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Elation has become frustration for homeowners in a new Kakaako condominium tower now embroiled in litigation with the developer of their homes at Ward Village.
In a pair of lawsuits filed Friday and Monday, the board of directors representing owners in the 10-month-old Ke Kilohana high-rise allege that developer Howard Hughes Corp. lowballed maintenance costs, violated building codes and left the 43-story tower at the corner of Ward Avenue and Halekauwila Street with construction defects.
The lawsuits follow months of unsuccessful efforts to resolve issues between the condo owners and the Texas-based developer that has already been taken to court over issues at two other Ward Village towers. Most units at Ke Kilohana were sold at moderate prices to satisfy a state affordable-housing requirement.
In the complaint over maintenance fees filed Monday, Ke Kilohana’s board alleges that Hughes Corp. grossly underestimated costs for operating the building “to artificially make units appear affordable.”
This lawsuit claims that the developer was able to sell units at a higher price by lowballing maintenance fees because the monthly cost to own a unit could not exceed 33% of a buyer’s gross monthly income under a state affordable- housing regulation applying to most Ke Kilohana units.
“Had Howard Hughes properly estimated the association fees/dues, the price of the units would have been significantly lower in order to satisfy the (state’s) affordability requirements,” the complaint said.
The lawsuit also said that as a result of higher-than- projected costs to operate the building, no portion of maintenance fees paid by unit owners through January has gone toward financial reserves that were supposed to grow by about $14,000 a month.
In a written statement the condo board, excluding one member from Hughes Corp., said expenses to operate the building have exceeded maintenance fee revenue by $40,000 to $50,000 a month since the tower opened in May after two years of construction and a lottery that quickly sold out the 375 below-market units in the 425-unit project.
To cover the shortfall, the board raised maintenance fees by 53% this year, which added between $150 and $280 to monthly payments for owners.
“Our journey to homeownership started in 2016, when we were marketed an affordable building with low maintenance fees in the heart of Kakaako,” the statement said. “Less than one year after moving into Ke Kilohana, it became apparent that we had been deceived by Howard Hughes Corp., which provided us with a flawed budget, along with a litany of construction defects that put the safety of residents at risk.”
Buyers of below-market Ke Kilohana units had to meet moderate-income limits, and some of these unit owners had to get additional jobs to pay the higher maintenance fees, the statement said.
Hughes Corp. in a statement called claims in both lawsuits false and said litigation, which followed spurned offers of cash assistance and financial advice over operating expenses, will only slow solutions and increase costs for homeowners.
“We are extremely disappointed the board of the Ke Kilohana homeowners association has made false claims against us and the project,” the company’s statement said.
In the lawsuit over construction filed Friday, the board alleged that more than 60 building defects exist, including plumbing that allows sewer odors with potentially poisonous hydrogen sulfide gas into homes, windows that won’t stay open in typical wind conditions, excessive lobby floor cracking and inadequate size and access to some compact parking spaces.
This complaint, which also names general contractor Nordic PCL Construction as a defendant, further alleges building code violations that include railings in two “sky lanai” gathering spaces that are precariously low because of a curb below the railing that can serve as a step.
Because of the railing issue, the condo board restricted anyone under the age of 18 from the lanai.
A Nordic representative was not available to comment Tuesday.
Andrew Lee, a Ke Kilohana resident, said condo buyers were told by Hughes Corp. representatives to pour hot water into a component of the plumbing system in their homes to prevent or get rid of a sewer smell that has recurred.
“It’s like rotten eggs,” he said of the smell.
Lee also said pipes on his water heater are corroding, his air conditioner is too loud and he can barely get into his car because of what he described as a ridiculously narrow space.
“I was appalled,” he said. “There’s a lot of things that (the developer) hid from us.”
Brad Yamashita, another condo owner, said he’s concerned about more than 100 patches on the tower’s roof and water that drips out of cracks in parking garage ceilings when it rains.
The statement from board members said condo owners don’t have the resources to fix the problems and felt they had to take legal action after an unsuccessful effort to resolve issues with the developer.
“After good faith efforts by the residential board to negotiate fell through, we no longer trust that Howard Hughes Corp. will act in the best interests of our residents without legal action,” the statement said. “We understand what we are up against — Howard Hughes Corp. is a multibillion-dollar corporation — while we are local Hawaii families now faced with extreme and unexpected financial hardship.”
Hughes Corp. has a master plan to develop up to around 4,500 residential units in 16 towers along with about 1 million square feet of retail space on 60 acres it owns in Kakaako.
To date, the company has built four towers at Ward Village, including three with average unit prices over $1 million. Two more towers are under construction. A seventh tower, Victoria Place, is planned, and as of last week 185 of 350 units had been sold.
Two existing towers at Ward Village, Waiea and Ae‘o, had construction issues that led to litigation between Hughes Corp. and contractors. The Ae‘o case was settled, and the Waiea case is still pending.
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