In August of 2020, Nebraska passed LB 808. This bill, among its many changes, gave new provisions to the Nebraska Condominium Act. While condominiums were a popular project in the early 2000’s, the Great Recession of 2008 saw them stall out, and there has never been much of a rise in their development since. 

This bill hopes to increase the rate of condo development, as within the last five years there has been less than twenty new condominiums in the Omaha area, with only two planned to be built in 2022 so far. Bob Dailey, an attorney for McGrath North who specializes in condominium and homeowner law, reached out to the paper on the subject to help explain the changes for prospective developers. As he explained it, the importance of this bill is that it is pro-developer.

This Bill Has Given Five Major Updates, Which Are The Following:

Statute of Limitations

The statute of limitations for claims against developers by condo owners/associations has been lowered to two (2) years. Action must be taken within one (1) year of the date of discovery of any defect. When selling a condominium, the developer and buyer can agree to lower the statute to one (1) year. The statute of repose, the final date a lawsuit can be brought, has been reduced to five (5) years. No lawsuit of any kind can be brought five (5) years after construction has been completed.

Condominium Associations

Condominium Associations must maintain and adhere to preventative maintenance plans. Any new Declaration, the document to create a condo, must have a preventative maintenance plan. This will include a minimum financial reserve and a reserve analysis in order to limit developer’s risk.

Pre-Litigation Notice / Cure Period

Before litigation against a developer, the owner must provide a written notice of the proposed litigation to the developer and allow for three (3) months for the developer to fix any defect as a ‘cure period’. If the defect cannot be fixed within a three (3) month time period, then the cure period will be extended for as long as the developer is actively working on repairs. Any litigation that commences without compliance to these requirements can be dismissed.

Limit on Associations to Litigate

The Declaration for a condominium may not provide the condo association with the power to institute litigation without a vote of at least 80% of the association. Otherwise, this can only be instigated by the unit owner.

As explained by Bob Dailey, “This avoids the situation where you have one strong-willed owner that can make the whole Association bring suit. As a result, even though only one owner has a complaint, the developer is faced with a class action type of lawsuit brought by all of the owners.”

Limit on Developers Liability

The developer is no longer liable for any litigation expenses by the condo association. Developers are also only liable for negligent acts.

Dailey, who led a conference back in early June on Best Practices in Condo and HOA Operation, commented that part of the reason for the lack of development was “the influx of construction defect litigation.”

“These are much like class-action lawsuits. Instead of facing one lawsuit brought by one owner of a house, a developer is faced with lawsuits brought by fifty (or more) condominium owners. The cost of commercial general liability insurance coverage for damages arising out of these construction defects skyrocketed.  As a result, developers became shy about spending money on quality projects.”

Dailey commented that there is only one livable condo that has been completed this year, which he was a party in getting it off the ground. Considering that the law changed in 2020, he stated that he had “expected a tidal wave” of building to come from it and was shocked that so few took advantage of the law changes. He believes the cause of this is a lack of information, where prospective developers are unaware that there have been changes in their favor and have not taken advantage of it.

He also commented that he felt it was important for more condos to be built, as there are not a lot of single-family alternatives like it, and that there are many who would appreciate condo-style residences, such as young people getting started, those wanting to downsize in their later years, people wanting second homes, or those just not wanting the hassle that comes with being a homeowner.

Bob Dailey is an attorney with McGrath North working in real estate advice and specializes in condominium law and homeowner association law.