a window, the common area must be exposed. The repair of a window generally happens in the common area too.

In sum, it is important to understand Civil Code Section 5980 but it is equally important to remember to read the Association’s CC&Rs. Between these two items, you will generally be able to figure out who is responsible for repairs and thus who has standing.

If necessary, to figure out the lines between common area and separate interest, you can look to the condo plan. This is often more difficult to interpret and often times it refers you back to the CC&Rs.

The last document that may come into play is a Reciprocal Easement Agreement. Often referred to as an REA. It is not related to the real estate company – rather it is often a complex and complicated agreement that developers use to divide up responsibility for maintenance of mixed use projects. In these projects, the builder often retains ownership of the commercial areas that are attached to the residential modules.

As you can see from subsections (c) and (d) of 5980 provide that if the Association has the maintenance responsibility, it will have standing. This makes sense because if the Association has to spend money fixing something, it needs to be able to pursue the entity that caused a defective condition to exist in the first place! Often the REA is overlooked but it could provide an Association with some relief in a construction defect claim.

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