Condominium Warranty Bonds for New Construction

Posted by John Crisafulli on Thursday, August 27th, 2015 at 10:14am.

There is a program in DC that helps protect buyers of newly constructed condominiums. It is in effect for two years after the settlement date of the first condo in the building. 10% of the total cost of construction is put aside as a condominium warranty bond. It is held by the Department of Consumer and Regulatory Affairs (DCRA) and the condo association can request money from it for structural issues that arise. This link will help explain exactly how the process works. Here are some tips to keep in mind when buying a brand new condo to make sure the program is effective for you.


The developer of the condominiums is allowed to manage the building during the two year warranty bond period. This is a conflict of interest, and while legal, it should be something a buyer is cautious of. The developer of course wants their entire warranty bond back at the end of two years, so they usually will do whatever it takes to ensure that happens. Condo owners will likely not have their interests looked out for if the developer is the building manager, so beware of this situation. We recommend trying to steer clear of new condos where the developer and manager are one in the same.


Furthermore, the developers/managers are allowed to use their own inspectors in checking their work. Here is another way to protect yourself in this situation: insist on having a private inspection done by an inspector of your choice. They will take your interests into account and not those of the developer/manager. If the property is not up to code in terms of structural issues, you should have a case to access the warranty funds being held by DCRA.


For more information on condominium warranty bonds for new construction, please contact us or feel free to reach out to our colleague Marty Stanton at KVS Law Group. Marty’s e-mail address is marty@kvstitle.com and his phone number is 301-605-1423.


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