Courts Boost California Densities

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California court ruling may signal a renewed start to mulitfamily construction.

January 31, 2001

A recent California Supreme Court decision against a group of condominium owners in a construction-defect lawsuit was a big victory for the state's builders. And it may signal a renewed start to multifamily construction in the state.

"Condos are needed for Smart Growth," says Jerry Livingston of the San Diego BIA. "This is a good decision because builders might start building condos again."

The incidence of construction-defect lawsuits has grown to such a degree in California that the number of builders willing to build attached housing fell precipitously during the last decade. Developers with mixed-density plans for communities then found it difficult to find takers for the attached portions of their projects.

The reason for the trend: a problem with one unit would often result in a lawsuit brought by an entire homeowner’s association, multiplying the potential damage awards in court. It was not long before insurers responded by limiting coverage for builders of attached housing.

What made this case, Aas vs. San Diego Superior Court, particularly galling to builders was the lack of damage to the affected group of homeowners. Brought against the William Lyon Co., the lawsuit sought money for defects that resulted in no damage.

"Homebuyers in California already enjoy protection under contract and warranty law," the court said in its Dec. 4, 2000 decision, "and an exceptionally long 10-year statute of limitations for latent construction defects."

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