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  • Kathryn O'Leary, Esq.

The Door Has Been Shut on Massachusetts Home Buyers Who Seek Recourse After the Closing

In Sullivan et al. v. Five Acres Realty Trust, et al. (SJC-12934), the Supreme Judicial Court of Massachusetts considered claims that arose from the purchase of a $1,850,000 home in Dover, MA in 2012. The Plaintiff/Buyers sued after discovering defects that centered primarily on the kitchen and a "Tuscan Room" and included inadequate structural support, inadequate venting, the improper installation of a gas line and non-code compliant electrical wiring.

The Defendant was a family-owned realty trust. Trustees Rosalie and Guiseppe Gagliardi not only held all beneficial interests in the trust, they also owned a separately organized masonry and excavating business, and they had purchased and renovated properties for business purposes. They purchased the home in Dover in 2002. Four or so years later the Defendants renovated the kitchen and converted a porch into a "Tuscan Room" between. The renovations were completed by 2008. Defendant Guiseppe Gagliardi planned and designed the renovations and oversaw licensed trades people who did the work. It was undisputed that the Defendants did not get building permits for this work and that they were required. The Gagliardis lived in the Property before offering it for sale.

The Defendants put their home on the market in 2011. The Plaintiffs looked at it in late 2012 and interacted directly with the Defendants when they did. The parties specifically discussed the recently renovated kitchen and Tuscan Room. During these conversations the Defendants did not volunteer the fact that they didn't apply for a building permit for the renovations, nor did they reveal that they never received a Certificate of Occupancy after the work was done. The Defendants made no representations regarding the renovations except that they were done while they owned the property.

The Plaintiffs decided to buy the property and got the home inspected. The written inspection report recommended that they check "municipal records" before closing on the property because the inspection did not include the property's permitting history. The Plaintiffs opted not to check for any building permits, let alone for the renovations in question, before purchasing the home and claimed that they discovered the defects of which they complained within the first two years of ownership. The decision does not mention whether the Plaintiffs' building inspector was not a party. In terms of the defective construction, the Plaintiffs contended that the Tuscan Room had structural defects so severe that they were better off razing and rebuilding it and that it would cost $211,000 to do that, among other things.

The Plaintiff's complaint contained four counts - Breach of the Implied Warranty of Habitability; Fraud and Misrepresentation; Defective and Deficient Renovation work and Violation of M.G.L. ch. 93A. The Defendants moved for Summary Judgment before the Superior Court and were partially successful. The claims for Breach of Implied Habitability and Violation of Chapter 93A, however, survived and were ultimately tried to a jury. The Plaintiffs prevailed at trial on the remaining counts and were awarded damages on both counts, plus attorneys' fees of $425,727.72. The Defendants made unsuccessful post trial motions whereas the Plaintiffs claimed that grant of summary judgment on their fraud and misrepresentation claim and the denial of an award of jury consultant fees under Chapter 93A were in error. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

The SJC first analyzed the Plaintiffs' Chapter 93A claim. Section 2(a) of Chapter 93A prohibits unfair or deceptive acts or practices "in the conduct of any trade or commerce". The statute does not apply to transactions that are private in nature, and the sale of a residence by a private individual on a non-professional basis has been deemed not trade or commerce and thus not subject to liability under Chapter 93A. Billings v. Wilson, 397 Mass. 614, 615 (1986); see also Begelfer v. Najarian, 381 Mass. 177, 190 (1980). The Trial Court denied summary judgment on this claim because of undisputed issues of material fact, most of which revolved around the Defendants' history of purchasing, refinancing and renting out properties. The SJC ruled that because the Defendants had lived in the house for ten years before they sold it, they were not engaging in trade or commerce when they did sell it. Hoping to "generate wealth" when selling a house was not enough to turn the transaction into trade or commerce. By stark contrast, someone who builds houses just to sell them or flips properties, even if they lived in them incidentally, could be deemed involved in a business context. However, that was not the situation in the case at bar.

On the Implied Warranty of Habitability claim the SJC held that implied warranties of habitability attach only to sales of new homes by a builder/vendor. The purpose of this implied warranty "is to protect a purchaser of a new home from latent defects that create substantial questions of safety and habitability. . . . [A] home that is unsafe because it deviates from fundamental aspects of the applicable building codes, or is structurally unsound, or fails to keep out the elements because of defects of construction, would breach the implied warranty." Albrecht v. Clifford, 436 Mass. 706, 710-711 (2002). "To establish a breach of the implied warranty of habitability a plaintiff [has] to demonstrate that (1) he [or she] purchased a new house from the defendant-builder-vendor; (2) the house contained a latent defect; (3) the defect manifested itself only after its purchase; (4) the defect was caused by the builder's improper design, material, or workmanship; and (5) the defect created a substantial question of safety or made the house unfit for human habitation." Id. at 711-712.

The SJC held that the evidence was insufficient to show that the defendants were builder-vendors. Although Massachusetts law does not expressly define "builder-vendor," persons considered "builder-vendors" in case law have included builders of new residential condominium developments and homes. See Berish v. Bornstein, 437 Mass. 252, 254-255, 262-263 (2002) (defendant constructed condominium development); and Albrecht, at 707-708 (defendant constructed new single-family home). In determining whether a party is a builder-vendor for purposes of the implied warranty of habitability, other jurisdictions have focused on whether the house was "built for the purpose of sale to the public" (quotation omitted), Mobley v. Copeland, 828 S.W.2d 717, 728 (Mo. Ct. App. 1992), and relatedly, whether the sale was commercial in nature, rather than personal or casual, see Mazurek v. Nielsen, 599 P.2d 269, 271 (Colo. Ct. App. 1979); Mobley, supra at 728-729; Bolkum v. Staab, 133 Vt. 467, 469-470 (1975); Klos v. Gockel, 87 Wash. 2d 567, 570 (1976).

In the Sullivan case it was undisputed that the Defendants were not involved in the original construction of the house; as was the fact that one of the Defendants completed some of the renovations himself and hired contractors to complete other portions. Nevertheless, the SJC opined that the mere completion of renovations to one's private residence does not make him or her a builder-vendor.

The SJC concluded that the Defendant's post trial motions should have been allowed on the M.G.L. ch. 93A and the warranty of habitability claims, and that the Superior Court motion judge properly granted summary judgment in favor of the Defendants on the fraud and misrepresentation claim. The SJC also held unequivocally that jury consultant fees are not recoverable under M.G.L. ch. 93A.

Massachusetts law has always leaned in favor of finality when it comes to the purchase of a home. Buyers almost always sign quitclaim deeds, have home inspections and sign Purchase and Sale Agreements that define the responsibilities of buyer and seller when purchasing a home. The Sullivan case further foreclosed seller liability under Chapter 93A, further defined the Implied Warranty of Habitability, and tangentially applied the statute of repose in reaching its decision.

Kathryn A. O'Leary has successfully handled cases arising from the purchase and sale of real estate in Massachusetts. She offers free, remote consultations and would be happy to discuss your home-related problem.

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