Spoilation of Evidence – Fiduciary Duties of HOA Boards upon Discovery of Construction Defects.

The presence of construction or design defects within a community association introduces a complex dilemma regarding the fiduciary duty held by board members towards the association and its members. On one side, the board is entrusted with the fiduciary responsibility to uphold and address necessary repairs to the common elements. Consequently, there’s often pressure from unit owners to promptly rectify any construction or design flaws, particularly those posing health or safety risks. On the other hand, the board is also obligated to preserve evidence of these defects should litigation become necessary. However, immediate invasive inspections or repairs may inadvertently eradicate crucial evidence required to establish liability and quantify damages. Thankfully, with appropriate guidance, these seemingly conflicting fiduciary obligations can be effectively navigated.

The failure to preserve evidence, or its intentional destruction, when litigation is imminent or ongoing is termed “spoliation.” This defense is founded on the prejudice that arises when parties are denied an equal opportunity to examine alleged defects and witness any remedial actions. For instance, professionals hired by an association may inadvertently remove evidence of defects during inspections or repairs. Despite the association’s retained professionals documenting their observations, the failure to afford all responsible parties the chance to inspect the defects and witness repairs could significantly impede the association’s ability to establish liability and assess damages.

Therefore, it is imperative for the association to collaborate with legal counsel and other professionals to: (1) establish a systematic procedure for identifying defects; (2) notify all potentially accountable parties; (3) allow for inspections; and (4) permit all parties to observe and document all investigative, testing, and remediation activities.

While an association might face fewer penalties for unavoidable spoliation, if you are currently grappling with issues stemming from potential construction or design defects, seeking counsel immediately is crucial. Although board members have a fiduciary duty to maintain and repair common elements and may face pressure to do so swiftly, it’s equally important to ensure the preservation of evidence related to construction defects in anticipation of potential litigation.