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Monday, August 22, 2005 | Editor’s note: A Voice investigation uncovered complaints of construction defects in many downtown high-rise condos and apartments. This four-day series will shed light on the practices of developers and city inspectors, examine the risks buyers are taking and offer them advice.
Voice Special Report
Donn Bleau rents an apartment in Treo, an upscale, high-rise condo development on India Street in Little Italy. He reckons the place is worth $700,000-plus and he pays $2,500 a month to live there. But when he showers, he often has to wait up to 15 minutes for hot water. Since he moved into the apartment in March, Bleau has had water pressure problems and even had his hot water cut off. He’s glad he didn’t buy there.
A lack of hot water, however, is just one of many problems that plague several San Diego condo and apartment projects. Leaky windows, moldy bathrooms, shower heads that fall off, prematurely rusting railings, leaky showers, cracking stucco, cracked tiling, blocked drains, leaky pools – the list of defects that have been identified in the city’s booming downtown condo market goes on and on.
With billions of dollars being invested in thousands of properties in dozens of downtown housing projects, condo buyers should know what they are getting into. Although developers are clamoring to build ever more luxurious and state-of-the-art buildings, industry insiders warn that there may be deep-rooted problems with how such projects come to fruition. These problems have led to multi-million dollar lawsuits, feuds between homeowners and developers and ever-increasing insurance premiums for contractors.
Part four: Let the experts guide you through the process
Getting homeowners to talk about the problems they have encountered with their condos is difficult. Often the homeowners are in the midst of mediation or litigation and they are barred from talking about them by their attorneys. Confidentiality agreements included in litigation settlements prevent attorneys and plaintiffs from discussing the details of past cases.
However, a detailed analysis by Voice of San Diego of depositions from some of the downtown’s biggest construction litigation cases, combined with interviews with Realtors, architects, contractors, building engineers and others, have cast light on what has become an increasingly hot topic among real estate investors and home-buyers.
Nobody in the construction industry doubts that building a condo project that will eventually house hundreds of people is a complex task. The challenges a developer must overcome are enormous.
“In any kind of architectural project, you make billions of decisions,” said Catherine Herbst, associate chair of architecture at San Diego’s Woodbury University. “Do you make all of them at the height of your game? I’m going to say no.”
Herbst’s comments were echoed by developers and representatives of the construction industry.
“I do believe builders and trade contractors alike, along with the structural engineers and the architects, too, they really all want to do the right thing,” said Tom Lewis, president of the California Professional Association of Specialty Contractors. “It’s just, there have been times in the past when they’ve been a little careless about getting it done all properly and coordinated.”
Lewis described the construction process as an “imperfect science,” where a piece of dirt is transformed into a home. Especially when it comes to large projects, he said, the coordination of dozens of tradesmen, engineers and architects is incredibly difficult. Unfortunately, he said, sometimes mistakes are made. Walls start leaking, mold creeps in, things start to fall apart.
Construction defect litigation has, according to some experts, become a “cottage industry” in San Diego. It’s an offshoot of the real estate boom that has led to a number of condo developments ending up in court. According to Lewis, the construction defect litigation problem has become so widespread that many contractors now shy away from any involvement in condo projects, lest they end up in court.
Two years ago, the homeowners association at 100 Harbor Drive, an ultra-luxurious high-rise condo project overlooking the San Diego Marina, sued the developer of the project and a number of the sub-contractors who had been employed by the developer. They won. The defendants were ordered to pay the homeowners association $20 million in compensation for a litany of problems the homeowners had encountered.
Depositions taken during that litigation illustrate how wide-ranging the defects at 100 Harbor Drive were. One homeowner complained of elevators that were constantly closed down. Another complained of mold infesting his bathroom. There are widespread problems with water intrusion into several dwellings.
The biggest defect case currently in litigation involves Cityfront Terrace, another tony high-rise development a few blocks down Harbor Drive from 100 Harbor Drive. The homeowners in that case are suing dozens of defendants, both businesses and individuals who were involved in building their development. Their initial complaint, filed with the court in November 2004, lays out a number of problems residents have encountered in their condos, most of which sold for close to or more than $1 million.
The complaint outlines alleged faults in the building’s plumbing and drainage that led to sewage back-ups and property damage. It also complains of improper waterproofing of condo tubs, shower enclosures and tub drains that led to water intrusion and mold damage. The complaint alleges problems with elevators, deficiencies in the construction of pools and fountains, soundproofing issues and, perhaps most seriously, water intrusion through the outer “skin” of the building.
Attorney Bryan Garrie, who is representing the Cityfront Terrace Homeowners’ Association in the case, said this type of litigation usually results from a lack of oversight in the construction process.
“In my personal opinion,” he said, “[these problems] have to do with a gap between the structural engineer and architect on one hand, and the contractors on the other hand.”
Garrie said that this apparent gap is best filled by third-party oversight. This practice, which he said is already widespread in Europe and Australia, involves bringing in independent experts who are tasked specifically with checking on issues such as waterproofing and soundproofing of a building.
Michael Stepner, a professor of architecture and urban design at San Diego’s New School of Architecture, agrees that third-party oversight is an essential aspect of large construction projects that is often left out.
“We have construction managers and project managers here in this country, but generally they’re not a third party, they’re part of the owner’s team, who happen to be the builders, so there’s a tendency not to be as rigid as you should be about some of these decisions,” said Stepner.
“We have a tendency in this country to want to do things cheaper and faster, and that doesn’t always give you the best results,” he added.
Of course, that doesn’t mean that developers have free reign to throw up projects without adhering to city, state and federal guidelines. The city’s Inspection Services Division is supposed to offer exactly the sort of third-party oversight that Garrie, Stepner and others mention. The question is, just how thorough are such inspections?
The job of city building inspectors, according to Joe Harris, the city’s building inspection supervisor, is to make sure that developers are sticking to the building plans for which they have obtained building permits. In other words, the city is checking that the builders are doing what they said they would do. Harris said building inspectors check a building for structural stability and functionality. Specifically, he said, inspectors ensure that developers and contractors are following building codes relating to access, egress, fire safety and disabled access. Inspectors also look at a building’s plumbing and electrical systems.
“We’re just another set of eyeballs for the contractor, before they go to that next step,” he said.
Construction defect attorneys, however, questioned the role the city has to play in policing construction. Garrie pointed out that an estimated 80 percent of construction defect litigation arises from water intrusion, yet the city does not perform waterproofing checks on a building.
Neal Rockwood, a partner with Rockwood and Noziska, the firm that represented homeowners at 100 Harbor Drive, said the key problem with city oversight is one of liability. City inspectors, he said, are generally immune from liability for any negligence in their inspections. He explained that a city inspector is only liable if he doesn’t carry out an inspection. If that inspection is carried out poorly or even negligently, according to Rockwood, the city will not be held accountable.
Harris defended the city’s position, however. Though he would not comment on liability issues, choosing instead to defer to City Attorney Mike Aguirre, who has promised to look into the issue, he said inspectors are accountable internally.
“They are accountable,” Harris said. “The city holds them accountable. If someone’s not doing their job properly, we’re going to hold them accountable.”
Anthony Napoli, a straight-talking New Yorker who has run a real estate business out of Little Italy for four years, says the issue is not the oversight of developments, or the fact that certain developers make mistakes – they all do – the difference is in how those defects are rectified.
Many of the problems discovered by new homeowners, he said, are simply reported to the developer, who then takes pains to fix the problem as quickly as possible. However, according to Napoli, who has had problems with his own condo as well as with a number of the units he has sold, a quick repair job is not always in the cards.
Napoli is president of two downtown condo project homeowners associations. He’s had dozens of dealings with many of the major players in downtown development. He said he has encountered developers who time and time again refuse to deal with the problems they have created. The developer he has had the most problems with, he said, is Intracorp, which has built a number of projects downtown, including Porto Siena, 235 on Market, Pacific Terrace and Crown Bay.
Napoli lives in Porto Siena. He said that while the building is “over-engineered” and structurally sound, he and other owners have had to deal with prematurely rusting railings, flooring that stains when it comes into contact with water, stucco that has cracked and tiling that has fallen out. He described the frustration he encountered when he took the problems to the developers.
Intracorp President and CEO Keith Fernandez said his company was working with the residents at Porto Siena to deal with a number of their concerns, but said he was unaware of any defect issues at the building. He said his company works very hard to minimize any potential defects and that they are one of the more responsible developers, in that they do employ third-party inspectors.
“Our plans are reviewed in great detail by any number of experts from the architects to the structural engineers, to third parties that review their work,” he said. “We try to do quality, first-class construction, utilizing the best general contractors and the best sub-contractors we can.”
The Center City Development Corp. currently lists 52 new construction projects on the way in downtown San Diego. Most of these are condo or mixed-use projects. Many of these are still little more than fenced-in patches of dusty land dotted with cranes. Nobody knows how many of these housing projects will, in the next few years, develop the sort of problems that have been encountered in buildings like Cityfront Terrace, 100 Harbor Drive, Treo and others.
A more important question, however, is perhaps how well developers will respond to these problems as and when they arise. Plaintiff attorneys call litigation a “last resort” for frustrated homeowners. With such large payouts in the cards, however, contractors argue that plaintiff attorneys are often driven to find faults with buildings in order to build a predatory lawsuit. The attorneys counter that if the developers and the city did their jobs properly in the first place, there would be no problems to complain about. Meanwhile, the developers complain that there has traditionally been a dearth of skilled contractors in San Diego to handle the highly specialized work involved with building high-rise condo projects. Thus, the vicious circle keeps on spinning.
Of course, Realtors argue that condos in downtown San Diego are still a very healthy investment. Kismit Cyriacks-Vella, a Realtor and proprietor with Platinum Properties, is quick to point out that even in buildings that have gone through or come close to litigation, homeowners have still seen their units skyrocket in value. The key thing to take into account when looking at a potential home, she said, is who the developer is and not how much the condo costs.
“When it comes to the plumbing, the parking, the construction, the labor, the management, so much of it is based upon the developer’s track record,” she said. “So if the developer has boded well in their history, rather than just the name of the complex and where it’s located, people should really begin to take heed based on the developer.”
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Part Two: What is the city of San Diego’s role is in policing construction of condo projects through inspections and building codes?