Homeowners Recover $4.1 Million from Bankrupt Condo Developer

A homeowners association in Marina del Rey won a $4.1 million settlement Wednesday for faulty construction of a luxury condominium complex.

Poor waterproofing of the Indigo, a 77-unit residential building at 4050 Glencoe Ave., caused leaks in the apartments, the lobby and the decks whenever it rained, according to court documents. The condos were built in 2007 by WL Indigo Associates and WL Homes, but by 2009, the developer filed for Chapter 11 bankruptcy. 

On May 19, 2010, residents filed a lawsuit in Los Angeles Superior Court accusing WL Homes of defective construction, that led not only to aesthetic water damage, but also to cracks along structural cement pillars.

“We knew we had serious building issues, but we did not know how the builder's bankruptcy would impact our ability to recover enough funds to repair all of these defects,” said Dan Stern, president of the Indigo Homeowners Association, in a statement. “After many months of investigating, testing, and mediating our claims, restoring the value to our community association and in our homes is our primary focus."

Before the U.S. Bankruptcy Court for the District of Delaware – the state where WL Homes was incorporated – awarded the $4.1 million, homeowners had to satisfy a $1 million deductible, which they accomplished by selling three penthouse units that belonged to the bankrupt builder.

"Oftentimes, condo owners don't realize that insurance and assets exist to cover construction defect claims even after the builder declares bankruptcy,” said attorney Thomas E. Miller, who represented the homeowners association, in a statement.

Insurance companies for the builder, general contractor and 40 subcontractors are funding the settlement awarded to homeowners.