HOA Nut House

Homeowners pay $60,000 each to stop leaks

By CRIS BARRISH | The News Journal

Like many residents of the Canal Landing development, the $500,000 town homes built on Rehoboth Beach's outskirts in 2002, Maria and Ron Boulden often noticed water spots on walls and window sills after it rained.

Other owners had repairs done to stop the leaks, but last year an engineering study concluded that most houses in the 70-unit neighborhood had sustained serious water damage that threatened the structure of the buildings. The tab to replace roofs, siding, drywall and other affected items was estimated at $4.3 million.

In October, the Canal Landing Townhouse Association filed a Superior Court lawsuit against developer Louis Capano and Associates and the project's architect and engineer, charging that design flaws, sloppy work and poor supervision caused the damage. Capano's company and the other defendants have denied any liability and sued seven different subcontractors.

The Bouldens and other homeowners aren't waiting for the results of a court case that could take two years. Worried the damage could harm the value of their investments and give Canal Landing a bad reputation, they decided to dig deep in their pockets to fix up their homes. Each owner will pay about $60,000.

"It's a heck of a lot of money we have to put up,'' Maria Boulden said recently while standing in her living room, where moldy drywall has been removed and transparent plastic sealed by blue tape covers the spot.

Scott Reese, the owners' attorney, said the community's defects stem from the rampant development in Sussex County in recent years.

"Construction was going gangbusters, and the quality of the contractors and the supervision of everything was just not where it should be,'' Reese said. "It's not rocket science.''

Sussex County officials -- who approved the work at Canal Landing but didn't find defects that could lead to leaks -- insisted county inspectors followed all procedures.

Sussex changed its inspection policies after The News Journal informed the county of the lawsuit and the multimillion-dollar restoration project.

Before insulation and siding are installed, inspectors will now check to ensure that a structure is water-tight, county inspections chief Van Milligan said.

"Guys are going to pay strict attention,'' Milligan said of the six-month test project. "If the homes are wrapped properly, then they can put the siding on.''

'It was all the units'

Canal Landing consists of four-story town homes clustered in 10 buildings tucked off of Rehoboth Avenue about a mile from the boardwalk.

The Capano firm, based in Wilmington and headed by multimillionaire developer Louis J. Capano Jr., and Rehoboth Beach Associates, a limited liability corporation, developed the project in 2002.

County officials approved the project as it progressed, including the design, certified by the firm Architectural Associates. But because county inspectors did not scrutinize the paper or plastic wrap that keeps out water, no problems were detected at that stage.

Soon after residents moved in, however, many noticed wet and damp spots and had the problems repaired through their warranty agreements. But problems reappeared in repaired units and popped up in other units, said Charlie Ingersoll, the community's first homeowner and now the association's president.

"As the problems persisted, we discovered it was more pervasive,'' Ingersoll said. "And after engaging engineers and professional opinions, we discovered it wasn't just an age or happenstance situation.''

The Bouldens, who work for DuPont Co. and live in Landenberg, Pa., paid $550,000 in 2005 for what they figured would be their dream vacation home. The second owners of the property, the Bouldens said they initially shrugged off "the wetness.''

"It didn't happen every time it rained,'' Maria Boulden said. "But we began talking to neighbors and it seemed everybody had problems. Some had exceptional problems, where the water would pool.''

The homeowners association set up repairs as problems were detected and billed the residents. "But as they did more and more, they realized it was a systemic issue,'' she said. "It was all the units.''

And when the engineering study was conducted last year, "it exploded into a much bigger issue of major work and major repairs to make it right.''

Negotiations with the developers about making the repairs fizzled, Ingersoll said, so the association sued in October, claiming negligent design and construction, inadequate supervision and breach of contract.

"We felt that was our only recourse,'' Ingersoll said.

The defendants have denied all allegations and liability in court papers and have sought to dismiss the charges. In separate filings, Capano and other defendants have sought to hold subcontractors liable if the court awards damages to the property owners. Capano attorney Jeff Weiner and Scott Shannon, whose client is Architectural Alliance, would not comment.

While the lawsuit began wending its way through the legal system, the owners had to make a decision. Should they live with the problem, awaiting a court ruling or a possible settlement, or should they find the money to make the repairs?

In March, at the association's annual meeting, Peter Frank of engineering firm Cogent Building Diagnostics briefed residents. The meeting's minutes tell of "consistent and widespread water damage across all units. The damages are spreading and accelerating.''

The necessary work, Frank told residents, included replacing the roof, sheathing and siding, repairing beams, studs and headers, and reinstalling windows and doors with proper flashing. Frank urged the residents to commit to a two-year schedule that would fix the 10 buildings one by one. He estimated the cost at up to $67,500 apiece.

Of the 49 residents at the meeting, all but one voiced support for the repair schedule.

The board later voted to have the repairs done.

Local banks have offered special home equity loans for those with difficulty raising the cash.

"Residents have been extremely cooperative,'' Ingersoll said.

Last week, the Bouldens watched with relief as workers from EH Custom Homes, some on scaffolding, stripped off siding and rewrapped homes.

"It's a hardship,'' Maria Boulden said, "but these guys are giving us 6-year-old houses that are going to be like new, the way they should be.''

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