House hems in condo-owner litigation over construction defects

Condominium associations and similar organizations would have to clear a higher bar before they file lawsuits over construction defects.

The House passed HF1538, sponsored by Rep. Dennis Smith (R-Maple Grove), 108-23 Thursday. The bill now moves to the Senate, where Sen. Kari Dziedzic (DFL-Mpls) is the sponsor.

Rep. Dennis Smith

Smith called the bill the product of a year-and-a-half “odyssey of work,” predicting that differences with the Senate version mean it is destined for a conference committee.

Proponents say the proposal would lead to more housing construction by developers who now shy away from new condominium or townhouse projects because they fear entanglements with litigation-prone unit owners in common interest communities or CICs, including cooperatives.

Among the bill's supporters are city councils in several suburban cities, including St. Anthony, Hopkins and Chanhassen, who passed resolutions backing provisions of the bill.

The bill would:

• require CIC associations to give unit owners notice and get majority approval before filing litigation;
• require CIC associations to have a maintenance plan and schedule;
• assign responsibility for damage in common areas to the unit owner who caused it or to the association;
• exempt CIC construction litigation from the statute governing the awarding of attorney’s fees;
• give contractors and developers immunity for losses and damages due to a CIC association failing to follow its maintenance plan or schedule; and
• require that construction defect claims go first to mediation before a CIC association may file a lawsuit.

CIC associations would be free to intervene as third parties in litigation, but would have to notify unit owners “within 75 days of the association's commencement of the complaint in an intervention or the 
assertion of the counterclaim, crossclaim, or third-party claim.” The bill would apply to CICs established on or after Aug. 1, 2010.

WATCH House Floor debate on the bill 

DFLers unsuccessfully offered two amendments, including one to have the bill apply only to construction projects started after Aug. 1, 2017.

“We’re voting to take away the rights of people who purchase property,” said Rep. Raymond Dehn (DFL-Mpls). “We will be, in essence, nullifying the way in which they purchased their unit.”

Rep. Debra Hilstrom (DFL-Brooklyn Center) said the bill says: “If you as owner are harmed, you have to get 51 percent [of other unit owners] to decide to do the right thing.”