Utah court believes in justice against developers

A state Supreme Court believes in doing  justice rather than in perpetuating dated precedents. The Utah SC clarified the air in this case of developer-sellers versus HOAs over construction defects.  The association was seeking recovery of damages due to defects that became apparent after the developer turned the association over to the membership.  The court said,

 The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times.

  (It is time for the ancient 1946 Marsh v. Alabama holding pertaining to the “public functions” test, based on company towns, be buried deep, deep beyond resurrection.  There are new tests for state actors that will do well against private HOA governments).

  Here are some of the gems from the 2009 Davencourt at Pilgrims Landing Ass’n v. Davencourt at Pilgrims Landing, LLC (221 P.3d 234),

[W]hereas for a buyer the purchase of a new home is a significant and unique transaction. . . . To apply the rule of caveat emptor to an inexperienced buyer, and in favor of a builder who is daily engaged in the business of building and selling houses, is manifestly a denial of justice.”). Given these modern realities and this disparity, “[a] home buyer should be able to place reliance on the builder or developer who sells him a new house.”

 Hence, in protecting the innocent home purchaser by holding the responsible party accountable, the law has come to recognize that no longer does the purchaser of a new residence stand on an equal bargaining position with the builder-vendor or developer-vendor.

 And that should go for any issue relating to CC&Rs, as it is similar to the holding against adhesion contracts where one party has power over the weaker party.

 In regard to the developer’s fiduciary duties to the homeowners,

 The Restatement (Third) of Property offers guidance. It recognizes that a developer owes certain limited duties to an association and its members. (Section 6.20 of the Restatement).

 While the developer thus should not be a fiduciary in the broadest sense, we are nonetheless convinced that the developer’s control in this nonprofit association requires certain interests of the members and the association be protected. See id. This is achieved by the limited fiduciary duty.

Please understand this is a state court decision, and will serve as precedent elsewhere if there is no precedent  for the state in question.

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Published in: on May 26, 2010 at 6:37 pm  Leave a Comment  

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