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Contractors, Architects and Owners Beware: Beacon Residential creates a duty of care by architects to homeowners associations

On July 3rd in Beacon Residential Community Assn v. Skidmore, Owings & Merrill LLP (Case No. S208173) the California Supreme Court confirmed that construction design professionals owe a duty of care to third party property purchasers who did not hire or contract with the professionals. This landmark decision is a game-changer for owners, architects and contractors alike, as liability for design and defect issues now directly impacts architects and may lead to added construction costs.

Case Summary

In Beacon, a condominium homeowners association, Beacon Residential Community Association, sued the developer and various other parties involved in the construction of the units alleging that negligent architectural design work performed by the defendants resulted in several defects, including extensive water infiltration, inadequate fire separations, structural cracks, and other safety hazards.

Included in the alleged defects was a "solar heat gain," that resulted in the condominium units heating up such high temperatures that the units were uninhabitable and unsafe for significant portions of the year. The homeowners association alleged that the solar heat gain was due to the defendants' approval, contrary to state and local building codes, of less expensive, substandard windows and a design that lacked sufficient ventilation.

The two defendant architectural firms were the principal architects on the project, "providing original design services at the outset" of the project and playing an active role throughout the construction process, including coordinating efforts of the design and construction teams, conducting weekly site visits and inspections, recommending design revisions as needed and monitoring compliance with design plans. In exchange for these services, the architects were paid over $ 5,000,000.

The Court's Opinion

The California Supreme Court held that an architect owes a duty of care to future homeowners where the architect is a principal architect on the project - that is, the architect, in providing professional design services, is not subordinate to any other design professional - even if the architect does not actually build the project or exercise ultimate control over construction decisions.

The court in part relied on the Biakanja factors: (1) the architects' work was intended to benefit the homeowners living in the residential units that the architects designed and help to construct; (2) it was foreseeable that these homeowners would be among the limited class of persons harmed by the negligently designed unit; (3) the homeowners association's members suffered injury because the design defects made their homes unsafe and uninhabitable during certain periods; (4) there is a close connection between the architects' conduct and the injury suffered; (5) the architects' unique and well-compensated role on the project and their awareness of the homeowners' reliance on their knowledge attaches significant moral blame to their conduct; and (6) the policy of preventing future harm to homeowners supports recognition of a duty to care.

In this instance, the court noted, the principal possessed unique architectural expertise for the project: "[t]here is no suggestion that the owner or anyone else had special competence or exercised professional judgment on architectural issues such as adequate ventilation or code-compliant windows." Such unique knowledge contributes to the architect's duty of care.

Furthermore, the court noted, the architects' liability to the homeowners was not attenuated because the developer knew and concealed the alleged defects, although it might create claims by the architects against the developer. Lastly, even though the homeowners association was not a third party beneficiary to the contract between the architects and the owner, the association was not prohibited from alleging tort claims against the architects.

Conclusion

Contractors and architects must be aware of their standard of care to homeowners when entering into construction contracts to ensure that they obtain the necessary indemnification and defense obligations as well as to ensure that they have proper waiver and release provisions to avoid homeowner tort claims.

If you want more information on this issue, or have questions regarding your projects, please contact our construction law practice group.

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