FAQ: Leaky Building Litigation
Finding yourself in a recently built leaky building can be a sinking feeling (pardon the pun). The prospect of repairs, legal actions and high costs can plunge condominium and other building owners into a state of uncertainty.
Conkie & Company has developed extensive expertise assisting building owners, strata councils, housing co-operatives and landlords with the uncertainty that results from leaky buildings. Following is a list of Frequently Asked Questions that may assist you in setting a course of action to remedy your situation.
We also invite your further questions. Please e-mail us using our handy form or call us at (604) 662-7544.
When should our strata council seek legal advice, now that we know we have a building envelope failure?
Legal advice can be very helpful early on in the process. The strata council is wise to get basic information early from which it can make good decisions and come up with a game plan. A good preliminary legal opinion will tell you your options, possible parties you may sue, and whether any limitation periods have expired. Just because you have hired a lawyer for some preliminary advice doesn't mean you need to carry on with legal proceedings right away, or at all.
You may consider suing the companies and individual professionals who developed, designed and built your building envelope. This includes the architect, the developer, the general contractor, many of the sub-trades, the municipality, other inspection agencies possibly, and warranty providers. Many of those parties carry insurance, so the insurance companies also become involved.
Simply put, limitation periods are legal deadlines which have the effect of blocking you, the owners, from commencing or proceeding with a lawsuit if you take that step too late. Yes, you do need to worry about them. They may effectively cut off your access to legal proceedings, if you have waited too long before commencing a lawsuit, despite the merits of your case.
You should get legal advice as soon as possible about limitation periods, as this can be a complex area of the law. For example, different kinds of legal claims have different limitation periods that apply. Probably you have six years to sue for inherent defects in your building, but in some cases you may have two years. The counting of the applicable limitation period commences at different times, and you should definitely obtain legal advice about this tricky area of the law. The Legislature has attempted to balance the interests of plaintiffs and defendants. Your lawyer is your advocate in interpreting legal principles and applying them to your case so that you will be able to proceed if possible.
This is difficult to predict as almost all of these kinds of cases settle somewhere along the path to trial. However, if you were to proceed all the way through the legal process to a trial, you could expect it to take at least two years, and perhaps a year or two more. As almost all of these cases proceed to mediation these days instead of going to trial, it is more interesting to consider how long that process takes, which is running parallel to the court process. While that is also difficult to predict, keep in mind that settling very early on in the process can often mean taking less, while settling closer to a trial date often produces more profitable results. This means you should plan on the process taking at least two years, and it could take more, depending on many variables.
In some key ways, the process of going to mediation is very similar to the process to trial. While the mediation occurs earlier than a trial date, and can be much less expensive, the plaintiff still may have to take a lot of litigation steps, including exhaustive document analysis and exchanging extensive expert reports, in order to persuade the defendants to make meaningful contributions to a large enough settlement amount. Remember, in order to invite maximum contribution from defendants at a mediation, you need to persuade them of the strength of your case, usually. Thus, the costs can still be quite high. The question to ask yourselves is, how do the estimated legal fees compare to the total cost to remediate the building.
Fortunately, the courts of British Columbia have shown a willingness to intervene in cases where there is strong evidence of a building envelope failure and the need to remediate, even where a majority of owners have voted not to proceed with repairs. For example, in two British Columbia cases, commonly known as the Marco Polo case and the Tadeson case, where special resolutions to remediate were defeated, and a small number of owners petitioned the court for assistance, the judge focused on the obligations of the strata corporation to repair the building. On that basis the court made a declaration, for example in the Tadeson case, that repairs to rehabilitate the building envelope were required. The strata corporation was ordered to commence repairs and to assess each owner for their appropriate contribution for the repair costs.
Needing the court to intervene in this way is not desirable, as it is costly and still risky. It is preferable to support the democratic principles of majority vote that are set out in the Strata Property Act, and courts may well rule in favour of the majority of owners. Try to create a consensus first. Perhaps have your lawyer attend an informational meeting or two to stress the importance to the owners and the strata council of meeting their repair obligations.
If a strata council does not appear to be meeting its repair obligations, owners can petition the court for help. If a strata council is not fulfilling its duties, they can ask that an administrator be appointed by the court to manage the affairs of the owners. On the other hand, if a majority of the owners don't wish to support the recommendations of the strata council and a 75% vote is not reachable in order to fund repairs, the strata council can support the petitioners and jointly go to court. This is one of several options. Getting 75% of the owners to vote to fund repairs can often be quite difficult. It is obviously far preferable to have a lawyer or lawyers try to persuade the owners that petitioning the court and taking court orders to require that the repairs be done will end up being quite a bit more costly for the owners than is necessary.
The owner who lived here before me didn't tell me the full story, and neither did his real estate agent: can I sue them?
The short answer is yes. As a purchaser, you have an obligation to review the minutes of the strata council and perhaps various subcommittees to do your own 'due diligence'. If you ask the owner and your real estate agents expressly about water penetration problems, defects and deficiencies in the building and so on, they are obliged to disclose any information they may have to you. If they don't, you may be able to sue the owner for breach of contract and failure to disclose or warn you and the real estate agents for misrepresentation and negligence.
If you are hiring a lawyer to give you preliminary advice and perhaps to review some of your contracts in the tendering and repair process, they will typically charge either a flat fee for services or an hourly rate. Ask for an estimate of what their total fees will be for those services. A preliminary opinion may cost between $5,000 and $15,000, depending on the extensiveness of investigation and review of documents and the complexity of the case. Reviewing contracts and providing some advice as to contractual relationships during the repair process should cost quite a bit less. Ask the lawyers you are considering hiring what their hourly rates are and what kind of experience they have, sign a retainer letter setting out terms of your arrangement, and ask them what their billing procedures are. Never be reluctant to clarify any concerns or questions you have about this part of your relationship with a lawyer, as it should make all of your communications easier, too.
If you are retaining a lawyer to commence legal proceedings for the moisture penetration problems in your building, you have to know that this is a costly course of conduct. It is multi-party, complex litigation that is likely to last two years or more. While it varies greatly from lawyer to lawyer, you should expect to spend fees in the range of $50,000 upwards. Because all of the parties you are suing also have to spend money on legal fees, and because the costs of attending trial are so prohibitive, most of the parties are usually motivated to settle. Even though you may ultimately spend $100,000 or more in legal fees, if you have a $1 million cost to fix your building, the legal fees, as you can see, are a relatively small percentage of that total cost.
Although lawyers frequently get asked this question, it is something they simply can't predict. We can say that almost none of the lawsuits commenced in British Columbia Supreme Court have proceeded to trial, and presumably most of them have settled. A settlement is supposed to be a compromise of a dispute that all parties make because they feel they can live with the compromise. Are plaintiffs happy with the results they have obtained? We certainly know some happy plaintiffs. Remember that getting a contribution of any amount towards the total costs you are facing is helpful, as long as you haven't spent more on legal and expert fees than you recover.
One of the disadvantages of settlement is that the terms of them are usually confidential and they don't go into any kind of a record. No case or precedent law develops. Again, it would be interesting to somehow chart statistics on settlement payments: how much, and who is paying. If can safely be said, however, that architects, general contractors, developers, some of the sub-trades and municipalities have all made contributions to settlements. They don't always do so, and each case is different, but yes, these matters are settling, for money.
Update September 15, 2003