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How Condo Law Change Will Impact New Development

September 21, 2017
Minnesota Lawyer - Sponsored Blog; Finance & Commerce - Sponsored Content
Author: Kristin B. Rowell

“Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”
~ Marshall Field

Newsflash Minnesotans: our state laws governing condominiums and townhomes changed at the conclusion of the 2017 legislative session. For a business litigator who emphasizes a significant portion of her practice representing real estate developers in complex business disputes, I’ve been particularly interested in the evolution of these changes. Why? Because condominium development has stalled in recent years, and the prevailing belief amongst experts in the field (including my clients) is that the dearth in condominium development has little to do with our economy (indeed, there is no shortage of demand for condos), but rather the influx of construction defect litigation in recent years. Those who know of this cottage industry of litigation know what I am talking about—litigation commenced by homeowners’ associations, often with minor or meritless construction defect complaints, where the attorney’s fees and other costs are excessive, making the condominium development project not worth the risk.

That litigation risk—largely in the form of the cost of defending against claims brought by homeowners’ associations years after the development was constructed and sold—made even the most confident and well-respected developers gun shy about spending millions of dollars on a quality project. The problem with the law is that the statute of limitations, often referred to as the “liability tail” for construction defect claims, means that developers (and most or all of those in the developer’s chain of command) can be sued for the most minor infraction as much as a decade or more after the project is completed. The majority of developers decided that the cost to defend itself against litigation, often meritless, wasn’t worth the risk.

Are there legitimate claims by homeowners’ associations for defective construction? Absolutely. But the reality is that the Minnesota legislature did not intend by its law to create a cottage industry of construction defect litigation by aggressive plaintiff’s attorneys shopping for claims. As you may have deduced by now, I am fiercely protective of my developer clients. And, as beautiful and successful as my clients’ luxury apartment projects are, I am personally ready for developers to start building condominiums again. Jim Stanton’s recent passing has left yet another hole in condo market. It is finally time for condo development to recommence. Read more in Minnesota Lawyer or  Finance & Commerce.