Recently, the DC Council adopted amendments to the DC Condominium Act to revise the construction defect warranty provisions, along with the process for filing claims against the warranty bond required to be posted with the District of Columbia’s government to secure a condominium declarant’s warranty obligations. Attorneys from Rees Broome were instrumental in the drafting and negotiating of the final version of the related Bill. The Bill has been transmitted to Congress, with a projected effective date of March 8, 2023. We prepared this memorandum to provide our DC condominium clients and management partners with a summary of the changes to the law.
- § 42-1903.16(a)(1) of the Act was amended to change the definition of structural defect to include failure to comply with the applicable building code in effect at the time of construction by creating a rebuttable presumption that an affected component of a unit or common element falls below standards commonly accepted in the real estate market if:
- (A) The failure to comply with building code requirements results in demonstrable harm to the health or safety of a unit owner, lawful unit inhabitant, or guest; or
- (B) The units are conveyed prior to the issuance of a certificate of occupancy, or if the developed condominium units do not require a certificate of occupancy to be occupied, prior to the date of substantial completion of condominium construction as certified by the condominium development architect.
- § 42-1903.16(e)(1)(A) of the Act was amended to provide more clear criteria for the calculation of the amount of a warranty bond that a condominium declarant must post to secure its warranty obligations.
- The Act was further amended to provide that if the actual hard construction and conversion costs, including labor and materials, as of the time of substantial completion of the condominium, as certified by the project architect, exceeds the previously estimated costs by more than 10%, the declarant shall post an additional warranty security in the amount of 10% of the difference between the estimated hard construction and conversion costs, including labor and materials, and the actual hard construction and conversion costs, including labor and materials, as of project substantial completion, as certified by the project architect.
- Also, for a conversion condominium, a condominium declarant must now provide a sworn statement to the District of Columbia attesting to cost estimates for the conversion construction work proposed, including the costs of materials and labor at the time of filing the application for condominium registration, and at the time of substantial completion of the condominium, as certified by the project architect, if the costs have exceeded the estimates originally provided when initially posting bond by the condominium declarant.
- Condominium Declarant’s shall be required to provide a copy of the warranty bond to each purchaser at least 7 days prior to a conveyance to an initial purchaser.
- DC will be required to maintain a searchable online database for all condominium projects to monitor the amount and current status of all warranty bonds posted by condominium declarants.
- The Act now defines specific time periods for condominiums to submit claims of structural defects, the time period for condominium declarants to respond, and a time period for DC to respond to such claims. Prior to this, the only time frames set forth in the Act included the warranty period and required statute of limitations for commencement of legal action related to warranty claims.
- § 42-1903.17 of the Act was amended to specifically provide that judicial, non-judicial, regulatory, or administrative proceeding for breach of a warranty may be commenced within 5 years after the date the applicable warranty period began. This is important because it does serve to remove the time pressure imposed by DCHCD to submit a claim for breach of warranty within two years of the date of the first conveyance of a unit within the condominium.
- The Act now includes an appellate process to the Office of Administrative Appeals from any decision of DC rendering a determination on a claim against a warranty bond.
- The Act now prohibits condominium Bylaws from restricting a condominium association’s right to file a claim alleging structural defects.
- The Mayor is required to adopt regulations further defining the warranty claim process within 180 days of the date of adoption of the amendments to the Act.
- The Act includes enhanced penalties against any condominium declarant that fails to comply with certain obligations relating to the warranty bond posted with DC.
We believe these changes to the law will serve to allow DC condominium associations to more effectively ensure that condominium declarants honor their obligations under the warranty provisions. If your condominium association has claims for structural defects under the Condominium Act, please do not hesitate to contact any of Rees Broome’s DC community association attorneys, who can assist your condominium association in negotiating and filing claims against condominium declarants and the warranty bonds that they post with the DC government.
By Todd A. Sinkins