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RE: What is it about Condos

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Hey Stan....

Great article...thanks!


But, according to "Judge Smails", wasn't it originally called "Gof"?????



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Cape Cod Grand Cayman Holdings Ltd. - Cayman
Fisher+Partners Structural Engineers Ltd. - Cayman
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-----Original Message-----
From: Caldwell, Stan [mailto:scaldwell(--nospam--at)halff.com] 
Sent: Wednesday, August 16, 2006 9:45 AM
To: seaint(--nospam--at)seaint.org
Subject: RE: What is it about Condos

Mark Johnson wrote privately:

Thanks for the reply.  However, it's necessary to subscribe to the print
edition in order to read anything online.  If it's easy, send me a copy.

Mark:

Sorry, I screwed up.  Please accept my apology.  The full article follows
below.

Stan R. Caldwell, P.E.
Dallas, Texas

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Many years ago in Scotland, a new game was invented. 
It was ruled "Gentlemen Only...Ladies Forbidden",
and thus the word GOLF entered the English language.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 

Lawsuit Enmeshes Vendome

Experts: Legal 'Perfect Storm' Could Cast Pall on Dallas' Condo Boom.

Dallas Business Journal - July 28, 2006

The Vendome on Turtle Creek, one of the first luxury high-rise condominium
projects to hit the Dallas scene a few years ago, commanded prices as high
as $4.5 million per unit. 

Now, in a lawsuit filed against the developer, general contractor and real
estate agent, the project's Homeowners Association is seeking millions of
dollars in damages for alleged construction defects and other issues. 
  
Complaints range from the aesthetic, such as lobby décor that's not quite up
to snuff, to the potentially dangerous, such as water leaks in the elevator
pits. In the spring of 2004, court documents say, an elevator inspection
revealed rusted and corroded elevator ropes -- but not before one of the
elevators fell two floors and injured a woman who'd just returned from her
husband's funeral. 

The Vendome case has dragged on since it was first filed in 2004. It was
scheduled to go to trial in late August, but last week was moved into
arbitration. 

Industry experts say the $90 million Vendome is hardly alone. Virtually
every residential condo project built in Dallas over the last couple of
years is involved or has been involved in litigation, they say. HOA
lawsuits, described as "epidemic" in high-growth areas such as California
and Las Vegas, are rapidly becoming a major concern in Dallas' emerging
condo market, too. 

Plaintiff attorneys who have found success in California and Arizona are
moving into Texas, offering free inspections to HOAs, sources say. "It's
really becoming a mill, its own industry," one developer representative
said. 

"There are 24 projects under construction in Dallas," said Joe Bryant with
Dallas-based McLaughlin Brunson Insurance, which provides risk-management
services and insurance to architects, engineers and environmental
consultants. "A perfect storm is brewing." 

The 4-year-old, 21-story Vendome, modeled after the Hotel de Vendome near
the Louvre in Paris, sits at the corner of Lemmon Avenue and Turtle Creek
Boulevard in one of the most exclusive areas of Uptown. 

Inside, the Vendome's units are appointed with hardwood floors, marble
bathrooms, granite countertops and custom cabinetry. Outside, fountains
gurgled the other day while a small army of gardeners worked to coax the ivy
to grow, despite the sweltering summer heat. 

The garden is among the homeowners association's complaints. Residents say
the landscaping is failing to thrive, due to the use of wrong soils and
inefficient drainage systems. They put the cost of developing the formal
European gardens they were promised at $750,000. 

Other complaints involve the building's heating, ventilation and
air-conditioning systems, drainage issues, soundproofing and waterproofing
defects and a poorly designed fountain that often sprays residents at the
porte-cochere entrance. 

Both sides agree there are no concerns about the building's structural
integrity. 

In early 2004, New York-based Vendome Partners L.P. -- a joint venture
between New York's Metropolitan Development Group, which developed the
Dallas Vendome, and Lehman Bros. Holdings Inc. -- made some of the requested
repairs and gave the HOA $153,000 for others. According to the HOA, the cost
to make additional fixes and improvements will run more than $4 million. 

Besides the construction issues, the HOA also is charging Vendome Partners
and Dallas Realtor Judy Pittman with deceptive trade practices, saying they
were promised a state-of-the-art security system, wrought-iron railing on
the roof, a climate-controlled wine cellar and other amenities that were
never delivered. 

The HOA is asking for $4 million from Vendome and Oklahoma-based Manhattan
Construction Co. and $2 million from Pittman, plus other damages, court
costs and attorneys fees. 

Numerous condo owners were contacted for this story; all declined to be
interviewed. In a 2004 letter to residents, the HOA asked owners to
"exercise the utmost discretion in any conversations they may have regarding
the delicate situation," to help "preserve the value of individual
properties and the reputation of the building." 
  
Manhattan, which calls the HOA lawsuit frivolous, is no slouch when it comes
to condo construction. Besides the Vendome, the company built the $28
million second phase of The Plaza at Turtle Creek and is at work on the Ritz
Carlton Hotel & Residences, a 21-story, $200 million development in Uptown.
It also was recently selected as general contractor for the new Dallas
Cowboys stadium in Arlington. 

Manhattan filed a counterclaim earlier this year, asking for a clarification
with regard to warranties, as its contract was with the Vendome developer,
not the HOA. 

The HOA took ownership of the Vendome's common areas in October 2003.
Representatives say they brought the lawsuit only after being unable to
directly resolve issues with Vendome Partners. 

In mid-2004, the HOA hired Deborah Gagliardi to do an independent evaluation
of the project. A principal at the locally based Gagliardi Group, she is a
registered architect and mechanical professional engineer licensed in the
state of Texas. 

According to documents filed with the Dallas County District Court,
Gagliardi found 47 issues that needed to be resolved. 

Vendome Partners' attorney, Cynthia Dooley with Dallas-based Brousseau &
Associates, said her client has different positions on the various
complaints. She declined to provide more specifics, due to the pending
litigation. The HOA's attorney also declined to be interviewed, as did
Pittman. 

In an affidavit, one HOA board member described a contentious meeting with
Vendome Partners' John Conroy. The member said Conroy "vigorously disagreed"
with the group's observations and said he would not be "writing any big
checks" to resolve the issue. The meeting ended with Conroy vowing to "get
on a plane to New York and never return to Texas." 

Carolyn Shamis, one of the top residential Realtors in Dallas, said that's
indicative of the problem. "What happens is, as the buildings don't sell
out, the developer gets tired of it and things get shoved under the rug and
don't get fixed," she said. "They try to stall and get the HOA to pay for
things. They're carrying notes and don't want to spend any more money, so
they just stop." 

Arbitration regarding the Vendome situation is slated for March 2007. The
outcome will be binding only between the HOA and Vendome Partners. Attorneys
say that if the HOA gets a judgment against the developer, the developer
will go after the construction company, which in turn will go after
subcontractors. Fourteen subcontractors already have been brought into the
matter; one of them, Americast L.L.C., has filed for Chapter 7 bankruptcy
protection. 

>From a risk-management perspective, condominiums differ from apartments or
commercial projects because, once the condos are sold, the developer is out
of the picture, turning over ownership of all common areas to a homeowner's
association, which becomes responsible for maintenance and repairs. Because
condos typically are sold before they're built, buyers often make decisions
based on renderings and a vision. With multiple owners, there are a lot of
expectations. In Texas, if just two or more unit owners are unhappy, HOAs
have the right to pursue litigation. 
  
Don Neff, president of Irvine, Calif.-based La Jolla Pacific, a third-party
quality assurance services firm, said the Vendome exemplifies the typical
HOA lawsuit. His company just opened a Dallas office. "We've been living
with this for the last 10 years in California," he said. There, he said,
insurance companies left the state, as they were suffering $3 to $4 in
settlement losses for every $1 they collected. As a result, the
condo-construction market went flat. Carriers have recently returned, this
time with new insurance policies that require builders to "bleed with them,"
Neff said. 

Under the old model, "the plaintiff's attorneys stand on the sidelines and
watch the defendants duke it out," he said. "Whoever is left standing, the
HOA collects from." 

The new model, called a wrap insurance policy, simplifies things by bringing
the insurance company, the developer and all subcontractors under one
policy; all are represented by the same attorneys and all are financially
responsible for any litigation that may occur. 

Wrap-policy premiums are much higher. Ten to 15 years ago, a $1 million
policy might have cost $20,000 or $30,000. The same coverage today will cost
$650,000 to $800,000, Neff said. 

Mike Puls, with Dallas-based multifamily and condo consultancy Foley & Puls
Inc., said HOA lawsuits already have had a dramatic effect on insurance
costs for developers. "And without a good insurance policy, they won't get
financing from banks," he said. 


HOA lawsuits will continue to proliferate, he said, because it's difficult
to satisfy large groups of people. 

"When you get a number of buyers in the same building, some will get bored
and go looking for flaws," he said. "Or if a new building goes up, they'll
ask, 'Why isn't ours as good as that one?'" 

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