Condo Owners Settle Building-Defect Suit

In what may be the largest total settlement ever for a construction-defect case, Glendale Federal Bank agreed Monday to pay $18.75 million for its role in the development of a 267-unit condominium project in San Juan Capistrano.

The deal comes four months after the Mesa Vista North Townhomes Owners Assn. was paid $7.29 million by CCL Realty Inc., builders of 57 of the units, and a month after a subcontractor, CDR Concrete, agreed to pay $500,000.

In all, the association has won settlements totaling $26.54 million.

A bank spokesman said Monday that Glendale will pay $2 million in penalties, with the remainder being covered by its insurer and subcontractors. Executives at the realty and concrete firms could not be reached.

The bank’s settlement, agreed upon about a week before the case was scheduled to be heard in court, vindicates condo owners, who contended that their units contained serious construction problems, said Irvine lawyer Kenneth Kasdan, who represented the condominium group.

The settlements represent $89,300 for each of the 210 condo owners who bought their units from Glendale, and about $128,000 for the 57 owners who purchased units from CCL Realty.

Most of the condos were developed by Glendale beginning in the late 1980s. It sold the project to CCL Realty, now Vintage Homes, which finished the final two phases by 1995--the same year the suit was filed.

“Everything now can be repaired to put these units in better shape,” said Kasdan, who has 25 other suits pending alleging sulfate damage.

The association’s suit charged that foundations cracked from porous concrete, the result of a mixture that contained 50% more water than it should have, Kasdan said.

The soil in many areas of Orange County, once covered by the ocean, contains a salt compound that when mixed with rain or irrigation run-off can cause concrete to decay. Contractors building in these areas are supposed to use a low-water concrete mixture. Dense concrete can withstand such soil for as long as 130 years, according to the federal Bureau of Reclamation. A state-sponsored study of the problem in 1990 showed that foundations in 400 homes in Lakewood, Cypress and La Palma built in the 1960s and ‘70s had been damaged and a dozen were destroyed because of sulfates.

Many builders and concrete contractors don’t deny that the industry failed to follow the low-water requirements, mostly because they did not know about them. Instead, most contractors simply followed builders’ orders, which rarely involved mixes with low water content.

Those requirements have been part of the state’s Uniform Building Code since the 1970s, but Kasdan said in this case, those rules were ignored. Sulfates in the soil eroded the concrete, weakened the foundations and caused heavy damage that will require the bulk of settlement funds to repair.

The right concrete mix would have cost $350 per unit, Kasdan estimated.

In the suit, condo owners said so much water leaked through foundations that wood floors buckled. As a result, some foundations tilted as much as 4 inches, making drywall crack and preventing doors and windows from closing properly. Driveways and curbs, made of the same concrete, crumbled like dirt when kicked.