Texas Court of Appeals (El Paso): An Association and its property manager were held jointly liable

Texas Court of Appeals (El Paso): An Association and its property manager were held jointly liable for failure to implement repairs recommended in a reserve study, even though the members of the Association voted down an attempted special assessment to fund the necessary repairs.

Lakeside Village Homeowners Ass’n v. Belanger, 08-15-00214-CV (Tex. Ct. App. June 14, 2017)

Townhome unit owners filed suit for trespass and negligence against their owners association, property manager, and management agent for improperly maintaining and repairing a retaining wall and associated common area adjacent to a townhome duplex. The unit owners alleged that the improper maintenance and repair allowing the common area to divert surface and subsurface water towards the townhome property, which caused damage to the townhomes by way of soils movement-induced foundation damage.

Two reserve studies performed by the management company in 2005 and 2010 revealed that a railroad-tie retaining wall running throughout the 498-unit community was structurally deficient and failing, and each reserve study recommended an immediate replacement of the railroad-ties with a concrete retaining wall.  The Association did not have sufficient reserve funds to address all of the repairs recommended in the reserve studies.  In 2011, the Association sought a special assessment to contribute to the reserve account to fund the recommended repairs, but the members voted against the special assessment.

The jury awarded actual damages to the homeowner Plaintiffs of approximately $100,000 for physical damage to their townhome units occasioned by the failure to repair and replace the retaining wall, and an additional award of prejudgment interest and attorneys fees was attached to the judgment.  On appeal, the Court of Appeals upheld the jury verdict and entry of judgment.  The Association is still responsible for the retaining wall repairs.

Homeowners associations, their boards of directors, and their property managers must be vigilant in evaluating the condition of the common areas in the community to determine whether a portion of the community was defectively constructed by the original builder/developer.  By failing to initially identify the construction defect from the 2005 reserve study, and seeking to simply repair the property by special assessment, the Association and the property manager become liable to the unit owners for damage to their property even though the Association and property manager sought to specially assess the members of the Association to pay for the needed repairs.  A construction defect suit, brought in 2005, could have funded the necessary repairs and avoided the property damage suffered by the homeowners.