LA JOLLA, CA-A construction defect lawsuit has ended in an $18 million settlement against the British Columbia-based developer of the Pacific Regent La Jolla condominium complex and its subcontractors.

McGregor & Garrie LLP represented the condo association in the lawsuit against the Pennyfarthing Development Corp., Van Maren Construction Group, and The Fountains, a Tucson-based company that operates the condominium tower. The three firms are the largest of more than two dozen entities named in the lawsuit.

According to court documents, the 148-unit, 22-story tower was damaged by leaking water. The project used a siding material that–unlike standard construction stucco–allowed moisture to leak in through windows, balconies and sliding glass doors, according to the law firm. With adequate drainage, the moisture caused mold and corrosion.

An Atlanta-based engineering firm, Law Crandall, also will have to pay nearly $675,000 under the settlement because repairs it designed for the building were deemed inadequate.

The case was filed in March 1999 after mediation failed to produce a resolution. The trial started in April of this year.

For years, construction defect lawsuits involving condominiums have plagued the building and insurance industries, making it impossible for contractors to secure insurance. Legal experts say legislation taking effect July 1 could hold hidden perils for developers of condominiums and town houses.

In October, Gov. Davis signed into law sweeping reforms to the 1996 Calderon Act, which imposed settlement obligations on homeowners associations as a precondition to filing suit. The amendment requires all parties to participate in complex alternative dispute resolution proceedings.

If the changes adopted at the beginning of the months are not fully complied with in a timely way, the parties could waive substantial rights, according to Roger Haerr, partner in the real estate litigation practice for Luce, Forward, Hamilton & Scripps.

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