LAW OFFICES OF ANN RANKIN

 

June 9, 1998

 

Board of Directors
Refugio Valley Maintenance Association
c/o Ms. Sharon Collins
Collins Management Company
3220 Blume Dr. Suite 195
Richmond, Calif. 94806

Re: Refugio Valley Maintenance Assn. v. Standard Pacific

Dear Board Members and Ms. Collins:

This letter was jointly prepared by Norris and Norris and by Law Offices of Ann Rankin in response to a request by Sharon Collins for a "disclosure letter" that could be furnished to Association members and to their real estate agents and lenders to disclose the outcome of the referenced lawsuit.

The lawsuit was filed in 1994, and sought recovery for soils-related problems, and for the developer’s failure to establish an adequate operating budget for the Association.

Legal counsel worked with soils engineer David Mathy of DCM Joyal Engineers, and with other professional consultants, including David Levy, CPA; Paul Wolfe of Lee Wolfe Landscape Architects and Horticulturalists; and Carducci & Associates, Landscape Architects.

The Association initially demanded that the developer, Standard Pacific, pay $300,000 or the Association would file suit. Standard Pacific offered no money, so the lawsuit was filed. Numerous efforts to settle the case out of court failed. Trial began on April 20, 1998. On the fifth day of trial, Standard Pacific settled with the Association for a payment of $800,000. Once attorneys’ fees have been paid, the Association will be left with a balance of $600,000. The Board will consult with the professionals regarding how best to use the funds.

The Association’s soils engineer, David Mathy, has studied the conditions at the development, and has pointed out that after three winters of very heavy rain, there have been no serious soil movements. He believes the Association should spend approximately $40,000 to $50,000 on hydraugers on Grissom Street.

The Association’s budget claims arose because Standard Pacific had (1) understated the amount of open space and perimeter landscaping to be maintained by the Association and (2) misstated the cost of maintaining the landscaping. Since the claim was originally filed, the Association, with the permission of the City, has modified the perimeter landscaping so it is a less expensive burden. The funds that are not required to install the hydraugers will be available for Association purposes, which could include restoration of reserve funds; improvement of landscaping; and augmentation of the operating budget. The Board will work with its professional consultants to determine the appropriate use of the funds.

The Board, in deciding to accept the settlement, relied on the advice of legal counsel and of the professional consultants. Counsel advised that accepting the settlement was in the Association’s best interest, given the unpredictability of jury verdicts in general and of the outcome of this case in particular; the fact that the landscaping has already been modified to reduce the cost overruns previously experienced; the likelihood of a lengthy appeal if the case were tried to verdict and either side were unhappy with the result; and the cost of expert witness fees for a two month trial.

Please keep a copy of this letter for your records. We also recommend that a disclosure file be maintained at Collins Management, and that this letter, and the various plaintiff and defendant reports generated during the lawsuit, be maintained in this file as well. If you wish to sell or refinance your home, you may furnish a copy of this letter to your real estate agent and/or to any lender.

In California, disclosure duties go from the seller to the buyer, and not from the Association to the potential buyer. Therefore, we recommend that Collins Management provide this letter only to Association members, and not to potential buyers or their agents; they should get the documents from the seller, through the seller’s agent.

Finally, since disclosures need to be in writing, please do not call the attorneys to discuss the settlement, since we will be unable to discuss these issues verbally with the members. We believe this disclosure letter will be sufficient for the members’ legitimate purposes. We have enjoyed being of service to the Association.

Very truly yours,

LAW OFFICES OF ANN RANKIN

Ann Rankin

 

NORRIS & NORRIS

 

Cy Epstein