Disney-Built Community Faces Serious Construction Deficiencies
The November 16, 2016 issue of the Wall Street Journal ran an article about Celebration, Florida, which is the master-planned community built by The Walt Disney Company in 1996. The title of the article summarized the state of affairs in Celebration as follows: “There Is Little Celebration in the Town Disney Built: Mold, leaks, rot are hurting the 1990s utopia; ‘they’re harassing my team.’” My initial thought was that if this can happen to a community built by the world’s most famous mouse, it is little wonder that a large portion of my practice involves representing community associations in lawsuits against developers and architects for construction and design deficiencies.
Celebration is situated near Orlando on about 11 square miles. The town was designed in the New Urbanist style with villages clustered around a small downtown composed of shops, restaurants, and civic buildings. The residences consist of 105 condominium units and about 4,000 single-family homes. The 2010 census placed the population at 7,427. Despite having a post office and a town hall, Celebration is an unincorporated town (aka census-designated place). The town itself resembles one of Disney’s theme parks or resorts; critics draw comparisons to The Truman Show and The Stepford Wives.
From the building styles down to the manhole covers, every detail was designed at the direction of The Walt Disney Company. The all-star team of architects, planners, and graphic designers assembled by The Walt Disney Company included Robert A.M. Stern, Jacquelin Robertson, Phillip Johnson, Michael Graves, Charles Moore, Graham Gund, Cesar Pelli, Robert Venturi, Denise Scott Brown and Michael Bierut. Combined with the irrational attachment many people have towards The Walt Disney brand, it was not surprising to learn that Disney held a lottery for the right to purchase one of the first 474 homes within Celebration and that over 5,000 people entered this lottery. In 2004, The Walt Disney Company sold its interests in Celebration to the New York-based private equity firm of Lexin Capital.
Despite this assembled talent, it appears that basic construction concepts were overlooked. As reported in the Wall Street Journal, balconies slope towards some buildings, and some walls are lined with nylon, which traps water and promotes microbial growth.
In addition to the construction and design deficiencies, there are allegations that one of the associations failed to remediate roofs that began leaking in 2006. The prolonged water infiltration has led to massive wood rot, termite damage, and more mold. Today, many roofs are covered in tarps and some residents have been warned that their balconies are structurally unsound. In one instance, temporary structural beams have been installed along the entire back wall of a building after structural cracks appeared in existing beams and walls, and it was discovered that floors on the third floor were slanted.
In February 2016, the association obtained a repair estimate of $5M, which will translate into special assessments ranging from $20,000 to $40,000 per unit. I suspect that these numbers will likely increase as the full extent of the deficiencies and damages are determined.
Although I have not reviewed any of the governing documents, it appears that part of the problem is the structure of ownership and control (at least for the sub-association of the condominiums). Lexin Capital owns 60% of the Town Center Condominium Association (“Condo Association”). In a lawsuit filed by the Condo Association, the unit owners point out that since they hold a minority of the voting interests and seats on the Condo Association’s board, the unit owners were powerless to force Lexin Capital to perform timely repairs and maintenance.
Metin Negrin, the president of Lexin Capital, told the Wall Street Journal that the Condo Association has shirked its responsibility over the years to pay its dues for upkeep of the buildings. Mr. Negrin also stated that, “no amount of maintenance could have avoided these kinds of issues because it wasn’t built properly.” “We feel we are victims here too.”