§ 42–1903.16. Warranty against structural defects; limitation for conversion condominiums; exclusion or modification of warranty.

(a) Repealed.

(a-1)(1) The failure to comply with the applicable building code in effect at the time of construction shall create a rebuttable presumption that an affected component of a unit or common area 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.

(2) To the extent that a structural defect results in damage to a unit or to a portion of the common elements, repair of the structural defect pursuant to the declarant's common element warranty against structural defects shall also require repair of the damage to a unit or a portion of the common elements resulting from the structural defect.

(3) Nothing in this section shall be construed to make a declarant responsible for any damage resulting from lack of proper maintenance of a unit or the common elements.

(b) A declarant shall warrant against structural defects in each of the units for 2 years from the date each unit is first conveyed to a bona fide purchaser, and all of the common elements for 2 years. The 2 years shall begin as to any portion of the common elements whenever the portion has been completed or, if later:

(1) If within any additional land or portion thereof that does not contain a unit, at the time the additional land is added to the condominium;

(2) If within any convertible land or portion thereof that does not contain a unit, at the time the convertible land may no longer be converted;

(3) If within any additional land or convertible land or portion of either that does contain a unit, at the time the first unit therein is first conveyed to a bona fide purchaser; or

(4) If within any other portion of the condominium, at the time the first unit is conveyed to a bona fide purchaser.

(c) A declarant of a conversion condominium may offer the units, common elements, or both in “as is” condition. If the conversion condominium is offered in “as is” condition, the declarant’s warranty against structural defects shall apply only to a defect in components installed by the declarant or work done by the declarant unless the declarant gives a more extensive warranty in writing.

(d) Except with respect to a purchaser of a unit that may be used for residential purposes, the warranty against structural defects:

(1) May be excluded or modified by agreement of the parties; and

(2) Is excluded by an expression of disclaimer such as “as is”, “with all faults,” or other language that in common understanding calls the purchaser’s attention to the exclusion of warranties.

(e)(1)(A) At the time that the condominium registration order is issued by the Mayor, the declarant shall post with the Mayor a warranty security in the amount of 10% of the estimated hard construction and conversion costs, including labor and materials, to satisfy costs that arise from a declarant's failure to fulfill the requirements of this section.

(B) If prior to the conveyance of the first residential unit to a purchaser, the declarant has not posted warranty security as required by subparagraph (A) of this paragraph, the escrow agent for the sale of the residential unit shall collect the warranty security payment prior to closing and submit the warranty security payment to the Mayor on the settlement date.

(C) The bond, letter of credit, or other security shall be in a form that is automatically renewable and may only expire with permission by the Mayor, unless a release or approval of revocation is granted by the Mayor.

(D) The amount of the warranty security shall be based on the estimated hard construction and conversion costs, including labor and materials, at the time of filing the application for condominium registration. These costs shall be determined according to industry standards for estimating construction costs. 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.

(E) No condominium unit shall be conveyed to a purchaser until the warranty security has been posted in accordance with requirements set forth in this subsection.

(2) To support the amount of the warranty security posted by the declarant, a declarant shall provide a sworn statement 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 as set forth in paragraph (1)(D) of this subsection.

(3)(A) The warranty security may be reduced at the declarant's request in pro rata segments beginning 2 years after the conveyance of each unit, based on the residential unit's percentage interest in the residential portion of the condominium; provided, that in no event shall the warranty security be reduced below 50% of the original amount of the warranty security until one year after the transfer of control of the residential executive board of the unit owners' association to residential unit owners other than the declarant, or an affiliate of the declarant.

(B) Pro rata segments shall be based on the residential unit's percentage interest in the residential portion of the condominium.

(4) At the end of 5 years after the conveyance of the first residential unit to a purchaser, the declarant may sell unsold residential units as resale units, in which event no warranty against structural defects in the units under this section shall be required and the bond shall be reduced pro rata as to those unsold units; provided, that one year has passed following transfer of control by the declarant.

(5) The bonding requirements pursuant to this subsection and the warranties required under this section are applicable only to residential condominiums or the residential condominium portion of mixed-use condominiums or mixed-use projects that contain 2 or more types of uses, including residential, retail, or office. If a residential unit is part of a mixed-use condominium, the cost of the residential portion of the condominium shall include:

(A) The residential condominium unit's pro rata share of common elements, based on the residential condominium unit's percentage interest in the common elements; or

(B) The residential condominium unit's pro rata share of those portions of the project directly supporting, enclosing, or servicing the residential condominium.

(6) The Mayor shall maintain an online record of the warranty security amounts and the form of warranty security being held for each condominium project for which such warranty security is required, which shall be available to the public on a searchable website.

(7)(A) A claimant asserting a claim of structural defect to a residential unit or a portion of the common elements shall notify the declarant in writing via certified mail and return receipt requested of the claimant's intent to file a claim with the Mayor at least 30 calendar days prior to filing such a claim. The declarant shall have an opportunity to respond to the claimant during the 30 calendar days following the date the declarant receives the notice required by this subsection.

(B) After 30 calendar days from the date the declarant receives the claimant's notice of intent to file a claim, the claimant may file a claim of structural defect to a residential unit or portion of the common elements with the Mayor on a form prescribed by the Mayor. The claimant shall send a copy of the claim to the declarant via certified mail and return receipt requested on the same date the claimant files a claim with the Mayor.

(C) A declarant shall file with the Mayor a written response to a structural defect claim filed with the Mayor within 30 calendar days after receipt of a copy of the claim. The declarant shall also send a copy to the claimant via certified mail with return receipt requested.

(D)(i) After receiving the unit owner's or unit owners' association's structural defect claim and the declarant's response, the Mayor shall make a final determination as to whether the claim of structural defect is a perfected claim.

(ii) The Mayor's determination that the structural defect claim is not perfected in a previous instance will have no bearing on any other current or future claim by a unit owner or the unit owners' association based on additional or different information.

(E) Upon a final determination by the Mayor that the claim is perfected, the Mayor shall make a determination based on the materials provided in the claim of the cost to repair or replace the structural defects to be paid from the warranty security posted with the Mayor.

(F)(i) Upon the Mayor's final determination of a perfected claim and determination of the amount of warranty security to be awarded for payment of the costs to repair or replace the structural defects, the declarant and the claimant shall complete all forms required by the Mayor to release the necessary funds.

(ii) Upon receipt of all necessary completed forms, the Mayor shall release the funds to the claimant within 30 calendar days.

(G) Any party aggrieved by the Mayor's determination may submit a written request to the Office of Administrative Hearings ("OAH") within 30 calendar days after the date of the Mayor's final determination for a de novo consideration of the claim. Any award from the warranty security posted by the declarant shall be suspended pending the issuance of an order from OAH, in which case the decision of the OAH shall supersede any decision by the Mayor.

(H) If a unit owners association or unit owner files suit in a court of competent jurisdiction for a breach of the warranties created by this section, the prevailing party shall be entitled to an award of reasonable attorney fees and costs as may be determined by the court. A unit owners' association or unit owner that files suit shall provide written notice to the Mayor, and the warranty security posted by the declarant shall not be reduced or released until a decision is rendered by the court.

(8) If claims for structural defects under this section are pending at the time the warranty security that is posted would otherwise be allowed to be reduced or no longer be required, then the warranty security shall be required to be maintained until the claims have been finally resolved, and the warranty security has been made available to satisfy the declarant's responsibilities to the unit owners and unit owners' association under this section.

(9) The bylaws or other condominium documents prepared by the declarant shall not restrict or hinder a unit owner or a unit owners' association's right to assert claims under this section.

(10) For purposes of this subsection, "transfer of control" shall have occurred when 51% or more of the residential executive board is composed of residential unit owners other than the declarant, successor declarant, or the declarant's selections or nominees.

(e-1) The Mayor shall approve the release of the funds secured under subsection (e) of this section to satisfy any costs that arise from a declarant's failure to satisfy the requirements of this section pursuant to:

(1) A written agreement between the declarant and claimant regarding the release of the warranty security in satisfaction of the claim and approved by the Mayor;

(2) An order issued by the Mayor pursuant to subsection (e)(7)(F) of this section;

(3) An order of the Office of Administrative Hearings issued following an appeal under subsection (e)(7)(G) of this section; or

(4) An order of a court of competent jurisdiction.

(f) Repealed.

(g)(1) The Mayor shall issue proposed rules to implement the provisions of this section within 180 days of October 22, 1999. The proposed rules shall be submitted to the Council for a 45-day period of review, excluding Saturdays, Sundays, legal holidays, and days of Council recess. If the Council does not approve or disapprove the proposed rules, in whole or in part, by resolution within this 45-day review period, the proposed rules shall be deemed approved.

(1A)(A) The Mayor shall issue proposed rules to implement the provisions of the Condominium Warranty Claims Clarification Amendment Act of 2022 [D.C. Law 24-262] within 180 days after February 23, 2023.

(B) The proposed rules shall be published in the District of Columbia Register with a 60-day public comment period. The proposed rules shall be submitted to the Council for a 45-day period of review, excluding Saturdays, Sundays, legal holidays, and days of Council recess. If the Council does not approve or disapprove the proposed rules, in whole or in part, by resolution within this 45-day review period, the proposed rules shall be deemed approved.

(2) The Mayor shall report to the Council on an annual basis on the use and effect of this section and the number of condominium units traded each year.

(h)(1) At least 7 calendar days prior to the initial conveyance of a residential unit, the declarant shall provide a copy of the bond, letter of credit, or other warranty security required under subsection (e)(1) of this section to the purchaser of the residential unit.

(2) At any time prior to 30 calendar days after the date that the declarant's control of the condominium expires, the declarant shall provide a copy of the warranty security required under subsection (e)(1) of this section to the executive board of the unit owners' association.

(i)(1) The Mayor shall establish a fund for the purpose of providing financial assistance, such as for inspections, cost estimates, and attorney costs, incurred by unit owners or unit owners' associations in the filing of a claim for a condominium developer's warranty against structural defects ("fund"). The rules for determining eligibility shall provide for the distribution of financial assistance based on financial need and shall be established through rulemaking. The fund shall be made available to unit owners or unit owners associations that undergo a special assessment on monthly condominium fees as a direct consequence of a unit owners association's expenditures resulting from a structural defect discovered within the warranty period.

(j) For the purposes of this section, the term:

(1) "Adjudication" shall have the same meaning set forth in § 2-502(19).

(2) "Claimant" means a unit owners association or a unit owner asserting a claim under the warranty for structural defects required by this section.

(3) "Conveyance" or "convey" means the transfer of legal title to real estate by written instrument, which for purposes of warranty security reduction and calculating the 2-year warranty against structural defects is deemed to be the date on which the applicable deed of conveyance is recorded with the Recorder of Deeds of the District of Columbia.

(4) "Order" shall have the same meaning set forth in § 2-502(11).

(5) "Perfected claim" means a claim that a structural defect exists, which contains all information and supporting proof required by this section or any other applicable law or regulation.

(6) "Structural defect" means a defect in a component that constitutes a portion or all of either a unit or the common elements that:

(A) Reduces the stability or safety of the unit or common elements below standards commonly accepted in the real estate market; or

(B) Restricts the normally intended use of all or part of the common elements of a unit and which requires repair, renovation, restoration, or replacement to serve the purpose for which it was intended.

(7) Warranty security" means a payment in the form of a bond, letter of credit, or other form approved by the Mayor that is required to be posted with the Mayor.