Drexel Properties, Inc. v. BAY COLONY, ETC.
406 So. 2d 515, 1981 Fla. App. LEXIS 21550 (1981)
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Rule of Law:
An implied warranty of fitness and merchantability, and of compliance with approved plans and building codes, extends only to original purchasers of new condominium units; however, a cause of action for negligent construction leading to purely economic loss can be maintained by both original and subsequent purchasers without privity of contract. For defects in common elements, a condominium association may recover full damages on either theory.
Facts:
- Drexel Properties, Inc. developed the Bay Colony Club Condominium.
- Drexel Properties, Inc. failed to install decorative aluminum fencing around air conditioning units on the roof as detailed in the construction plans filed with governmental authorities, and did not amend the plans.
- The South Florida Building Code required ceilings to be of at least one-hour fire resistive construction.
- The South Florida Building Code required bedroom windows to be capable of a five square foot opening without the use of tools.
- The ceiling roof assembly in the condominium was found not to be capable of a one-hour fire resistive rating.
- The bedroom aluminum awning windows could not be opened to provide a clear opening of five square feet without the use of tools.
Procedural Posture:
- Bay Colony Club Condominium, Inc., and representative unit owners, commenced a class action against Drexel Properties, Inc., in a non-jury trial in a trial court of first instance.
- The amended complaint alleged claims of breach of implied warranty and negligence against Drexel Properties, Inc.
- The trial court found Drexel Properties, Inc. liable for construction defects and entered a final judgment awarding damages of $917,356.00.
- Drexel Properties, Inc. (appellant) appealed the final judgment to the District Court of Appeal of Florida, Fourth District.
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Issue:
1. Does an implied warranty for construction defects in a new condominium extend to subsequent or remote purchasers who are not in direct privity with the developer? 2. Is privity of contract required for a negligence claim seeking recovery for purely economic loss arising from construction defects in condominium units? 3. May a condominium association recover the full amount of damages for defects in common elements, even if subsequent purchasers will benefit?
Opinions:
Majority - Rivkind, Leonard, Associate Judge
No, an implied warranty for construction defects in a new condominium does not extend to subsequent or remote purchasers. The court held that the implied warranty doctrine is applicable only to those in privity with the seller (original purchasers). This warranty includes substantial compliance with approved plans and specifications, applicable building codes, and fitness and merchantability, meaning major defects that prevent the home from meeting ordinary, normal standards entitle the original buyer to damages. No, privity of contract is not required for a negligence claim seeking recovery for purely economic loss arising from construction defects. The court rejected the contention that recovery in negligence is limited to cases of personal injury or physical property damage, holding that there can be recovery for economic loss. A cause of action for negligent construction therefore exists for both original and subsequent purchasers, with the question of whether the developer exercised requisite care, skill, and ability being a factual determination. Yes, a condominium association may recover the full amount of damages for defects in common elements. The court reasoned that to do otherwise and apportion damages would penalize the original purchasers, and that awarding the entire sum is necessary for appellees to receive the benefit of their bargain and be made whole, even if subsequent purchasers also benefit. Based on these principles, the court affirmed damages for the decorative aluminum fencing on implied warranty for original purchasers (as it concerned common elements), for the ceiling roof assembly on both negligence (all purchasers) and implied warranty (original purchasers) as it concerned common elements, and for the aluminum awning windows (not common elements) for original purchasers on both theories and for subsequent purchasers on negligence.
Analysis:
This case significantly clarifies the scope of developer liability in condominium construction, distinguishing between implied warranty and negligence claims. It establishes that while implied warranties are limited by privity, negligence claims for economic losses due to construction defects are available to both original and subsequent purchasers, broadening the pool of potential plaintiffs. Furthermore, the ruling emphasizes the ability of condominium associations to recover full damages for common element defects, promoting comprehensive repairs and holding developers accountable for the overall quality of shared property.
