Owners of Upscale Dana Point Condos Sue Developer : Safety: They claim shoddy construction resulted in hazards and are seeking payment of $10 million.

Residents of an upscale condominium complex in Dana Point filed a $10-million lawsuit Monday against a South County developer, accusing the company of violating building safety codes when it constructed the 7-year-old condos.

The lawsuit, filed in Orange County Superior Court, accuses Stein-Brief Development Co. in Dana Point of cutting corners during construction, thus creating safety hazards at the Tennis Villas at Monarch Beach.

“They have to re-engineer the entire complex,” said Kenneth Kasdan, a partner with the Irvine law firm Kasdan, Simonds, Peterson, McInture, Epstein & Martin. “There’s a hidden danger that lurks within the condos.”

Stein-Brief lawyer Jane Kacer said she had not seen the lawsuit and could not comment on it.

The suit is the second legal challenge that Stein-Brief has faced over the 88 units in the first and second phases of the sprawling, gated community, which overlooks the Monarch Beach golf course near Pacific Coast Highway and offers breathtaking ocean and bay views.

Last year the company paid $750,000 to the villas’ homeowners association to settle allegations that Stein-Brief built shoddy second-floor drains that caused water to leak into first-floor units, ruining the ceilings.

The latest accusations came after Kasdan’s firm was hired to represent residents of the complex’s third and fourth phases, who had filed a separate lawsuit in 1992. Those latter phases were developed by D.T. Smith Enterprises Inc., which bought the property from Stein-Brief.

The 1992 suit, which is still pending, accuses D.T. Smith of not properly installing fireproof insulation, using plasterboard instead of plywood on walls designed to take the brunt of earthquake tremors, using inferior outside doors and a long list of other construction defects.

An inspection of the first two phases found many of the same shoddy construction practices that were allegedly used by Stein-Brief before it sold the property to D.T. Smith, Kasdan said.

Kasdan said that the cost of retrofitting the 88 units of the first two phases would be more than $7 million. He said that Stein-Brief has refused to take responsibility for the alleged problems, leaving him with no alternative but to file the suit.

“They knew about these issues and allowed them to remain,” Kasdan said.

Kasdan settled a similar suit in late 1992 involving a Lake Forest condominium complex. Residents there sued Newport Beach home builder William Lyon Co., alleging that the company failed to build in safety measures. Lyon Co. paid $8.7 million as part of that settlement.