Ober|Kaler Obtains Confirmation of Significant Arbitration Award for Condo Unit Owner’s Claim

by Baker Donelson
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Ober|Kaler Construction Group principal Raymond D. Burke and associates Matthew T. Vocci and Jackson B. Boyd secured judicial confirmation last year in the Circuit Court for Baltimore City of a significant arbitration award on behalf of the owner of a penthouse condominium unit located at 100 Harborview Drive in Baltimore’s Inner Harbor. The Circuit Court’s confirmation of the $1,252,487 arbitration award resulted in what is believed to be Maryland’s largest judgment against a condominium council of unit owners for its failure to maintain, repair, and replace the common elements of a condominium building (in this case, the roof system, exterior façade, and HVAC ductwork of a 27-story high-rise). The Circuit Court also confirmed the arbitration award’s order of specific performance, which requires the condominium’s council of unit owners to replace the building’s roof system, repair its exterior façade, clean its HVAC ductwork, and insulate its rooftop exterior HVAC ductwork. The value of the work required by the specific performance order is approximately $6 million.

The arbitration trial team represented Penthouse 4C, LLC (the plaintiff and owner of the almost 5,000 square foot condominium unit) against 100 Harborview Drive Council of Unit Owners (the defendant and party responsible for maintaining the common elements of the high-rise building). James W. Ancel, Sr. (the sole member of Penthouse 4C, LLC and, in practical effect, the owner of the unit) lived at the condominium through mid-August of 2011, when he was forced to move out because of mold contamination that had rendered his unit unsafe for normal occupancy.

Penthouse 4C, though its sole member, Mr. Ancel, had asked the Council for almost two years to fix the water infiltration and mold contamination problems in the unit, which were caused by defects in the building’s roof system, exterior façade, and HVAC ductwork – all common elements of the condominium. As a unit owner in a condominium regime, Penthouse 4C had no ability or authority to fix the defects in these common elements; instead, the Council was solely responsible to maintain the common elements pursuant to the requirements set forth in the condominium’s bylaws and the Maryland Condominium Act. When the Council refused to fulfill its contractual and statutory obligations, Penthouse 4C filed suit in the Circuit Court for Baltimore City. The Circuit Court then stayed the case for arbitration, as required by the condominium’s bylaws.

During a week-long arbitration trial held at Ober|Kaler’s offices in downtown Baltimore before the Honorable Dana M. Levitz, the Honorable Paul E. Alpert, and the Honorable Dale R. Cathell, Penthouse 4C presented evidence to establish that water leaks and mold contamination arising from defects in the building’s roof system, exterior façade, and HVAC ductwork were causing property damage and unabated mold growth throughout the unit. Penthouse 4C also presented evidence to establish that the Council was negligent and had breached its obligations to adequately fund reserves to maintain the condominium’s common elements.

Penthouse 4C presented evidence of defects in the building’s roof system, exterior façade, and HVAC ductwork through the testimony and expert reports of Mr. Ancel (who is the owner of James W. Ancel, Inc. – a highly successful construction company) and professional engineers from Becht Engineering BT, Inc. and Simpson Gumpertz & Heger Inc. Penthouse 4C presented evidence of mold contamination through the testimony and/or expert reports of industrial hygienists from Compliance Environmental International, Inc. and Penniman & Browne, Inc. Penthouse 4C presented evidence of the cost to remediate the mold contamination and repair the water damage in the unit through the testimony and expert reports of Mr. Ancel and the president of Roy Kirby & Sons, Inc. Finally, Penthouse 4C presented evidence of the Council’s failure to adequately fund reserves to maintain the common elements through the testimony of Rachel M. Hess – an attorney with the law firm of Winegrad, Hess, Friedman & Levitt, LLC, an expert in Maryland condominium law.

The Council, meanwhile, defended the case though the testimony and/or expert reports of a professional engineer, the condominium building’s engineer, three industrial hygienists, a mold remediation specialist, a cost of repair estimator, an expert on the standard of care for condominium associations, and the Council’s president. The Council argued that it met the standard of care for maintaining the condominium’s common elements, that it adequately funded the condominium’s reserves, that the unit had normal levels of mold, and that the cost to repair any water damage in the unit was at most $53,118.23.

In the ensuing arbitration award, the majority panel of Judge Levitz and Judge Alpert found that “there are numerous defects allowing water to infiltrate into [the unit].” The majority panel also found that the unit “cannot be said to be safe for normal occupancy” because of “water damage, mold growth, and mold deposition” and that a “remediation protocol must be followed to correct the problems.” Based on its findings, the majority panel awarded Penthouse 4C “the sum of $1,252,487 as compensatory damages suffered as a result of the Council’s negligence and breach of their contractual obligations.” The majority panel also ordered the Council to replace the building’s roof system, repair its exterior façade, clean its HVAC ductwork, and insulate its rooftop exterior HVAC ductwork – work that is valued at approximately $6 million.

The Council immediately filed a motion with the arbitration panel to request a modification of the award, which was denied. The Council then filed a petition in the Circuit Court for Baltimore City to vacate in part and modify in part the award, which was also denied. The Circuit Court confirmed the award and entered it as a final judgment last year. To date, Penthouse 4C has collected the full money judgment portion of the award from the Council: $1,252,487. The Council has until December 30, 2013 to complete the specific performance requirements set forth in the award (replacing the building’s roof system, repairing the exterior façade, etc.). The Council, though, has appealed the Circuit Court’s decision to confirm the award. The appeal is currently pending in the Maryland Court of Special Appeals.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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