By: Karl Bublitz On: May 3, 2022 In: Civita - Mission Valley, Lifestyle Comments: 0

What is Construction Defect Litigation?

Construction defect litigation is when the HOA sues the developer for money to repair any potential defects from when the development was built. The HOA has ten years from the date of completion of the development to request these repairs. Prior to this, the HOA and developer attempt to reach an amicable agreement outside of court. The HOA will inform the developer of any potential issues and ask that the builder address them. Experts visit communities to assess the situation and collect information. Architects, civil engineers, soil engineers, appraisers, economists, and stucco experts are just a few of the experts that will likely be used. They will go to court if they do not reach an agreement.

Are there communities in Civita that are under construction defect litigation?

Yes, a few communities, including Origen, Frame & Focus, and Lucent 1 are in litigation. More communities will likely go into defect litigation since they are under the 10 year mark.

Will this affect the sale of my home or being able to purchase in one of these communities?

Yes, both buying and selling will be impacted. For sellers, this will narrow your buyer pool because the buyer will need to obtain special financing to purchase. Special financing comes with a higher interest rate often more expensive lending fees and stricter buyer guidelines. Rates can typically be 1% or more higher than the traditional interest rate. Non-qualified mortgages, or Non-QM loans, are the type of loans that fall under this category. These loans do not have to fulfill agency documentation standards and cannot be sold to Freddie Mac or Fannie Mae.

How long could it stay in litigation?

Litigation can last for about a year to potentially a few years.

Final Thoughts

It is critical for sellers to hire an agent who is familiar with building defect litigation. It is our responsibility to be open and honest with potential purchasers, explaining how the process works in order to save time and money. Accepting an offer with a traditional loan will almost certainly result in the lender not being able to perform and falling out of contract. This entails re-listing your home, which raises buyer suspicion and makes them less likely to make a competitive offer.

And Always Remember, It Matters Who You Work With!

Give me a call today at (240) 461-7361 or email me at Karl@livingthesandiegolife.com for more information or to schedule a tour of the neighborhood!