Construction Law

    In Concerned Dunes West Residents, Inc. v. Georgia-Pacific Corporation, 349 S.C. 251, 562 S.E.2d 633 (2002),the South Carolina Supreme Court held that a developer has a duty to ensure that the roads and other common areas are in good repair at the time ownership of the common areas are transferred to a property owner?s association or to provide the association with sufficient funds to bring those common areas up to standard as of the date of the transfer.  The court also held that the developer was responsible for making up all shortfalls in the POA?s operating budget up to an amount tqual to the assessments which would have been generated by property owned by the developer during the period that the developer exerted de facto control over the POA.

    The basis for the decision in Dunes West derives from a Court of Appeals decision from 1993. In Goddard v. Fairways Dev. Gen. Partnership, 310 S.C. 408, 426 S.E.2d 828 (Ct. App. 1993), the court held "that the developer of a planned unit development owes a fiduciary duty to the property owners association and its members, much like that owed by promoters of a corporation to investors." The Supreme Court in Dunes West found that both developers and promoters "are entrusted by interested investors to bring about a viable organization to serve a specific function." Dunes West, at 257, 562 S.E.2d at 636. The court also found that "[b]oth should be expected to use good judgment and act in utmost good faith to complete the formation of their organizations."

    In conclusion, these decisions from South Carolina?s court show that a developer has a fiduciary duty to the property owners association and its members. The developer will be responsible for transferring roads and common areas in good condition or to provide the association with sufficient funds to bring them up to standards by the date of transfer. A developer who breaches this duty will be liable to the association "for all damages proximately flowing from the breach, including damages for the continued deterioration of these areas." 

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