## Facts

- A developer planned and built a townhome project consisting of 38 buildings and 145 units with shared common areas.
- The developer created recorded CC&Rs and formed a nonprofit homeowners association to maintain and repair common areas, including exterior surfaces and roofs.
- Before any unit sales, the developer owned all units and controlled the association through its managing individual, who served as trustee and as multiple corporate officers.
- The developer hired a construction company to construct, supervise, and inspect the project for quality and building-code compliance.
- After turnover, the association discovered significant water intrusion through walls, doors, windows, window boxes, and roofs, damaging stucco and other building components.
- A specialist attributed the problems to faulty design, faulty workmanship, defective materials, improper construction, and building-code noncompliance.
- The association also learned of prior information indicating collapsible soil conditions that could lead to subsidence.
- The association sought repairs from the developer and builder; they refused.
- The association sued for, among other claims, breach of implied warranty of workmanlike manner and habitability, negligence, and breach of fiduciary duty.
- The trial court dismissed several claims under Rule 12(b)(6) and denied leave to amend to reinstate dismissed claims.

## Issues

1. Whether a homeowners association may assert breach of the implied warranty of workmanlike manner and habitability for common-area defects, including for the benefit of subsequent purchasers.
2. Whether the association has standing to assert negligence and related tort claims for damage to common areas and limited common elements.
3. Whether a developer that controls an association during the development period owes fiduciary duties to the association, and whether the pleadings stated a claim for breach.
4. Whether statutes of limitation or repose, and pleading deficiencies regarding discovery and damages, required dismissal and made proposed amendments futile.

## Decision

- The court affirmed in part and reversed in part the dismissal order.
- It held that the implied warranty of workmanlike manner and habitability extends to subsequent purchasers and may be enforced by the association for defects affecting common areas; dismissal of that theory at the pleading stage was improper as to the developer and builder.
- It held the association sufficiently pleaded negligence claims for construction defects in common areas and limited common elements; dismissal of those tort claims at the pleading stage was improper.
- It held the developer, while controlling the association, owed fiduciary duties in managing association affairs; the allegations of self-interested conduct and failure to protect the project’s interests stated a claim for breach of fiduciary duty.
- It affirmed dismissal of certain claims deemed legally deficient or time-barred.
- It reversed the denial of leave to amend as to claims for which the proposed amendments were not futile and remanded for further proceedings.

## Legal Principles

- An implied warranty of workmanlike manner and habitability in new residential construction may run to subsequent purchasers and may be asserted by a homeowners association for defects in common areas.
- A homeowners association has standing, based on governing declarations and its maintenance obligations, to pursue contract and tort remedies for damage to common areas and related repair costs borne collectively by owners.
- A developer that controls an association during the initial governance period owes fiduciary duties (including loyalty and care) to the association in its management and control of association affairs.
- At the pleading stage, claims based on latent construction defects should not be dismissed where the allegations plausibly support delayed discovery and resulting damages; however, claims that are clearly time-barred or legally unsound may be dismissed, and amendment may be denied as futile only on that basis.

## Conclusion

The Utah Supreme Court permitted an association to proceed on implied-warranty, negligence, and fiduciary-duty theories for common-area construction defects and required allowance of non-futile amendments, while leaving intact dismissal of claims that were time-barred or otherwise defective, and remanded for continued litigation on the surviving claims.


Davencourt at Pilgrims Landing Homeowners Ass'n v. Davencourt at Pilgrims Landing, LC, 221 P.3d 234 (Utah 2009)