Rodney Kauffman, executive VP of the Seattle chapter of the Building Owners & Managers Assn., says while BOMA is not directly involved in the multi-family market, it is concerned from the standpoint this issue is impacting Downtown living, the vibrancy of which is critical to building owners and managers. "That issue is basically putting a stop to the creation of new condo developments in Seattle," states Kauffman.

One general contractor tells GlobeSt.com the problem lies rooted in attempts to develop product with palatable market prices while keeping up with codes. In certain instances, the combination of "economical" designs and materials resulted construction flaws. Though the industry plight extends beyond the Pacific Northwest, water intrusion is the most prevalent defect locally.

These and other sources say lawsuits by homeowners associations and the payment of legitimate claims have been like chum to the sharks, as schools of attorneys are now industry-building by enticing owners to sue--defect or not. The condo-development world is now replete with stories that , from the developers' perspective, bear a disturbing resemblance to witch-hunts.

Speaking not for attribution, a contractor recounts for GlobeSt.com the experience of being sued by a condo owners' association: It had been several years since the development had been completed, and no flaws had been found. The purpose of the suit was simply to extend the statute of limitations on the chance some defect were discovered in the future. This time, the action was thrown out of court. But, the contractor has permanently abandoned his involvement in condominium projects as a result.

Speaking for the other side is Bo Barker, a partner in the Seattle law firm of Barker Martin & Merchant, which specializes in representing condominium associations in matters of construction defects. "There is just is no integrity to the building permitting process," adds Barker tells. "When a developer retains an architect to design a condo, virtually without exception they will tell the architect to draw the minimum set of plans needed to obtain a building permit and get it on the market."

As for the prevalence of ungrounded law suits and assertions that claims are driving up insurance rates, Barker disagrees. "It is not litigation which creates the problem; it is faulty construction," says Barker "The construction out there is so bad you can't help but prevail in these claims if the owners find them out in time. The last thing in the world I would do on behalf of a client is assert a claim which would cause a loss in credibility for the good claims, and there's so much bad construction out there that it simply does not pay to lose credibility."

Susan Stead is with Parker, Smith & Feek, a firm which brokers insurance from several companies to the condo development industry, says the number of claims insurers have had to pay is similar to asbestos in the number and size of the claims. "What's happening from the insurance side is that carriers have paid a number of claims for construction defects that are expensive to repair, into the millions of dollars," Stead tells GlobeSt.com. "Those companies are recognizing that it's challenging to pay those kinds of settlement amounts--and as often as they are."

Stead confirms that the market and number of carriers willing to write insurance on condominium projects is diminishing. "Another thing," the broker adds, in addition to restricting the amount of insurance the carriers are willing to write, they are adding a lot of exclusions that weren't on policies a couple of years ago.

Lobbyists for the Building Industry Association of Washington, meanwhile, are pushing for passage of Senate Bill 6409, which would beef up the rules governing construction defect lawsuits and make insurance easier and cheaperto obtain.

The bill, which is being backed by Democrats and Republicans alike, received its first public hearing last week from the Senate Labor, Commerce and Financial Institutions Committee.

Current law now permits people six years to find a construction defect, and an additional six years to take legal action. Further, a plaintiff need not prove negligence on the part of the builder in order to be successful.

According to the Senate bill report, the proposed legislation would:

-- Allow the contractor an opportunity to fix or pay for residentialconstruction defects before the lawsuit is filed.

-- Require an initial list of construction defects to be filed with aconstruction defect lawsuit.

-- Before filing a lawsuit, the officers of a condominium association mustnotify all unit owners of the lawsuit and its anticipated cost.

Committee members have yet to take formal action on the bill, which requiresa second reading. A companion measure, House Bill 6525, is moving its waythrough legislative channels in the other chamber.

Instant Insights /

Drama, Crisis in Condo-Development Market

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