Real estate has long been considered unique property under the law. This means that no parcels of land are the same. They are different in space, terrain, foliage, etc. For the longest time, lawyers felt that homeowners could sue independently or join together to sue home builders if the construction was defective, but it was considered a stretch, by many, for homeowners’ associations (HOAs) to sue on behalf of the owners for construction defects in the individual (unique) units. This would have amounted to class action-like suits, which did not make sense for disputes over real property. Class actions are generally related to product defects. You know, like some part on your car has been found to be defective so Plaintiffs band together to form a class which sues on behalf of all owners of that car, forcing the car manufacturers to recall the cars, or parts, and/or pay a settlement which amounts to a few dollars in each class member’s pocket but millions in the Plaintiffs’ lawyers’ pockets.
Even though there was no clear guidance about whether HOAs could sue on behalf of condo owners for unit specific defects, HOAs could clearly, sue for defects of construction in common areas, such as the clubhouse, or even parts of the units that were shared by multiple condo owners, such as roofs or even plumbing. But, say the windows in some of the units were defective, but not in all, should the HOA represent all condo owners as a class to sue for the defective windows even though those windows are attached to real estate which is supposed to be unique and outside the purview of class action suits.
Well, Nancy Quon and some other Las Vegas Plaintiff construction defect lawyers, wanted to treat condos as mere personalty instead of real property. They wanted class action status. The reason? More money to the plaintiffs’ lawyers and less costs in having to sign up hundred of owners, all you needed was the HOA board. Incidentally, Nancy Quon was under investigation by the FBI, I’m not sure what is going on there.
Well, Builder DR Horton is a Texas maverick that decided not to settle or accept the Plaintiff’s view of things. It fought the First Light HOA all the way to the Supreme Court of Nevada on the issue of whether condos HOA boards could represent all condo owners to file suit against builders. They lost, and the Nancy Quon’s of the legal world won a significant victory. Now, construction defect litigation will continue for the foreseeable future, especially since so many apartments were converted into condominiums over the last two decades.
The question now is whether regular houses could be subjected to class action status. That would be a disaster for homeowners. Imagine you are in an HOA and some of your neighbors have decided that they bought too much house for them to afford, so they convince the HOA to sue the builder. If the HOA board can represent all homeowners, then your house will be the subject of a class action construction defect, unless you opt out. Construction defect lawsuits on houses devalue the houses and potentially make them unsellable. Real estate agents have a duty to disclose to buyers whether a home has been in a construction defect suit.
However, you probably will only have to worry about this if you are a condo owner, at least for the time being. The Supreme Court Justices have ruled that the District Court judges will have to analyze each construction defect claim on a case by case or even claim by claim basis to determine whether it ought to be a class action or not. They have to follow the guidelines in the class action code, which is NRCP 23.
If you want to read the boring case, D.R. Horton v. Dist. Ct., you may at: http://www.nevadajudiciary.us/index.php/advanced-opinions/483-dr-horton-v-dist-ct.html
Copyright: September 18, 2009
By: Anthony M. Wright, JD