California Court Says Architects Owe Duty to Condo Buyers
Posted on May. 28, 2013

The California Court of Appeals has held that architects owe third party condominium unit purchasers a duty of care in the performance of professional services despite contractual language stating otherwise.  In Beacon Residential Community Association v. Skidmore, Owings and Merrill, 3211 Cal.App.4th 1301 (2012), the court relied on the state common law as well as a California statute in deciding that if a design professional performs its services negligently, it will be liable for damages to the ultimate purchasers of residential property. 

Skidmore, Owings & Merrill LLP and HKS Architects provided architectural and engineering services for the Beacon Residential Condominiums. The condominium’s homeowners association sued the architects and others for alleged construction defects.  The HOA alleged that the design professionals had a duty of care to the association and unit buyers when designing the project and that their professional negligence damaged them.  The trial court dismissed the complaint against the designers because it found they owed no duty of care to the HOA or its members and therefore could not be liable. 

In reversing the trial court, the California Court of Appeals applied a series of balancing factors for determining whether a defendant will be held liable to a third person with whom it does not have a contract.  As explained by the court, the factors to be considered include “the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.”

The court also rejected contract language specifically intended to avoid any designer responsibility to third party beneficiaries.  The contract provided:

“[N]o person other than the parties or their successors and assigns shall be a third-party beneficiary of the obligation contained in the Agreement or have the right to enforce any of its provisions. It is understood that (i) Owner reserves the right to sell portions of the Project to one or more condominium associations or purchasers during or after the conclusion of the Project; (ii) Architect is solely responsible to Owner and not to such condominium associations or purchasers for performance or Architect’s obligations under this Agreement; and (iii) no such condominium association or purchaser shall be a third-party beneficiary or third-party obligee with respect to the Architect’s obligations under this Agreement.”

The court determined, however, that this intended limitation only highlighted that the architects were well aware that condominium purchasers would necessarily be affected by the services that they performed. The court also said that the scope of the duty of professional care determines liability to foreseeable residential purchasers rather than whether those purchasers are third party beneficiaries under a contract. That is, while a duty of care arising from a contract can be contractually limited, a design professional cannot do the same with a duty of care otherwise imposed by law. 

The court then explained that a purchaser of residential housing “is certainly more fairly characterized as a ‘consumer’ and residential housing as a ‘product,’” and that “[w]hile the individuals and entities participating in the development process may have the ability to privately order allocation of liability among themselves by contract or through structuring of insurance overage, the buyer does not.”

The lawsuit will now proceed to trial for a jury to determine whether the design professionals breached the duty of care that the appellate court concluded they owed to the HOA and condominium purchasers.

This case illustrates the very challenging legal climate for architects and engineers providing services in California, and especially those designing condominium projects.  Project selection is always an important risk management tool.  Design professionals would be wise to carefully consider the enhanced liability exposure when contracting to perform services on a condominium project, whether in California or elsewhere.

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About Adam

Adam
Attorney Adam T. Mow

Adam is a trusted resource for architects, engineers and other members of the construction industry in litigation, risk management, contract negotiations and mechanics’ liens. Adam is also a licensed architect and a past president of the Utah chapter of the American Institute of Architects. He has been elected by his peers to the Utah Legal Elite since 2009.

Awards and Recognition

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Excellence in the Study of Architecture, American Institute of Architects Certificate of Merit, 1999

CALI Award for Excellence in Mediation and Advanced Negotiation, 2003

Community Mediator of the Year, Utah Dispute Resolution, 2007

Graduate of the Last Decade, Ball State University, 2008

Utah Business Magazine, Legal Elite, 2009-Present

Mountain States Rising Stars (Construction Litigation), 2009-Present