## Facts

- A developer and builder-vendor constructed and sold units in a phased residential condominium project in Mashpee, Massachusetts, expanding the project over time as additional units were built and sold.
- The developer, through trust and trustee roles, initially controlled the condominium association and managed common areas while units were being marketed and sold.
- The condominium association trustees alleged widespread latent construction defects affecting common areas and individual units, including water intrusion and related structural and code-compliance problems impacting habitability.
- The association’s governing documents vested the trustees with authority to manage and protect the common areas for the benefit of unit owners.
- The trustees sued the developer and related parties for, among other claims, breach of an implied warranty of habitability, negligence for defective construction, and breach of fiduciary duty arising from the developer’s control of the association and alleged mismanagement of common areas and common expenses.

## Issues

1. Whether Massachusetts law implies a warranty of habitability in the sale of a newly constructed residential condominium unit by a builder-vendor.
2. Whether a condominium organization of unit owners may sue for breach of that implied warranty based on latent defects in common areas that affect the habitability of individual units.
3. Whether the economic loss doctrine bars negligence claims for defective construction when the allegations support an inference of property damage beyond the defects themselves.
4. Whether the developer’s conduct while serving as an association trustee supported fiduciary-duty liability and full repair-cost damages based on a finding of willful default.

## Decision

- The court held that an implied warranty of habitability applies to the sale of newly constructed residential condominium units by builder-vendors.
- The court held that a condominium organization of unit owners may assert the implied-warranty claim for latent defects in common areas that materially affect the habitability of individual units.
- The court ruled that dismissal of the negligence claim on economic-loss grounds was error where the allegations reasonably supported property damage beyond the defective work itself (including water damage).
- The court largely affirmed fiduciary-duty and related damages rulings tied to the developer’s actions as an association trustee, including enhanced liability where the breach amounted to willful default.
- The case was remanded for further proceedings consistent with these holdings.

## Legal Principles

- A builder-vendor’s sale of a newly constructed residential condominium unit carries an implied warranty that the unit is fit for habitation as to latent defects that substantially impair habitability and existed at the time of sale.
- The implied warranty extends, in appropriate circumstances, to newly constructed common areas when latent defects in those common elements materially affect the habitability of individual units.
- A condominium association may sue to enforce implied-warranty rights concerning common-area defects when those defects implicate unit habitability, subject to ordinary proof requirements and applicable limitation and repose periods.
- The economic loss doctrine does not require dismissal of negligence claims where the pleadings and allegations support a reasonable inference of property damage beyond the cost to repair or replace the defective construction.
- When a developer controls a condominium association as a trustee, fiduciary obligations run to the association and unit owners, and willful default in that capacity can support liability measured by the full cost of specified remedial work and related losses.

## Conclusion

The court extended Massachusetts implied-warranty protections to newly constructed condominium units and allowed condominium associations to pursue warranty claims for latent, habitability-related defects in common areas, while also rejecting categorical economic-loss dismissal of negligence where additional property damage is plausibly alleged and sustaining fiduciary-duty consequences for willful misconduct by a developer in association control.


Berish v. Bornstein, 437 Mass. 252, 770 N.E.2d 961 (2002)