Court Applies New Home Protection To Condominiums

by Thomas V. Bennett

The Supreme Judicial Court ruled that the sale of new residential condominiums by a builder-vendor carried with it an implied warranty of habitability and that the condominium association could bring a claim for breach of the implied warranty of habitability for latent defects in the common areas and facilities of the condominium that implicated habitability of individual units. This case not only is important because it applies the doctrine of implied warranty of habitability to the sale of new condominium units but also because it indicates who has the authority to bring such an action, i.e. the unit owner or the condominium association.
 

The Court observed that the ownership of a condominium unit is a hybrid form of interest in real estate entitling the owner to both exclusive ownership and possession of his or her unit and an undivided interest as a tenant in common together with the other unit owners in the common areas.
 

The Court further noted that condominium unit owners relinquish management and control of the common areas to the organization of unit owners which is the only party which may bring litigation relating to the common areas of the condominium development on their behalf.
 

The Court found that a claim for breach of implied warranty of habitability that attaches to the sale of a new residential condominium unit by a builder-vendor may be brought by an individual unit owner who can establish
 

1. He or she purchased a new residential condominium unit from the builder-vendor;
2. The condominium unit contained a latent defect;
3. The defect manifested itself to the purchaser only after purchase;
4. The defect was caused by the builder's improper design, material or workmanship; and
5. The defect created a substantial question of safety or made the condominium unit unfit for human habitation.
 

The Court further ruled that where the defects or other problems are in the common areas, the organization of unit owners has the exclusive right to seek a remedy.
 

In order for the condominium association to establish a claim for a breach of implied warranty of habitability in the common areas that would implicate the habitability of individual condominium units, the organization of unit owners must demonstrate that
 

1. It is an organization of unit owners as defined by the statute,
2. The common area of the condominium development contains a latent defect,
3. The latent defect manifested itself after construction of the common areas was substantially completed,
4. The defect was caused by the builder's improper design, material and workmanship, and
5. The defect created a substantial question of safety as to one or more individual units or made the units unfit for human habitation.
 

The Court further found that the actions, either by the unit owner or the condominium association must be brought within the three-year statute of limitation and the six-year statute of repose for tort actions arising from improvements to real property that begins to run at the earlier of the dates of (1) the opening of the improvement to use, or (2) substantial completion of the improvement and taking possession for occupancy by the owner.
 

The actual case involved a number of serious problems identified in the common areas of the condominium development, including problems with the sliding doors, chimneys, decks, and roofs which resulted in water leakage and damage to sheet rock and other materials inside the individual units.
 

In addition, outside decks were not constructed in accordance with the Code causing supporting columns to deteriorate and prematurely rot.
 

The litigation lasted many years due to the nature of the factual issues involved in the development of the condominium and the developer's acting as the trustee of the condominium trust and the subsequent turnover to the unit owners and subsequent amendment of the Master Deed of the condominium creating additional units.
 

The Court found that the exclusive right of the organization of unit owners to bring claims with respect to the common areas, combined with the unit owner's virtually nonexisting control over the common areas, may result in an incomplete remedy for unit owners against the builder whose improper design, material or workmanship is responsible for a defect in the common area which causes a unit(s) to be uninhabitable or unsafe. To insure that there is a complete remedy for a breach of implied warranty of habitability in the sale of new condominium units, the Court concluded that an organization of unit owners may bring a claim for a breach of implied warranty of habitability when there are latent defects in the common area that implicate the habitability of individual units.
 

The Court therefore, allowed both the unit owners and the condominium association to bring actions against a builder-vendor where, for instance, the association of unit owners may continue to be controlled by the developer. The case also dealt with the fiduciary obligation of the trustee which gives a second cause of action to a unit owner where the trustees fail to bring the appropriate action against the developer for latent defects in the common areas.