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Are Condo Developers Liable for Sinking SF Luxury Condos?

By George Khoury, Esq. on February 06, 2017 | Last updated on March 21, 2019

When buying a home, especially a newly built home, a buyer expects that the builder or developer will stand by their work and take responsibility for any mistakes in the construction. Unfortunately, when a defect becomes apparent, developers are not always going to be liable, and what's worse, insurance coverage may not always be available.

In San Francisco, residents in a luxury condo building are facing this exact problem as a result of their high rise sinking into the ground. Owners of units in the building have filed lawsuits attempting to get the developers and insurers to cover the cost of repairs, which for a sinking luxury high rise building in San Francisco, could reach into the tens of millions or more.

The Leaning Condo Tower of San Francisco

In 2008, a new luxury condo building opened in San Francisco and offered homes to those who could afford the luxurious new spaces. Not shockingly, the bulding sold out quickly. Among the once-considered-lucky tenants is, San Francisco royalty, Joe Montana. However, in 2016, it was announced to residents at an HOA meeting that the building had begun to sink, and had actually sunk 16 inches, and worse, had begun to tilt as well. The lawsuit filed by the residents alleges that the developers knew about the sinking years in advance of 2016, and actually knew shortly after pouring the foundation in 2006-2007, if not in 2009 when it was discovered it had already sank nearly 9 inches.

Although the building is still considered safe for occupancy at this time, the residents are rather upset. Experts with knowledge of the situation are concerned that while there may be a few hundred million in insurance coverage, the insurance policies may not actually cover the cost to repair the defect.

Developer Liability

When a real estate developer sells a property, along with the property, there is usually a warranty that covers defects, even if the written agreement is silent on the existence of any warranty. State laws generally require that known defects be disclosed prior to a sale, and if they are not disclosed, that could potentially lead to legal liability against whoever failed to provide the required disclosure, including potentially inspectors or brokers

In new construction, known defects may be difficult to assess as defects may take time to become apparent. How long a developer's warranty is expected to last is another question entirely, and some developers will ask buyers to waive liability for construction related defects either immediately or after a reasonable period of time known as the settling in period.

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