This is part 4 of Randy Sawyer’s 16 Part series on UCIOA. You can read Parts 1, 2 and 3 here.
Section 87, subsection (d)
Subsection (d) of UCIOA’s Section 87 is quite troubling. This section requires the developer to submit a written statement setting forth its proposed settlement of the Association’s construction defect claim to the Association within 60 days of the completion of its investigation into the Association’s claims as provided under subsection (c):
§87(d) – Within 60 days after completion of its inspections and testing, the declarant shall submit a written statement to the association setting forth declarant’s proposed settlement of the claim, which shall be referred to as the “settlement offer.” If the declarant does not deliver the settlement offer within the 60-day period, the association may institute an action without satisfying any other condition of this section.
The glaring problem with subsection (d) is that there is no requirement whatsoever that the settlement offer by the developer must be “reasonable.” In other words, a developer whose only interest is to drag the matter out and bleed the Association of its limited resources could force the Association into the alternative dispute process contained in UCIOA and then offer only $1 to settle the claim. There is no provision that allows the Association to get out of this mandated process in the event the developer reveals its bad faith in this fashion. The Association, after obviously rejecting that offer, would still be obligated to continue on with the arbitration proceedings even with the knowledge that the developer was acting in bad faith.
In addition, it is extremely troubling that the statute makes no effort to include the Sponsor/Developer’s insurance carriers in the settlement process. Given that most Sponsor/Developers are shell companies with no assets that are set up only to handle the specific project in question, a settlement offer from a Sponsor/Developer without support from its insurance carriers is in our experience often meaningless. UCIOA should mandate the involvement of the insurance carriers at the outset of the alternative dispute procedure, since in our opinion this is the only real way of giving the settlement process any hope of succeeding.
Another problem that becomes more clear here is the 180 day tolling of the statute of limitations under subsection (b) of Section 87, discussed in my previous blog post. Under subsections (c) and (d) combined, the developer has had 60 days from the date of its reply to the Association’s notice of a defect claim to conduct its investigation, and then another 60 days from the completion of its investigation to issue a settlement proposal. That is a total of 120 days of the 180 day tolling period already gone.