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Condo Construction Is On The Rise. Will Defects Litigation Increase, Too?

At present, there are dozens of condominiums going up throughout central Florida, representing thousands of units - the most robust growth in nearly a decade. Not everyone is cheering these developments, however. In fact, many industry experts expect the furious pace of new construction to lead to a rash of lawsuits over construction defects and are advising prospective buyers to be wary.

Their apprehension is well-founded; during the last housing bubble, housing lawsuits bubbled, too.

What are construction defects?

Construction defects occur - and are legally actionable - in many different situations, including when:

  • The condo has design deficiencies, caused by engineering or architectural defects
  • The condo has material deficiencies, caused by faulty or damaged building materials
  • The condo has construction deficiencies, caused by poor workmanship

No matter a defect's underlying cause, the resulting lawsuit will almost certainly drag on in court. Such cases typically involve everyone associated with the development - contractors, subcontractors, architects, owners, developers, and so on - which means there are many parties to the suit. Gathering evidence and presenting testimony can prove interminable. Meanwhile, condo unit owners watch their investment lose value. It's lose-lose.

After the 2008 housing bubble, there were scores of construction defect cases. Demand for condos had surged, and there weren't enough experienced contractors and skilled laborers to meet demand. As such, shoddy craftsmanship proliferated and required legal redress.

At present, the Florida construction market faces a similarly high demand paired with a similar shortage of skilled labor. It is no wonder that market observers are predicting lawsuits to increase.

A current case in the Supreme Court could change everything

Since 2008, Florida developers have implemented several quality control measures and building codes have improved. However, the sheer volume of condos slated for construction throughout the state suggests that some of the buildings will necessarily suffer significant problems.

Nevertheless, there is one major factor that might keep litigation in check. The Florida Supreme Court is currently considering whether to overturn a district court decision that would have limited insurers' liability in construction defect suits. Specifically, the court's initial finding was that insurance companies do not have to provide defense to their insureds in certain defects matters. That is, the court found that insurance companies should not be obliged to pay for contractors' defense attorneys and other related fees.

If the Supreme Court reverses this decision, however, insurers would face much more liability. As such, insurers may place additional pressure on developers by getting involved in construction defect cases earlier on. As a result, cases may settle out of court, saving time and money for everyone.

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