SJC Ready to Tackle Implied Warranty for Home Buyers

Published on: January 21, 2002

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:

  • 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?

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. 

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.

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.