Homeownership opportunities throughout Washington State are being threatened — and the culprit is an epidemic of unnecessary lawsuits for construction defects. This rise in homeowner association lawsuits has caused insurance companies to put a halt to writing policies for condominium developments. As a result, many condominium builders are being forced to curtail construction plans because they simply cannot find or afford liability-insurance coverage.

Condominium builders in Washington have been under fire by homeowner associations and their attorneys for alleged construction defects in their condominium units. In many cases these defects could be fixed by the builder at a modest cost, however instead of allowing the builder to make a good-faith effort to remedy the defects, the condominium homeowner association often resorts to filing suit.

Builders, fearing high legal costs, will often settle out-of-court for large sums. As a result, insurance companies, who ultimately pay the settlement, have either raised their premiums substantially, or in many cases, stopped providing liability insurance to condo builders altogether. In fact, according to the Master Builders Association, 17 insurers have pulled out of Washington State over the past year, leaving builders without access to a single standard insurer (standard insurers are backed by state funds, which guarantee claims if a company goes out of business).

The representing attorneys and condominium homeowner associations argue that the problem isn’t unnecessary lawsuits, but rather, substandard construction. Builders agree that, as in any industry, there are bad practitioners out there. But they also propose that aggressive lawsuits have ensnared reputable builders, as well, often turning minor problems into major lawsuits.

Finding a solution to this problem is vital to the stability and health of our communities because condominiums offer homeownership opportunities for a wide range of people. And a high level of homeownership is the foundation of a strong community because it fosters stable families, it gives people a stake in their neighborhood, and it enables people to build security through equity. Furthermore, as prices of single-family homes have risen, condominiums offer an affordable opportunity for many first time buyers to get into homeownership. They also offer an excellent choice for empty nesters and retirees.

The rapidly growing threat of lawsuits could eventually bring condominium construction to a halt in Washington, eliminating homeownership opportunities and an excellent tool for growth management. Our state’s Growth Management Act calls for an efficient use of land in urbanized areas and encourages more multi-family construction. Condominiums allow communities to meet their targets for housing density while maintaining stability through homeownership. Condominiums also offer affordable housing opportunities near the job centers, giving many people the choice of a shorter commute and taking pressure off of our already crowded roads. In short, fewer condominiums means more sprawl and traffic.

The Legislature passed a bill earlier this year that addressed liability issues. The “Right to Cure Bill” gives contractors the chance to fix or pay for a defect before a lawsuit is filed. This new law requires homeowners to alert builders of grievances before filing a lawsuit. The builder is then given 45 days — by law — to develop a solution to the problem. After being notified, the builder has an additional 21 days to have it fixed, to dispute the problem, or buy back the residence.

While the “Right to Cure Bill” is a positive first step, more needs to be done to fix the insurance problems that condominium builders continue to face. The Master Builders Association is working with stakeholders to review possible additional legislative solutions for the 2003 Legislature. Fixing this problem remains a top legislative priority for the association. For those involved the alternative is a possible halt to condominium construction, which would have reprehensible effects on affordable homeownership opportunities and the overall health of our local communities.

(Editor’s Note: J. Lennox Scott is the Chairman and CEO of John L. Scott Real Estate. You can visit his Web site at www.johnlscott.com.).