Condos, construction liability laws, etc.

Introductions - Urban Issues - Miscellaneous News, Topics, Interests
TroyGBiv
US Bank Plaza
Posts: 624
Joined: July 6th, 2012, 10:33 pm

Condos, construction liability laws, etc.

Postby TroyGBiv » July 28th, 2015, 9:25 pm

The condo market is hot - the issue is if they are willing to make the investment risk of building condos... condo buildings require a much longer "warranty"....

nordeast homer
US Bank Plaza
Posts: 692
Joined: June 1st, 2012, 11:11 am

Re: Nicollet Hotel Block

Postby nordeast homer » July 29th, 2015, 9:29 am

I keep hearing about the warranty issue... if it's a quality build, why should a warranty issue matter? These aren't going to be stick-built or low end units. Either way, I'm guessing the Pohlad's have enough to cover it...

twinkess
Rice Park
Posts: 473
Joined: November 26th, 2012, 10:46 am

Re: Nicollet Hotel Block

Postby twinkess » July 29th, 2015, 9:33 am

It also wasn't an issue when the Carlyle, Grant Park, Skyscape and on and on were developed in the 2000s.

Architorture
Metrodome
Posts: 67
Joined: December 26th, 2012, 1:21 pm

Re: Nicollet Hotel Block

Postby Architorture » July 29th, 2015, 9:53 am

The warranty issue is of great concern for condo developers. Generally speaking, state law allows the home owners 10 years to file a suit over construction defects. The definition in the law is vaguely word and was left to the courts to figure it out. There has been a great deal of litigation by home owner associations near the end of the 10 year warranty period. This issue has been further exacerbated by a few attorneys that specialize in these type of lawsuits. Developers, builders, and architects have had to invest a great deal of time and money to address the issues. This lead to the insurance companies greatly increasing the premiums on condo construction due to all of the suits/settlements. Some people are working behind the scenes to have the state legislature review the language of the law. However, it will take a lot to get it changed as it can be viewed as a “consumer protection” law. Hopefully fair adjustments can be made to encourage more condo development. There is definitely a market for it and this would be a great site.

Wedgeguy
Capella Tower
Posts: 3785
Joined: June 1st, 2012, 6:59 am

Re: Nicollet Hotel Block

Postby Wedgeguy » July 29th, 2015, 12:44 pm

Only problem now is that the old retail portion of the Hyatt is now pretty much ballrooms for the hotel. All of the restaurants and shops have long gone from that 2nd level. But then again it is on the tail end of the skyway and there doesn't really have that much skyway traffic from the near by residential population. Most just stay at street level/greenway as the skyway takes them well out of their way to get to places on Nicollet. But if retail can survive on the skyway level of the office and condos on the north end of 2nd, then if they can get a skyway to Whole Foods I would think that retail in the Eclipse and Nicollet block would work very easily for both skyway levels.

Didier
Capella Tower
Posts: 2430
Joined: June 3rd, 2012, 10:11 am
Location: MSP

Re: Nicollet Hotel Block

Postby Didier » July 29th, 2015, 1:32 pm

Those warranties are important. I live in a boom era-condo that had insufficient windows and several construction defects. Ultimately everyone needed to buy new windows and the entire exterior of our building was replaced, since shoddy construction meant water was getting inside and rotting some of the wood.

We sued the developer, but half the contractors no longer exist and ultimately we had to settle, which meant we got several million dollars in the settlement and still every owner had $10,000+ in special assessments.

Konante
Nicollet Mall
Posts: 198
Joined: June 1st, 2012, 9:17 am
Location: Warehouse District

Re: Nicollet Hotel Block

Postby Konante » July 29th, 2015, 2:49 pm

Didier wrote:Those warranties are important. I live in a boom era-condo that had insufficient windows and several construction defects. Ultimately everyone needed to buy new windows and the entire exterior of our building was replaced, since shoddy construction meant water was getting inside and rotting some of the wood.

We sued the developer, but half the contractors no longer exist and ultimately we had to settle, which meant we got several million dollars in the settlement and still every owner had $10,000+ in special assessments.
Agreed. My building is spending a bunch of money to repair damage because major piping was installed without supports and joints. Huge issue, of course, so why should the homeowners pay for it?

Requiring a 10 year warranty doesn't make it too difficult to build condo buildings, it merely makes them less profitable. This is developers campaigning that consumers should bear more risk so they can get more favorable terms on construction loans and build more. If the market demand is there, developers will build. And they'll be building with an appropriate distribution of risk/responsibility in play. Caveat Emptor (largely) went away in real estate for good reason.

MNdible
is great.
Posts: 5797
Joined: June 8th, 2012, 8:14 pm
Location: Minneapolis

Re: Nicollet Hotel Block

Postby MNdible » July 29th, 2015, 5:32 pm

Well, the fact that they're not building condos in spite of evident demand should suggest that with the added costs and uncertainty, they are unable to build condos for a price that people are willing to pay for them.

Wedgeguy
Capella Tower
Posts: 3785
Joined: June 1st, 2012, 6:59 am

Re: Nicollet Hotel Block

Postby Wedgeguy » July 29th, 2015, 6:48 pm

MNdible wrote:Well, the fact that they're not building condos in spite of evident demand should suggest that with the added costs and uncertainty, they are unable to build condos for a price that people are willing to pay for them.
"They" have built condos since the big boom. There is one on Gold Medal Park with another proposed to sit right next door. There is one being built on 8th and Portland, and these as not small projects either. What it shows is that too many developers rely on "value engineering" to line their pockets with what down the road could be subpar workmanship. Condos are being built across the country and we are not the only city that looks out for the consumer when building go up. So it is just that they are cheap now, until they run out of easy money projects they will stay way from them until they need something that there is a market for. Right now there is an apartment market, but if or when it goes south, then they will have to look elsewhere for projects to keep their tradesmen working. So until they want to spend the money, they will wait until there are is table scraps of a market, where the only thing left is the condo market that they can build in. It is the only market that is not being over built right now.

min-chi-cbus
Capella Tower
Posts: 3131
Joined: June 1st, 2012, 9:19 am

Re: Nicollet Hotel Block

Postby min-chi-cbus » July 29th, 2015, 7:11 pm

If argue office isn't being overbuilt either.

MNdible
is great.
Posts: 5797
Joined: June 8th, 2012, 8:14 pm
Location: Minneapolis

Re: Nicollet Hotel Block

Postby MNdible » July 29th, 2015, 8:03 pm

Minnesota's rules regarding this are unique and really should be changed.

Jim Stanton is the exception that proves the rule. He's too stubborn to not build condos.

Archiapolis
Foshay Tower
Posts: 818
Joined: November 2nd, 2012, 8:59 am

Re: Nicollet Hotel Block

Postby Archiapolis » July 30th, 2015, 7:43 am

Wedgeguy wrote:
MNdible wrote:Well, the fact that they're not building condos in spite of evident demand should suggest that with the added costs and uncertainty, they are unable to build condos for a price that people are willing to pay for them.
"They" have built condos since the big boom. There is one on Gold Medal Park with another proposed to sit right next door. There is one being built on 8th and Portland, and these as not small projects either. What it shows is that too many developers rely on "value engineering" to line their pockets with what down the road could be subpar workmanship. Condos are being built across the country and we are not the only city that looks out for the consumer when building go up. So it is just that they are cheap now, until they run out of easy money projects they will stay way from them until they need something that there is a market for. Right now there is an apartment market, but if or when it goes south, then they will have to look elsewhere for projects to keep their tradesmen working. So until they want to spend the money, they will wait until there are is table scraps of a market, where the only thing left is the condo market that they can build in. It is the only market that is not being over built right now.
Uh, a key point here is that all of the projects that you mentioned are being developed/built by the same guy who has his own financial resources to put at risk. The point that Architorture is making is that developing condos is very tricky legally and nobody likes risk (especially banks). By all means, rip the "greedy developers" (because I do it all of the time) just make sure that you are ripping them for the right reasons.

sushisimo
Landmark Center
Posts: 232
Joined: June 2nd, 2012, 3:47 pm

Re: Nicollet Hotel Block

Postby sushisimo » July 30th, 2015, 9:19 am

What happens when an apartment complex turns condo? Are there any of these state laws applied then? I'd guess not, and the new association would have due diligence to identify the building's features that are going haywire and secure funds to fix.

eastharrietguy
City Center
Posts: 36
Joined: December 28th, 2014, 11:46 pm

Re: Nicollet Hotel Block

Postby eastharrietguy » July 30th, 2015, 2:37 pm

Didier wrote:Those warranties are important. I live in a boom era-condo that had insufficient windows and several construction defects. Ultimately everyone needed to buy new windows and the entire exterior of our building was replaced, since shoddy construction meant water was getting inside and rotting some of the wood.

We sued the developer, but half the contractors no longer exist and ultimately we had to settle, which meant we got several million dollars in the settlement and still every owner had $10,000+ in special assessments.
I agree completely. If Stanton can build condos successfully, and appears unconcerned about warranty issues, why can't others? Does Stanton build a better quality product and is therefor confident his buildings will not have any issues? Or does he budget $ in case a suit comes up? If I were to buy a new condo I would like to think the developer would stand behind it for 10 years.

TroyGBiv
US Bank Plaza
Posts: 624
Joined: July 6th, 2012, 10:33 pm

Re: Nicollet Hotel Block

Postby TroyGBiv » July 30th, 2015, 2:56 pm

I may be wrong - but my understanding was that the issue is securing financing. Lenders / investors (like REITs) are hesitant to make a lone with this 10 year warranty issue. Stanton is using his own money and so this issue is just part of his business model. Converting apartments to condos is not an easy or cheap proposition... depending on how the building was built and how the utilities and the space was configured. If anyone has better info on this - please correct me!

MNdible
is great.
Posts: 5797
Joined: June 8th, 2012, 8:14 pm
Location: Minneapolis

Re: Nicollet Hotel Block

Postby MNdible » July 30th, 2015, 3:30 pm

Did you have some tangential involvement with a condo project?
Did somebody somewhere along the line of the project have a bad day and not install some flashing properly (or any of the one million other things that could go wrong on a big project)?
Do you have good insurance?

Congratulations, you're getting sued!

Wedgeguy
Capella Tower
Posts: 3785
Joined: June 1st, 2012, 6:59 am

Re: Nicollet Hotel Block

Postby Wedgeguy » July 30th, 2015, 10:47 pm

MNdible wrote:Did you have some tangential involvement with a condo project?
Did somebody somewhere along the line of the project have a bad day and not install some flashing properly (or any of the one million other things that could go wrong on a big project)?
Do you have good insurance?

Congratulations, you're getting sued!
If the contractor does not know how to put up a vapor barrier, flashing, wiring, etc.. Then they should have to pay to fix what they did not do correctly. That is why they are licensed and bonded. I'd sure hate to spend a quarter of a mil, only to find out they did a piss poor job building the place. Should I the owner have to fork over thousands of dollars on top of what I'm already paid for. Should I demand to know every contractor and sub-contractor who built part of the project to see what type of rating they have with the BBB so I the owner don't end up paying for someone else's screw up, Corner cutting, incompetence? We expect a car to at least last for close to 10 years, should our home not at least last as long also?

Archiapolis
Foshay Tower
Posts: 818
Joined: November 2nd, 2012, 8:59 am

Re: Nicollet Hotel Block

Postby Archiapolis » July 31st, 2015, 7:37 am

Wedgeguy wrote:
MNdible wrote:Did you have some tangential involvement with a condo project?
Did somebody somewhere along the line of the project have a bad day and not install some flashing properly (or any of the one million other things that could go wrong on a big project)?
Do you have good insurance?

Congratulations, you're getting sued!
If the contractor does not know how to put up a vapor barrier, flashing, wiring, etc.. Then they should have to pay to fix what they did not do correctly. That is why they are licensed and bonded. I'd sure hate to spend a quarter of a mil, only to find out they did a piss poor job building the place. Should I the owner have to fork over thousands of dollars on top of what I'm already paid for. Should I demand to know every contractor and sub-contractor who built part of the project to see what type of rating they have with the BBB so I the owner don't end up paying for someone else's screw up, Corner cutting, incompetence? We expect a car to at least last for close to 10 years, should our home not at least last as long also?

Aaaaaand, this is why nobody is building condos. You are absolutely right to feel this way.

However, the way that the laws are written isn't simply a matter of "responsible bonded/insured parties have to fix problems." As you can probably imagine, there are lawyers who take advantage of these situations. If there is a leaking window in one unit, a lawyer will go to ALL owners, try to push forward a class action type of suit and push the scope as far as possible - not just new flashing, but new windows, new install, new siding which means different trades, scaffolding, material cost, etc. Once a lawsuit like that emerges and the contractor gets sued, they then go on to sue anyone who ever glanced at a drawing (the architect, the engineer, the subcontractor, all of their loved ones...). The insurance companies that insure architects, etc. have seen all of this play out and have said, "Go ahead and design condos, just expect your bill to triple." Same goes for the law firm representing the design firm.

Hence, everyone in the list above is running away from condos to reduce risk. People above have laid out the financing difficulties with risk averse banks which brings us to where we are today.

Until these laws get changed and some agreement can be reached where architects, contractors, developers, etc. get more protection then large condo developments aren't going to happen. I own a home and I want the work done on my home to be good. If it isn't good, I hope to be able to get it fixed but suing everyone to maximize every possible cent for a lawyer is not an ethical motivation (the way I see it).

User avatar
Anondson
IDS Center
Posts: 4027
Joined: July 21st, 2013, 8:57 pm
Location: Where West Minneapolis Once Was

Re: Nicollet Hotel Block

Postby Anondson » July 31st, 2015, 7:39 am

What makes work done on condos differ from work done on homes that law requires differing liability? Why shouldn't they be the same?

sushisimo
Landmark Center
Posts: 232
Joined: June 2nd, 2012, 3:47 pm

Re: Nicollet Hotel Block

Postby sushisimo » July 31st, 2015, 8:15 am

Or apartments for that matter. If the cladding on Nic on 5th falls off and smashes an LRT, do we say "Eh, C'est la vie, apartments. Thank god it's not condos or imagine the litigation!"


Return to “Anything Goes”

Who is online

Users browsing this forum: No registered users and 1 guest