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Berish v. Bornstein6/28/2002
Barnstable.
January 8, 2002
Condominiums, Management, Common area. Real Property, Sale, Condominium. Warranty. Contract, Warranty, Sale of real estate . Limitations, Statute of. Repose, Statute of. Negligence, Economic loss. Consumer Protection Act, Availability of remedy. Practice, Civil, Master: report. Fiduciary. Damages, Breach of fiduciary duty, Breach of contract, Interest.
The plaintiff trustees of the Trust of the Cotuit Bay Condominium (unit owners' association), commenced an action against the developer of the Cotuit Bay Condominium (condominium development), Stuart Bornstein (Bornstein); the original trustees of the unit owners' association, including Jamila, Morris, and Paul Bornstein (Bornstein trustees); and the general contractor of the condominium development, Cotuit Bay Condominium, Inc. (CBC)., In their complaint, the trustees alleged inter alia that Bornstein breached the implied warranty of habitability by improperly constructing the condominium development, and that he and the Bornstein trustees breached various duties by failing properly to manage the unit owners' association and care for the common areas while they were original trustees.
After thirteen years of litigation, judgment was entered in the Superior Court in the trustees' favor on breach of fiduciary duty and breach of contract claims. Both parties have appealed. We granted the trustees' application for direct appellate review. The principal issue we decide is whether a warranty of habitability is implied in the sale of a newly constructed condominium unit or in the transfer of newly constructed common areas to an organization of unit owners. We conclude that such a warranty is implied in both types of transactions.
1. Factual background. In addition to being an original trustee of the unit owners' association, Bornstein was the principal beneficiary and trustee of the Cotuit Bay Condominium Trust (nominee trust), which owned both the land in Mashpee on which he built the condominium development and all of the condominium units until they were individually sold. Construction of the condominium development began in 1981, and as the units were completed and sold between 1981 and 1985, Bornstein amended the master deed to expand the condominium development from the thirty-two original units to a total of sixty-two units.
On October 30, 1981, the unit owners' association was created. The declaration of trust, which sets out the trustees' rights and responsibilities, conveyed " ll rights and powers in and with respect to the common areas and facilities of [the condominium development]" to the trustees "to exercise, manage, administer and dispose of the same and to receive the income therefrom for the benefit of the owners of record." It also required that the trustees set and assess common expenses for the upkeep of the common areas as follows:
"At least thirty days prior to the commencement of each fiscal year of this trust and within thirty days after the execution hereof with respect to the portion of a fiscal year then remaining, the Board of Trustees shall estimate the common expenses expected to be incurred during such fiscal year together with a reasonable provision for contingencies and reserves, and after taking into account any undistributed common profits from prior years, shall determine the assessment to be made for such fiscal year. The Trustees shall promptly render statements to the Unit Owners for their respective shares of such assessment, according to their percentages of interest in the common areas and facilities (or 25% thereof with respect to unoccupied Units owned by Declarant as above provided), and such statement shall,
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