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CONT I NU E S ON PAGE 66
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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
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-