Condominium and New Home Warranties and Rights of Action

1. Condominium and New Home Warranties and Rights of Action June 27, 2012 Raymond Daniel Burke Ober|Kaler 100 Light Street | Baltimore, Maryland 21202 410.347.7392 | rdburke@ober.com www.marylandcondolaw.com

2. Implied Warranties Under Maryland Law Warranties that the law implies in every new home purchase agreement

3. Implied Warranties Under Maryland Law Do not have to appear in any written document

4. Implied Warranties Under Maryland Law 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

5. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 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

6. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 • Free from faulty materials • Constructed according to sound engineering standards • Constructed in a workmanlike manner • Fit for habitation

7. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 Home must comply with: • Applicable building codes • The contract documents • Industry standards • Manufacturer’s specifications • Americans With Disabilities Act

8. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 Cannot be excluded or modified unless the home has been completed

9. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 An exclusion or modification of the warranties on a completed home must: • Be in writing • Set out “in detail” the warranty to be excluded or modified • Set out the terms of the new agreement • State that the purchaser consents • Signed by the purchaser

10. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 Run for one (1) year from • Delivery of the deed or • 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 • Date of completion or • Date of possession Whichever is first Except: For “structural defects” the warranties run for two (2) years from those dates

11. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 In the event of a breach of the warranties, a court may award legal or equitable relief, or both, as justice requires

12. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 An action must be commenced • Within two (2) years after the defect as discovered or should have been discovered or • Within two (2) years after the expiration of the warranty Whichever is first

13. Implied Warranties Under Maryland Law Implied Warranties Under Title 10 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

14. Implied Warranties Under Maryland Law 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

15. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 May not be modified or excluded

16. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 Implied warranties on the unit In addition to the Title 10 implied warranties there is a warranty that the developer will correct any defects in materials or workmanship in the construction of • walls • ceilings • floors And that the heating and air-conditioning systems were installed in accordance with acceptable industry standards

17. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 Implied warranties on the unit Run 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

18. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 Implied warranty on the common elements In addition to the Title 10 warranties Warranty from the developer to the council of unit owners

19. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 Implied warranty on the common elements In 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 and that the following components are within acceptable industry standards in effect when the building was constructed: roof electrical systems foundation plumbing systems external and supporting walls other structural components mechanical systems

20. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 Implied warranty on the common elements Run 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

21. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 Implied warranty on the common elements Run for three (3) years from The first transfer of title to a unit owner or 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

22. Implied Warranties Under Maryland Law Condominium Implied Warranties Under Title 11 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

23. Homeowner Association Warranties Every homeowner receives the Title 10 implied warranties on their home unless they are modified or excluded by contract

24. Homeowner Association Warranties 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

25. Homeowner Association Warranties Common Area Warranties under Title 11B Implied warranty on the common areas Common area must comply with: • Applicable building codes • The contract documents • Industry Standards

26. Homeowner Association Warranties 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 developer to the homeowners association that the improvements to the common areas are • free of faulty materials • constructed according to sound engineering standards • constructed in a workmanlike man • Manufacturer’s specifications • Americans With Disabilities Act

27. Homeowner Association Warranties Common Area Warranties under Title 11B Implied warranty on the common areas Pools Playgrounds Clubhouses Sport Centers Pavilions

28. Homeowner Association Warranties Common Area Warranties under Title 11B Implied warranty on the common areas Retaining Walls Curbs and sidewalks Parking lots Drainage areas Private roads

29. Homeowner Association Warranties Common Area Warranties under Title 11B Implied warranty on the common areas 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

30. Homeowner Association Warranties Common Area Warranties under Title 11B Implied warranty on the common areas 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

31. Homeowner Association Warranties Common Area Warranties under Title 11B Implied warranty on the common areas 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

32. 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

33. Express Warranties Under Maryland Law Governed by Title 10 Representations by a “vendor”

34. Express Warranties Under Maryland Law Governed by Title 10 Express warranties: • 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. • 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. • 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.

35. Express Warranties Under Maryland Law Governed by Title 10 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

36. Express Warranties Under Maryland Law Governed by Title 10 Express warranties: Does not include affirmation of the value or statement of opinion or recommendation

37. Express Warranties Under Maryland Law Governed by Title 10 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.”

38. Express Warranties Under Maryland Law Governed by Title 10 An exclusion or modification of an express warranty must: • Be in writing • Set out “in detail” the warranty to be excluded or modified • Set out the terms of the new agreement • State that the purchaser consents • Signed by the purchaser

39. Express Warranties Under Maryland Law Unless the express warranty provides otherwise: Run for one (1) year from • Delivery of the deed • 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 • Date of completion • Date of possession Whichever is first

40. Express Warranties Under Maryland Law In the event of a breach of an express, a court may award legal or equitable relief, or both, as justice requires

41. Express Warranties Under Maryland Law An action must be commenced • Within two (2) years after the defect as discovered or should have been discovered or • Within two (2) years after the expiration of the warranty Whichever is first

42. 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.

43. Separate Claims Under Contract Law 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

44. Separate Claims Under Contract Law “We will fix it.” Creates a promise of future performance which constitutes a contractual obligation

45. Separate Claims Under Contract Law 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

46. 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

47. Claims Under The Maryland Consumer Protection Act “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.

48. Claims Under The Maryland Consumer Protection Act 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”

49. Claims Under The Maryland Consumer Protection Act 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”

50. 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. • 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. • A duty will be imposed where the harm results in property damage. • 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