If you have decided that the condominium lifestyle is for you, and have purchased a sparkling new unit in a recently constructed complex, you probably take comfort in the fact that Maryland law provides for a three-year warranty on major components of the common elements. However, you may not be aware that when you purchased your unit, the three-year warranty was probably already running, and, in fact, may even have expired. That is because the common element warranty, does not begin to run when you settle on your unit, but, instead, commences when the first unit sold in the complex settles. As a result, where the size of the condominium or the slowness of the market results in the project taking a period of years before all units are sold, it is possible that many purchasers may take title when the three year common element warranty has nearly, if not already, expired.
Condominiums are, of course, a unique form of real property ownership, in which the purchaser buys a unit that they own in fee simple as they would own an individual home. Additionally, the condominium purchaser also obtains an undivided ownership interest in the common elements of the complex, which they own in common with all of the other unit owners. By virtue of this ownership interest, all unit owners are responsible for the maintenance, upkeep, and, if necessary, repair of the common element components. The extent of their responsibility is established by a percentage share allocated in the condominium documents, which usually is a function of the size of their individual unit. The important fact to remember, however, is that every unit owner has an ownership interest, and corresponding responsibility, for all of the common elements throughout all of the complex, no matter how many buildings might be involved, or how far removed the common elements may be from any individual unit.
For that reason, it is significant that the Maryland Condominium Act establishes a three year common element warranty, which makes the developer responsible for correcting any defect in materials or workmanship in the roof, foundation, external and supporting walls, mechanical, electrical, and plumbing systems and any other structural elements of the condominium, and must warrant that those components are within acceptable industry standards in effect when the building was constructed. This is in addition to a warranty on components of the individual unit, as well as other statutory warranties that apply to all new housing, including condominiums. The warranty furnishes a means by which condominium unit owners may obtain correction of defective conditions that, because of the components involved and the fact that the conditions may exist throughout a large complex, could otherwise result in costly repairs.
Nevertheless, there are several aspects of the common element warranty that are highly problematic, not the least of which is the fact that the three-year period commences upon the first transfer of title to a unit owner. That means that, for all but the very first purchaser of a unit in a condominium complex, the three year warranty is already running at the time of each purchase, and any unit owner purchasing more than three years after the first purchase in the complex takes an ownership interest in the common elements after the statutory warranty has already expired.
The statute does provide that, for common elements not completed at the time of the first sale of a unit, the warranty does not commence until completion of that element or its availability for use by all of the unit owners. This results in the possibility of several different three year periods being applicable within a given condominium, as well as the likelihood that the warranty may have expired for some common elements while remaining viable as to others.
A further complication arises from the fact that condominiums are governed by a council of unit owners, which is the legal entity comprised of all of the individual unit owners. Until a majority of the units in a condominium complex are sold, the council is under the control of the developer. Only after more than fifty percent of the units have been sold do the unit owners themselves take control of the condominium. Accordingly, because the common element warranty runs to the benefit of the council of unit owners, and not to any individual unit owner, the warranty is running during a substantial period of time when the unit owner purchasers have no ability to require that the council undertake an investigation of the condition of the common elements, let alone enforce the provisions of the statutory warranty.
Additionally, while the statute provides for a one-year period after expiration of the warranty in which a claim can be made, it also requires that notice of any defect be given to the developer within the three-year warranty period. As a result, the unit owners need full knowledge and understanding of the condition of the common elements within the three year warranty in order to be able to provide the required notice that is a prerequisite to pursuing a warranty claim.
For all of these reasons, unit owners need to exercise due diligence if they intend to preserve their rights to enforce the common element warranty. A first order of business before the warranty expires should be for the unit owners to undertake an adequate engineering investigation of the common elements that will identify any conditions that are not within accepted industry standards. Such transition studies are necessary in any event so that the unit owners can establish the proper budgets required by law for maintenance and reserves. When done properly, the investigation may also save the unit owners a huge bill for repairs by alerting them to matters for which the developer should be responsible under the warranty.