By Brenda M. Sauro, Esq. & Adina R. Bergstrom, Esq.
Associations faced with construction defects in Minnesota range from leaking or improperly installed windows, improperly installed siding, settling buildings and roofing issues are well aware of the tremendous cost to remedy their buildings. Fortunately, if claims are pursued in a timely fashion, for those condominium and townhome associations formed on or after June 1, 1994, there is an important tool that may help with the cost of dealing with construction defect issues and an attorney at Sauro & Bergstrom, PLLC can help.
Under the Minnesota Common Interest Ownership Act (MCIOA), every developer is required to extend a six-year warranty against defective construction. For the individually-owned interior of the units, the warranty starts to run from the data of the sale or time the purchaser enters into possession of the unit whichever is earlier, As to common elements, the warranty begins to run from the later of the time the common element is completed, the time the first unit is sold or the termination of the period of declarant control. Typically, developers hold onto control of the association for some time after the common elements are completed and as units are being sold thus effectively extending the warranty on the common elements for some time.
If the developer fails to uphold the terms of the warranty, the association and its members can bring claims for breach of warranty and potentially recover their damages, including attorney fees. This is one of the rare instances in Minnesota law that allows a party affected by defective construction to seek legal fees associated with the pursuit of a claim.
Savvy developers know, however, that if done properly this warranty can be limited to two years. For the warranty to be shortened from six years to two years, there must be a written agreement separate from the purchase agreement signed by both the develop rand original purchaser of the unit. Subsequent owners are bound to this warranty limitation. Very few courts have considered the validity of a warranty reduction. However, in Clifton Place LLC v. 301 Clifton Place Condominimum Ass’n, 783 N.W.2d 551 (2010), the Minnesota Court of Appeals refused to enforce a reduction in the warranty period because the document purporting to limit the warranty to two years was attached as an exhibit to a purchase agreement and incorporated into the agreement by the contract language. Since it was not “kept apart” from the purchase agreement, it was not enforceable.
Practically speaking, association boards rarely have all the information they need to make an informed decision as to whether their association has construction defects or not. Board members and management companies must be acutely aware of any approaching warranty deadlines and pay attention when members report problems that may signal a larger construction issue. Unfortunately, many associations remain in the dark about their rights and remedies viewing reported problems as isolated or unrelated to the building’s construction. As a result, this important warranty is allowed to expire and, along with it, the right to claim legal fees.
Proactive boards and management companies should engage the services of a construction professional with the experience assessing defect claims to analyze their association before the expiration of this warranty so that, if applicable, warranty claims can be pursued in a timely manner. Rather than assuming a leaking window is normal, the underlying construction should be explored by qualified professionals, plans reviewed and the advice of consultants heeded if they identify a larger construction issue. While MCIOA remedies are not the only warranties or legal claims available to associations, the impact of the ability to seek legal fees is significant and is a remedy not available once the MCIOA warranty expires.