Www.ober.com Condominium and New Home Warranties and Rights of Action June 27, 2012 Raymond Daniel Burke Ober|Kaler 100 Light Street | Baltimore, Maryland.

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Condominium and New Home Warranties and Rights of Action

June 27, 2012

Raymond Daniel BurkeOber|Kaler

100 Light Street | Baltimore, Maryland 21202410.347.7392 | [email protected]

www.marylandcondolaw.com

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Implied Warranties Under Maryland Law

Warranties that the law implies in every new home purchase agreement

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Do not have to appear in any written document

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Implied Warranties Under Title 10

Apply to “improvements” meaning every newly constructed private dwelling unit and every fixture and structure made part of it at the time of construction by a building contractor of subcontractor

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Enforceable against a “vendor”

Any person engaged in the business of erecting or otherwise creating an improvement to realty

or

To whom a completed improvement has been granted for resale in the course of his business

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1) Free from faulty materials

2) Constructed according to sound engineering standards

3) Constructed in a workmanlike manner

4) Fit for habitation

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Home must comply with:

1) Applicable building codes

2) The contract documents

3) Industry standards

4) Manufacturer’s specifications

5) Americans With Disabilities Act

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Cannot be excluded or modified unless the home has been completed

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An exclusion or modification of the warranties on a completed home must:

1) Be in writing

2) Set out “in detail” the warranty to be excluded or modified

3) Set out the terms of the new agreement

4) State that the purchaser consents

5) Signed by the purchaser

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Implied Warranties Under Title 10Run for one (1) year from

1) Delivery of the deed or2) Date of possession Whichever is first

Except:

Where the home is not complete at the time of delivery of the deed, the warranties run one (1) year from

1) Date of completion or2) Date of possession Whichever is first

Except:

For “structural defects” the warranties run for two (2) years from those dates

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In the event of a breach of the warranties, a court may award legal or equitable relief, or both, as justice requires

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An action must be commenced

1) Within two (2) years after the defect as discovered or should have been discovered

or

2) Within two (2) years after the expiration of the warranty

Whichever is first

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Apply to newly constructed condominiums and the common elements

One or more original unit owners can sue for breach of the warranties as to the common elements, and can recover the full damages

Even if some unit owners’ claims are time-barred

The council of unit owners can bring the action on behalf of any two or more unit owners

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Condominium Implied Warranties Under Title 11

The Title 10 implied warranties apply to all sales by developers of condominiums, and 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

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May not be modified or excluded

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Condominium Implied Warranties Under Title 11Implied warranties on the unit

In addition to the Title 10 implied warrantiesthere is a warranty that the developer will correct any defects in materials or workmanship in the construction of

1) walls2) ceilings3) floors

And that the heating and air-conditioning systems were installed in accordance with acceptable industry standards

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Implied warranties on the unitRun for one (1) year from the transfer of title to the unit

Notice of a defect must be given to the developer within the one (1) year warranty period

An action must be commenced within one (1) year of the end of the warranty period

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Implied warranty on the common elementsIn addition to the Title 10 warrantiesWarranty from the developer to the council of unit owners

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Implied warranty on the common elementsIn addition to the Title 10 warranties there is a warranty that the developer will correct any defects in defect in materials or workmanship in the following specified components

andthat the following components are within acceptable industry standards in effect when the building was constructed:1) roof2) foundation3) external and supporting walls

5) electrical systems6) plumbing systems7) other structural

components4) mechanical systems

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Implied warranty on the common elementsRun for three (3) years from

The first transfer of title to a unit owner

Except:As to any common element not completed at the time of first transfer of title, the warranty runs for three (3) years from completion of that element or from its availability for use by all unit owners, whichever is later

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Condominium Implied Warranties Under Title 11Implied warranty on the common elementsRun for three (3) years from

The first transfer of title to a unit owneror

Runs for two (2) years from The date on which the unit owners, other than the developer and its affiliates, first elect a controlling majority of the board of directors

Except:As to any common element not completed at the time of first transfer of title, the warranty runs for three (3) years from completion of that element or from its availability for use by all unit owners, whichever is later

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Implied warranty on the common elements

Notice of a defect must be given to the developer within the two (2) or three (3) year warranty period whichever is applicable

An action must be commenced within one (1) year of the end of the warranty period

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Homeowner Association Warranties

Every homeowner receives the Title 10 implied warranties on their home unless they are

modified or excluded by contract

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Common Area Warranties under Title 11B

Implied warranty on the common areas

In addition to the Title 10 warranties on the homes Warranty from the “vendor” or “grantor” to the homeowners association

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Implied warranty on the common areasCommon area must comply with:

1) Applicable building codes

2) The contract documents

3) Industry Standards

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Implied warranty on the common areasIn addition to the Title 10 warranties on the homes Warranty from the developer to the homeowners association that the improvements to the common areas are

1) free of faulty materials

2) constructed according to sound engineering standards

3) constructed in a workmanlike man

4) Manufacturer’s specifications

5) Americans With Disabilities Act

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Pools

Playgrounds

Clubhouses

Sport Centers

Pavilions

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Retaining Walls

Curbs and sidewalks

Parking lots

Drainage areas

Private roads

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Runs for two (2) years from the first transfer of title to a lot

Except:

As to any common are improvement not completed at the time of first transfer of title, the warranty runs for two (2) years from completion of that improvement or from its availability for use by the lot owners, whichever is later

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Runs for two (2) years from the first transfer of title to a lot

or

Runs for two (2) years from the date on which the lot owners, other than the declarant and its affiliates, first elect a controlling majority of the governing body of the homeowner association

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Notice of a defect must be given to the vendor or grantor within the two (2) year warranty period

An action can be brought by the homeowner association or any lot owner

Action must be brought within one (1) year of the end of the warranty period

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Express Warranties Under Maryland Law

Governed by Title 10

Applies to representations concerning “improvements” meaning every newly constructed private dwelling unit and every fixture and structure made part of it at the time of construction by a building contractor of subcontractor

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Representations by a “vendor”

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Governed by Title 10Express warranties:

1) Any written affirmation of fact or promise which relates to the improvement and is made a part of the basis of the bargain between the vendor and the purchaser creates an express warranty that the improvement conforms to the affirmation or promise.

2) Any written description of the improvement, including plans and specifications of it, which is made part of the basis of the bargain between the vendor and the purchaser creates an express warranty that the improvement conforms to the description.

3) Any sample or model which is made a part of the basis of the bargain between the vendor and the purchaser creates an express warranty that the improvement conforms substantially to the sample or model.

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Express warranties:

Even oral representations may be actionable

Not necessary to use formal words like “warranty” or “guaranty”

Content of brochures and sales literature

Statements by sales agents

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Express warranties:

Does not include affirmation of the value or statement of opinion or recommendation

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Once made “neither words in the contract of sale, the deed, other instrument of grant, nor merger of the contract of sale into the deed or other instrument of grant is effective to exclude or modify the warranty.”

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An exclusion or modification of an express warranty must:

1) Be in writing

2) Set out “in detail” the warranty to be excluded or modified

3) Set out the terms of the new agreement

4) State that the purchaser consents

5) Signed by the purchaser

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Unless the express warranty provides otherwise:

Run for one (1) year from1) Delivery of the deed

2) Date of possession

Whichever is first

Except:Where the home is not complete at the time of delivery of

the deed, The warranties run one (1) year from

1) Date of completion

2) Date of possession

Whichever is first

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In the event of a breach of an express, a court may award legal or equitable relief, or both, as

justice requires

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An action must be commenced

1) Within two (2) years after the defect as discovered or should have been discovered

or

2) Within two (2) years after the expiration of the warranty

Whichever is first

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Separate Claims Under Contract Law

A representation or promise about the condition of an improvement at the time it is sold is a warranty, and enforcement is governed by

warranty law.

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A promise to perform an obligation in the future other than the payment of money is a

contractual obligation governed by the law of contracts

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“We will fix it.”

Creates a promise of future performance which constitutes a contractual obligation

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Governed by the discovery rule:

A claim accrues when the claimant knew, or, in the exercise of reasonable diligence, should have known, of the wrong

A claim must be brought within three (3) years from the date of discovery

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Claims Under The Maryland Consumer Protection Act

Applies to “consumer realty”

New sales of real property purchased primarily for personal, household, family or agricultural purposes

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“Unfair and deceptive trade practices”

Representation that realty has a “characteristic” or “quality” that it does not have

A representation that a property was constructed in accordance with the plans and specifications is a representation of a “characteristic” which, if false, is an unfair and deceptive trade practice under the Act.

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Enforceable by the Attorney Generals’ Office

The Act also provides for a private right of action to recover in law or equity

Claimant can recover “reasonable attorney’s fees”

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Enforceable by the Attorney Generals’ Office

The Act also provides for a private right of action to recover in law or equity

Claimant can recover “reasonable ATTORNEY’S FEES”

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Negligence Actions

Maryland recognizes a general cause of action for failure to exercise due care in construction. This includes negligence in the design and construction of the project, negligent selection of materials, and negligent supervision of the various trades.

1) A duty will be imposed, even where only economic loss is involved, where the nature of the harm gives rise to the risk of serious personal injury among a foreseeable group.

2) A duty will be imposed where the harm results in property damage.

3) Where the harm is purely economic loss, without the risk of personal injury, a duty will be imposed where there is contractual privity between the parties, or a sufficiently close nexus or relationship so as to be the functional equivalent of contractual privity.

A action must be brought within three (3) years of discovery under the discovery rule

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Maryland Construction Law Deskbook

Published by the Maryland Bar Association Construction Law Section

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Maryland Condo Law Blog

www.marylandcondolaw.com

Www.ober.com Condominium and New Home Warranties and Rights of Action June 27, 2012 Raymond Daniel Burke Ober|Kaler 100 Light Street | Baltimore, Maryland.

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