Maryland General Assembly Fails To Finalize Legislation Prohibiting Limits on Condominium Owners’ Rights Of Action

Despite similar bills unanimously passing both houses, the 2012 Maryland General Assembly was unable to finalize an amendment to the Condominium Act that would have precluded developers from restricting rights of action by councils of unit owners and individual unit owners to enforce warranties and other claims.  Both House Bill 740 and Senate Bill 725 would have added a new section to the Condominium Act that would have dramatically stripped away the ability of developers to limit the time in which councils and unit owners can bring suit, as well as impose other hurdles to commencing litigation.  Both bills would have prohibited provisions in a condominium declaration, bylaws or contract of sale that (1) purport to shorten the statute of limitations applicable to to any warranty claim or other statutory or common law claim; (2) purport to waive the applicable “discovery rule” or other accrual date for claim; (3) operates to prevent the filing of suit, initiating arbitration, or otherwise asserting a claim with the applicable statute of limitations; and (4) requires a claim to be asserted in a period of time shorter than the applicable statute of limitations.  Significantly, the new law would also have prohibited provisions requiring that a vote of the owners, approval of the developer or other non-unit owner, (most likely meaning mortgage holders), as a precondition to pursuing a claim; unless such restrictive i is adopted by the council of unit owners after election of the first independent board of directors.

The only difference between the two versions was that the House bill provided an exception for condominiums sold by the developer “as is” and without warranties.  This is peculiar since the Condominium Act warranties under Section 11-131 cannot be excluded or modified.  Both versions provided an exception for non-residential condominiums.  We will see if the legislation is renewed at the next session.

Implied Warranties for New Condominiums In Maryland

          Section 11-131 of the Maryland Condominium Act provides significant warranty protections for the purchasers for new condominium units.  Section 11-131 (a) codified the ruling in StarfishCondominium Ass’n v. Yorkridge Service Corp., and established that new home warranties under Section 10-203 “apply to all sales by developers” of condominiums, and that “a newly constructed private dwelling unit means a newly constructed or newly converted condominium unit and its appurtenant undivided fee simple interest in the common areas.”  Specific warranties are applicable to certain specified components of both individual units and the common elements, and they are the obligation of the condominium’s developer. (more…)

Maryland Implied Warranties That Are Applicable To All Newly Contructed Homes, Including Condominiums

I was recently asked to again discuss the impled warranties under Maryland law.  Pursuant to Md. Code Ann., Real Prop. Tit. 10, certain implied warranties are applicable to the sale of every newly constructed home in Maryland.  These warranties are applicable to all “improvements,” which are defined as “every newly constructed private dwelling unit, and fixture and structure which is made part of a newly constructed private dwelling unit at the time of its construction.”  They are enforceable against a “vendor,” defined as “any person engaged in the business of erecting or otherwise creating an improvement on realty, or to whom a completed improvement has been granted for resale in the course of his business.”  These broadly worded implied warranties provide that the improvement is:  (1) Free from faulty materials; (2) constructed according to sound engineering standards; (3) constructed in a workmanlike manner; and (4) fit for habitation.  However, it is expressly provided that these warranties “do not apply to any condition that an inspection of the premises would reveal to a reasonably diligent purchaser at the time the contract is signed.  Nevertheless, there is a fifth implied warranty that is not subject to the inspection exception.  This is the implied warranty of fitness for a particular purpose.  “If the purchaser, expressly or by implication, makes known to the vendor the particular purpose for which the improvement is required, and it appears that the purchaser relies on the vendor’s skill and judgment, there is an implied warranty that the improvement is reasonably fit for the purpose.” (more…)

Warranties Under The Maryland Condominium Act

Section 11-131 of the Maryland Condominium Act provides significant warranty protections for the purchasers for new condominium units. Section 11-131 (a) codified the ruling in Starfish, and established that new home warranties under Section 10-203 “apply to all sales by developers” of condominiums, and that “a newly constructed private dwelling unit means a newly constructed or newly converted condominium unit and its appurtenant undivided fee simple interest in the common areas.” Specific warranties are applicable to certain specified components of both individual units and the common elements, and they are the obligation of the condominium’s developer.

Section 11-131(c) of the Condominium Act provides “an implied warranty on an individual unit from a developer to a unit owner” that is expressly in addition to the warranties provided by Section 10-203. Indeed, the Court of Appeals has held that the Title 10 warranties and the condominium warranties under Title 11 run concurrently, and aggrieved purchasers may proceed under either or both. This additional implied warranty is limited to specifically identified components, commences with the transfer of title to that particular unit, and extends for a period of one year. The warranty makes the developer “responsible for correcting any defects in materials or workmanship in the construction of walls, ceilings, floors, and heating and air conditioning systems in the unit,” and further warrants that “the heating and air conditioning systems have been installed in accordance with acceptable industry standards.” The stated standards are “[t]hat the heating system is warranted to maintain a 70°F temperature inside” and “[t]hat the air conditioning system is warranted to maintain a 78°F temperature inside” when the outdoor temperature and winds are “at design conditions established by the Energy Conservation Standards Act … or those established by the political subdivision” in which the condominium is located. This establishes what is, essentially, a strict liability standard; i.e., if the existence of a defect is proven, the developer is responsible for damages consisting of the cost of correction.

Section 11-131(d) provides for “an implied warranty on the common elements from developer to the council of unit owners,” that is also expressly in addition to the implied warranties provided in Section 10-203. Like the warranty on the units, this common element warranty is also applicable only to specific components, consisting of “the roof, foundation, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural components.” The reference to “external and supporting walls” encompasses not only the wall framing members, but cladding systems as well. The inclusion of “structural components” broadens the application of the warranty to any common element component that is part of the building’s structure and framing, as well as community amenities that have a structural capacity, such as paving, pools, sport courts, curbs, steps and sidewalks, and drainage areas. (more…)

Title 11 Implied Warranties On Condominium Units

Section 11-131 of the Maryland Condominium Act provides significant warranty protections to the purchasers for new condominium units. Section 11-131 (a) codified the ruling in Starfish, and established that new home warranties under Section 10-203 “apply to all sales by developers” of condominiums, and that “a newly constructed private dwelling unit means a newly constructed or newly converted condominium unit and its appurtenant undivided fee simple interest in the common areas.” Specific warranties are applicable to certain specified components of both individual units and the common elements, and they are the obligation of the condominium’s developer.

Section 11-131(c) provides “an implied warranty on an individual unit from a developer to a unit owner” that is expressly in addition to the warranties provided by Section 10-203. This addition implied warranty is limited to specifically identified components, commences with the transfer of title to that particular unit, and extends for a period of one year. The warranty makes the developer “responsible for correcting any defects in materials or workmanship in the construction of walls, ceilings, floors, and heating and air conditioning systems in the unit,” and further warrants that “the heating and air conditioning systems have been installed in accordance with acceptable industry standards.” The stated standards are “[t]hat the heating system is warranted to maintain a 70°F temperature inside” and “[t]hat the air conditioning system is warranted to maintain a 78°F temperature inside” when the outdoor temperature and winds are “at design conditions established by the Energy Conservation Standards Act … or those established by the political subdivision” in which the condominium is located.

LEGISLATURE PASSES NEW WARRANTY PROVISIONS BUT NO FORECLOSURE RELIEF

 

       The Maryland General Assembly passed House Bill 620, which, if signed into law by the Governor, will take effect on October 1, 2010. The newly enacted law will expand common element and common area warranty protections in condominiums and homeowners associations beyond the period of a developer’s control. It extends the implied condominium common element warranty, by providing that the warranty run for two years from the election of the first board of directors controlled by the unit owners. Similarly, it provides that the implied warranty on homeowner association common areas be extended to run for two years from the election of the first governing body controlled by the homeowners. It also requires that the common elements identified in a condominium declaration be consistent with those components that are specified as being subject to the common element warranty provisions under the Maryland Condominium Act. The Legislature did not, however, pass the proposed Residential Sustainability Act that would have provided some limited relief to condominiums and homeowners associations where foreclosure sales do not result in sufficient funds to cover unpaid association assessments. (more…)