November2017

CONSTRUCTION DEFECTS... from page 36.

of its subsidiary developer. In addition to seeking to pierce the corporate veil, many condominium associations will be left with no choice but to file a lawsuit right after transition in hopes of stopping the clock on any statute of limitations defenses. In certain circum-

stances, there will be little to no time for negotiation with the developer and attempting to resolve the issues with- out litigation. In an already litigious society, this does not bode well for developers of condominiums. In light of Palisades, if your associ-

likely still have various viable claims against its developer in such circum- stances, the developer is likely a single purpose entity with little to no assets. It is also likely that the developer failed to reserve significant funds to address warranty and other related construction defect claims. Thus, if a condomini- um association has serious construction defects, a successful recovery may be difficult if the association’s claims against the developer’s contractors and design professionals happen to be barred by the six-year statute of limita- tions as applied by Palisades. The truth is: the potential negative impact of the decision in Palisades will not just be felt by condominium associations, but by developers as well. In all likelihood, in circumstanc- es where an association is facing potential statute of limitations issues with respect to direct claims against a developer’s contractors and design professionals, every effort will be made to pierce the corporate veil of the developer to seek to hold its par- ent entities entirely responsible. While this is no easy task, it is certainly not impossible. Just earlier this year, a jury in Hudson County awarded a $9 million-plus verdict against a sub- sidiary of Hovnanian Enterprises, Inc. The jury further found that Hovnanian Enterprises, Inc., used a single pur- pose developer entity over which it exercised domination and control to commit a fraud or injustice and therefore pierced the corporate veil which will ultimately hold Hovnanian Enterprises responsible for the actions

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