Step 1:

Retain Experts

The specific defects will initially be determined by the association's construction and cost estimation experts. Thereafter counsel will assist the Board in analyzing the necessity and selection of additional experts.

The expert's purpose is three fold:

	Determine the defective components.
	Determine preferred and alternative methodologies of repair of each component.
	Determine the cost of repair, restoration or replacement.

The components shall be classified with respect to timing and methodology of repair in order to assist the Board with a strategy as to the proper manner to proceed. That strategy is then transformed into a written resolution on behalf of the Board.

Step 2:

Determine Defective Components (Examples)

	Asphalt
	Roofs
	Windows
	Soils
	Structural Damage
	Dryer Vents
	Gas Pipes

Step 3:

Methodology of Repair

The experts will determine preferred and alternate means of repair and replacement of defective components. The components will be categorized as follows:

	Immediate need of repair.
	Immediate need of replacement.
	Accelerated useful life requiring repair within the three years.
	Components requiring current and future repair and replacement.

Step 4:

Cost of Repair

The critical factor within the sphere of the Board's Business Judgment parameters relates to litigation strategies and financial commitments regarding experts and counsel. The Board must protect both the Association and itself as a governing body by making Business Judgment decisions throughout the pre, active, and post litigation stages.

These decisions are measured in large part by the amount of money required to repair, replace and, in certain respects, maintain the various defective components. The approximate cost of repair, replacement and future maintenance must be weighed against the projected cost of litigation inclusive of the retention of experts.

Step 5:

Cost of Litigation / Mediation

The projected expert and counsel costs will be determined based upon three different scenarios:

	Resolution of the claim through a structured non-adversarial settlement without litigation.
	Resolution of the action within nine months of the filing of the lawsuit through the utilization of the Judicial Arbitration and Mediation Services or other such alternative dispute resolution methods.
	Required prosecution of the action through a trial on the merits.

The projected costs in each of these three categories are to be balanced against the cost of repair and replacement. The result will enable the Board to make appropriate Business Judgment decisions as to financial commitments and strategy both with respect to structured work-outs and/or active litigation.

Step 6:

Financing the Claim

Whether through non-adversarial structured settlement or active litigation, it is imperative that the Board carefully analyze the financing of the claim. Once made aware of the approximate expert costs, legal fees and options for payment thereon, the Board can then determine the appropriate means to finance these costs.

The Civil Code, as amended at Section 1365.5 (c), permits the Board to expend funds designated as "reserve funds" for the "maintenance of litigation" involving the repair, restoration and replacement of major components for which the reserve fund was established. Alternatively, the Board can raise the appropriate funds through special or general assessments. Finally, certain financial institutions will work with Community Associations to finance defect litigation or the firm may advance all the Association's costs under certain circumstances.

Step 7:

Putting the Recovery to Work for Repair, Restoration and Replacement

Once the recovery has occurred, the Association must be prepared to proceed with corrective action. The strategy for repair, restoration and/or replacement is of significant importance.

Specifically, the Board should utilize its experts, including reserve analysts, to make a Business Judgment Decision as to the timing, financing and procuring of contractors to perform the requisite remedial actions.

Often funds can and should be set aside for future corrective work while other funds are earmarked for immediate utilization on severely distressed components. The Board should be prepared to adopt a remedial plan prior to accepting the terms of any resolution whether through immediate settlement or active and litigation.