Tips for Dealing with a Construction Defect Claim in a Condominium

Construction Defect ClaimTypically, the condominium purchaser would look to the common law warranty of fitness and merchantability for relief on a defect claim, specifically alleging as grounds that the unit does not meet building and zoning codes or that the construction was not completed in a workmanlike fashion, that the plans and specifications were not fit for their intended use or simply that the premises are unfit and uninhabitable. However, the statutory implied warranty of fitness and merchantability, which runs from the developer, contractor, and subcontractors to the purchaser of the unit, can be one of the most powerful legal tools.

The choice between common law and statutory warranties is not mutually exclusive. The benefits and burdens do stand in contrast though, in that the statutory warranty runs for a finite period from an objective date in time while the common law warranty does not. The statutory warranty cannot be waived or disclaimed by contract while the common law warranty may be. The statutory warranty runs from the developer, the contractor and all subcontractors and suppliers while the common law warranty extends only from the developer. Furthermore, unlike the common law warranty, the statutory warranty is not restricted to first purchasers but inures to the benefit of each owner and his or her successors.

It should be noted that, in a “cold” real estate market, developers may attempt to obtain an advantage by providing specific warranties, thus creating a selling point and greater incentive for their prospects. Under such circumstances, the developer may extend or broaden the scope of its common law and statutory warranties. These express warranties are binding on the developer and create a clear route for unit purchasers seeking to capitalize on the developer’s greater exposure to liability when construction elements go awry.

Negligence

In addition to the common law and statutory warranties, there are other alternative causes of action available to condominium unit purchasers who find themselves struggling with property defects. One is negligence. Under this theory, even remote purchasers have standing to sue the original contractor for any failure to meet the standard of reasonable care to safeguard those who may foreseeably be placed in peril. Although a greater degree of proof is required to prevail in a negligence action in contrast to a breach of warranty claim, negligence claims have distinct advantages for the unit purchaser. In such actions, the statute of limitations is usually longer and more flexible, allowing more time for discovery of any defect. Additionally, an action in negligence may attach to design professionals such as architects and engineers, against whom a warranty action would not customarily stand, given their lack of privity of contract with the purchaser. The design professional will be held to a duty of reasonable care as to design.

Interestingly, while an action in negligence usually cannot be maintained against a contractor after the contractor has completed its work, turned the unit over to the owner, and the unit has been accepted by the owner, courts have recognized an exception where the defect is latent and cannot be discovered by a reasonably careful inspection. The statute of limitations for such latent defects does not begin to run until the defect is discovered. This has the practical effect of extending the life of a defect (where the warranty claim may have lapsed) by allowing a negligence action to pick up where warranty is no longer available. However, actions for latent defects generally must be commenced within ten years after the date of actual possession by the owner, or the potential claim expires. A word of caution – the statute of limitations for such negligence involving latent defects begins to run when the defect is discovered or should have been discovered with reasonable diligence. This can shorten the life of a negligence claim considerably.

Defenses

Once claims are made, they are predictably countered by allegations that the condominium association or unit owner failed to perform routine maintenance or that the contractor did not adhere to applicable building codes and standards in effect at the time of construction. Contractors and developers will argue that the building is in substantial compliance with all contractual requirements and that any deviation from plans and specifications are de minimis and do not affect the value of the unit. Claimants can expect to be accused of failing to mitigate their damages, or, in a negligence action, that they are comparatively negligent in failing to inspect and/or maintain the premises.

Because determining fault is neither clear cut nor easy, all parties involved in the development, construction, sale or purchase of a condominium unit would do well to anticipate the worst. The inevitability of claims should encourage more careful drafting and contract analysis at the front end in hopes of minimizing the extent of misunderstandings which seem bound to occur. Better safe than sorry is an axiom worth heeding.

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