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Massachusetts is
one of only a handful of states that have not recognized an
implied warranty of habitability in the purchase of new dwellings.
But the state Supreme Judicial Court (SJC) seems poised to change
that.
The SJC this
month will consider two cases, which, combined, raise these key
questions:
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- Should
purchasers of residential dwellings reasonable assume that they
have an implied warranty of habitability, similar to the
warranty the courts have extended to tenants of rental housing?
- Does that
warranty apply to condominiums as well as detached,
single-family homes?
- And if so, how
should the warranty function within a condominium setting?
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The SJC accepted
the two cases on direct appeal, indicating that the court is now
ready to tackle a question it first raised more than two decades
ago in another suit involving a builder and the purchasers of a
single-family home. In that 1971 case, the SJC agreed that
the warranty issue was important, requiring “a case and a record
which presents it properly; we do not believe this is such a
case.”
The Right Stuff
Apparently, the
SJC thinks these cases (Albrecht v. Clifford —
single-family) and (Bearish v. Bornstein – condominiums)
are strong enough to bear the weight of the conflicting arguments
the court must resolve. The arguments for and against an
implied warranty run like this:
For
(1) The
old agrarian-based “caveat emptor” principal has little relevance
in an urban society, where the population is mobile, and a
homebuyer’s interest is not in the land but in the dwelling
constructed on it.
(2) Most
other states that have considered the issue have established an
implied warranty for builders and Massachusetts should extend the
same protection to its residents.
(3) The
same theory that supports a warranty for tenants applies equally
to homebuyers. Builders have the upper hand in negotiations
with homebuyers, in the same way that landlords have an advantage
over tenants.
(4) The
ability to inspect a dwelling before the purchase does not ensure
the discovery of latent problems. Inspections typically
occur after the building is complete, when many potential problems
are no longer visible to the buyers or to the professional home
inspectors they retain.
(5) There
is no rational basis to conclude that buyers can expect
“workmanlike” standards in the manufactured products they
purchase, but not in a newly constructed home. As the SJC
itself put it in a recent case, hinting at an implied warranty but
stopping short of asserting it: “There is no sound reason to
treat a builder of houses or other realty structures differently
from a manufacturer of chattels.” And, the court added in
another case, “The ordinary person buying a house is in no better
position to discover hidden dangers caused by negligent
construction than the purchaser of a defective bottle of perfume.”
Against
(1) There
is no current basis in Massachusetts law for assuming a warranty,
and no need too establish one.
(2) The
SJC first mentioned the warranty question more than 20years ago.
If the problems created by the lack of a warranty were that
pressing, the court would have addressed it long before now.
(3) Warranties
adopted by other states assume that homebuyers need special
protection, similar to the protection accorded tenants. But
that is less true today than it may have been 20 or 30 years ago.
Buyers enter their negotiations with builders well armed and well
equipped – with attorneys, home inspectors and other professionals
– to protect their rights. “Many single-family home builders
are no more sophisticated than the home buyers with whom they
deal,” one of the briefs on the anti-warranty side, contends.
Buyers have the ability to obtain express warranties from
builders, they have an opportunity to inspect their homes and make
their purchase contingent on a satisfactory resolution of any
problems identified, and they have “sufficient avenues both
practical and legal, to protect their interests.”
(4) The
public policy argument for a warranty is no stronger in a
condominium than in a detached single-family home; there is no
justification for an implied warranty in either setting.
Amicus Brief
The broad
question, obviously, is whether an implied warranty of any kind
exists for purchasers of new dwellings. We focused
specifically on the condominium aspects of that question in an
amicus brief submitted for the Community Associations Institute.
Specifically, we suggest that the implied warranty is even more
important in the condominium setting, because it may be the only
source of relief available, not just for the unit owners, but for
the community association.
| More often than
not, a condominium buyer bases the purchase decision on a
model in a development where construction is incomplete and
may not even have begun when the purchase documents are
signed. In a phased development, other buildings, roads,
common areas, and amenities in which the owner has an
interest, often don’t even exist at the time of purchase.
So there is no opportunity for the owner to obtain the
“express” warranties that the buyer of a completed
single-family home might demand. |
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Even if the development has been completed, it is
unreasonable to expect individual owners to obtain comprehensive
inspections covering hundreds of thousands of square feet of space
in a multi-building complex. And even if they could
undertake such a massive and expensive review, it is not clear
that individual unit owners could litigate express warranty claims
related exclusively to common areas.
One Claim or Many
Nor would it be desirable for them to do so.
The unit owner’s warranty, if there is one (and we’re happy to let
the two sides in the single-family home case fight that out)
should be limited to the interior of the owner’s unit only.
If a flaw in the condominium roof sends water pouring into an
owner’s unit, the owner arguably should have a cause of action
against the builder. But if the leak is confined to the
common area, it is the condominium association, not the individual
unit owners, that has to pursue that claim. Otherwise you
could have 100 different owners all with different ideas of how
the roof problem should be repaired and how much the claim is
worth filing separate suits around the same complaint.
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If the goal is, as it should be, to avoid piecemeal
litigation, it only makes sense to conclude that the association
is responsible for enforcing any claims affecting the common
areas. But the condominium trustees have no opportunity to
inspect the property or to secure express warranties at the time
of the purchase. The trustees play a supporting role and,
more accurately, a passive role, in the construction and sale
process. The association is out of the construction picture
entirely, but it has the statutory responsibility to maintain the
common areas and litigate claims related to them. |
This argues strongly for our conclusion that there
must be an implied warranty in the condominium setting, and the
warranty, as it applies to common areas, should run to the
association.
The arguments against a warranty for unit owners
and buyers of detached single-family homes do not apply at all to
a condominium association. So even if the court rejects the
warranty for individual owners of condominium units and
single-family homes, it could still find that a warranty exists
for community associations.
Given the court’s demonstrated interest in tackling
this issue, we expect the SJC decision will establish an implied
warranty of some kind. The interesting questions will be the
warranty’s scope and its duration. Will it extend to
condominiums as well as single-family, detached homes? Will
the warranty in a condominium setting run to the association in
addition to, or instead of, unit owners? And, crucially,
will it apply to subsequent purchasers or to the original
purchasers only?
The SJC will hear arguments on these and related
questions this month; we should have the court’s answers, and
possibly some new questions, long before it is time to celebrate
another new year.
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