Condominium associations have won a major legal battle in the District of Columbia. In a recent opinion issued by the U.S. District Court here, the judge ruled that condominium unit owners associations in the District of Columbia have the right to sue the developer who converted the building into a condominium for breach of implied warranties of fitness and habitability.
Although the District of Columbia Condominium Law has been on the books since 1976, there has been no definitive court decision interpreting the scope of the warranty provisions contained in that act.
Developers' lawyers always have attempted to read the warranty provisions quite narrowly, suggesting that the only warranty rights that condominium purchasers have are those found in the D.C. condominium law, namely an express warranty against "structural defects."
Individual unit owners are given a one-year warranty from the date they purchased their unit, and the D.C. law gives unit owners (or their association) a two-year warranty for the common elements. The law defines structural defects to mean "those defects in components constituting any unit or common element which reduced the stability or safety of the structure below accepted standards or restrict the normal intended use of all or part of the structure and which require repair, renovation, restoration, or replacement."
The meaning of this language has been debated by lawyers since 1976, and the old adage always has been applicable: "Where there are two laywers, there will be at least three opinions."
In its opinion, the court significantly expanded the warranty provisions beyond the express warranties provided by D.C. law. According to the court, unit owners have the right to rely on what lawyers refer to as "implied warranties of merchantability, reasonable fitness for ordinary use, and compliance with workmanlike standards." The judge expanded the existing D.C. law in this area to apply to condominium cases.
The leading case in the area of implied warranties is Berman vs. the Watergate West, decided in 1978. In that case, a tenant-shareholder in the Watergate cooperative for breach of implied warranties of fitness and merchantability, alleging that her apartment was defective because as much as 50 percent was uninhabitable due a faulty air conditioning system.
The District of Columbia Court of Appeals concluded in the Berman case that product-liability principles apply to the sale of newly constructed homes and cooperative units. According to that court, the plaintiff had the right to file suit based on principles of a breach of this implied warranty.
In this case -- the first to address the issue here in the District of Columbia -- the recent opinion extended the Berman case to be applicable to condominium associations. According to the court, "Even though many unit owners might have been previous residents of the [apartment complex], they were entitled to rely on the good faith and expertise of the [developer] to provide quality renovations, when those former tenants made their ultimate decisions to purchase units outright."
In issuing his opinion, the judge further wrote:
"We perceive no meaningful difference between a newly constructed apartment building and an old building that has been significantly refurbished and reconstructed, for purposes of imposing liability for defective conditions. While [the developer] may or may not be liable under products liability principles for conditions that pre-existed their involvement . . . they are certainly responsible for the quality and results of the work they, in fact, undertook. Those renovations and repairs, are, in purpose and effects, tantamount to the new construction at issue in Berman."
As in most court cases, many issues have been left unresolved -- perhaps to be decided in some future case. For example, it is unclear (although arguable) that the purchaser of a condominium unit has more than one year in which to file a claim for breach of the implied warranty -- despite the one-year statute of limitations for the express statutory warranty. Similarly, unit owners associations may be able to go beyond the two-year statute of limitations, again arguing this implied-warranty concept.
Little by little, the concept of buyer beware -- caveat emptor -- is being whittled away by the courts of the District of Columbia.