Developer Liability for Implied Warranty of Suitability
There is a common misconception among builders and buyers of condominium conversions that builders who convert apartments into condos are only liable for “what they touch” or the parts of the condominium that they actually improve. This is not correct. In fact, there are a number of avenues for recovery when a conversion condominium experiences leaks or other problems relating to original construction defects even when the converter did not touch that part of the building. Among these is a claim against the converter under the implied warranty of suitability, which is just now getting some focus in the industry.
In addition to the well-known warranties of quality for work actually done by a builder converting a building into condos, the Condo Act also provides that the creator of the condominium warrants that “a unit and the common elements in the condominium are suitable for the ordinary uses of real estate of its type.” This is called the implied warranty of suitability or fitness. Unlike the implied warranties of quality, this warranty applies to units and common elements, regardless of whether the developer did any work on those elements.
It is unsettled what “suitable for ordinary uses” means because there is no further definition of the term in the statute, nor are there any published legal opinions relating to this matter in the context of conversion condominiums. It may be that this warranty equates with a warranty of habitability, meaning the building is so unsafe as to be virtually uninhabitable under certain circumstances. But it may mean just what it says – that the building is “unsuitable” for its ordinary uses rather than uninhabitable. We have and will continue to argue that a building that leaks is unsuitable for use as someone’s home. To our knowledge, this theory has not been tested in the courts, but we expect to see breach of this warranty pleaded in the near future, especially where, for example, a 75-year-old apartment has been converted for current use as condos with little to no renovation.