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.”
These implied warranties may only be excluded or modified with respect to completed improvements, and only by a written document, signed by the purchaser, that sets for the full text of the warranty and shows the exact exclusions or modifications:
Neither words in the contract of sale, nor the deed, nor merger of the contract of sale into the deed is effective to exclude or modify and implied warranty. However, if the contract of sale pertains to an improvement then completed, an implied warranty may be excluded or modified wholly or partially by written instrument, signed by the purchaser, setting forth in detail the warranty to be excluded or modified, the consent of the purchaser to exclusion or modification, and the terms of the new agreement with respect to it.
The implied warranties run for “one year after delivery [of the deed] or after the taking of possession by the original purchaser, whichever occurs first,” except that “where the dwelling is not complete at the time of delivery of the deed, one year from the date of completion or taking of possession by the original purchaser, whichever occurs first.” Additionally, “[i]n the case of structural defects,” the warranties run for “2 years after the date of completion, delivery, or taking of possession, whichever occurs first.” The warranties do not expire in the event of a subsequent sale by the original purchaser.
In the event of a defect that constitutes a breach of these warranties, “the court may award legal or equitable relief, or both, as justice requires.” An action for breach of the warranties “shall be commenced with two years after the defect was discovered or should have been discovered, or within two years after expiration of the warranty, whichever occurs first.” Accordingly, this creates a maximum period in which a claim must be brought of three years after taking possession, and four years in case of structural defects. However, the period may be shorter if it is demonstrated that the defect was, or should have been, discovered at a date earlier than the end of the warranty. Indeed, if the issue should have been observed at the time of possession, the two year period for filing a claim would begin immediately, regardless of whether it involves a structural defect.
In Starfish Condominium Ass’n v. Yorkridge Service Corp., the Court of Appeals held that the Title 10 warranties were applicable to newly constructed condominium units and, importantly, also to the common elements. Significantly, it ruled that “one or more of the original purchasing unit owners in the condominium could directly have sued for breach of §10-203 implied warranties as to the common elements and could have sought the entire damages to the common elements.” This is true even where the claims of some unit owners might be time-barred. Additionally, it was held that the action could also be brought by the council of unit owners in its representative capacity of two or more unit owners with viable claims.