Buying new construction in Massachusetts

The developer’s contract

With a new building or a house under construction, the seller usually writes the contract. It is drafted by the developer’s attorney, it is longer than the standard form, and many terms favor the developer. Some projects take reservations before the contract; others take offers like a resale. A reservation generally does not bind either side to the final terms, so read what the reservation agreement says about refunding the deposit.

Have your own attorney review the contract before you sign, with these points in mind.

• Delivery date: the target date, how far the developer may extend it, and what you may do if the date slips, including getting your deposit back.
• Deposits: how much, when each payment is due, who holds the money, whether it sits in escrow, and when it becomes non-refundable.
• Substitutions: whether the developer can change materials, finishes or appliances, and to what standard.
• Site visits: when you may enter. Until closing the site belongs to the developer, so arrange visits through the contract or your attorney.
• Closing conditions: a certificate of occupancy, completed punch-list items, and how any unfinished work, such as landscaping in winter, will be handled at closing.
• Warranty: what the written warranty covers, for how long, and how to make a claim. Any upgrades you order should be in writing with prices.

Certificate of occupancy and closing

A certificate of occupancy confirms that a building or space is safe and legally approved for its intended use. Every Massachusetts city and town requires one before a newly built or substantially renovated space can be occupied. It is issued by the local building department after its inspections and, in Boston, after sign-off by the fire department as well.

Your lender will not fund a loan on a home that cannot legally be occupied, and you should not close on one either. Ask your attorney to make delivery of the certificate a condition of closing. Building permit and inspection records are public; you can request them from the building department, and our public records guide explains how.

Inspections on a new home

A building that passed code inspections can still have defects. Code inspections check minimum standards at certain stages; they do not check finish quality and they do not work for you. If the contract allows, hire a licensed home inspector to look at framing, insulation, plumbing and wiring before the drywall goes up, when problems are easiest to see and cheapest to fix.

Near the end, do a full walk-through with the developer’s representative and, ideally, your inspector. Everything unfinished or damaged goes on a written punch list with a completion date, signed by both sides. Walk it again before closing and check each item off. Things that cannot be finished by closing, such as exterior work in winter, should be addressed in writing, for example by an escrow holdback if your attorney and lender agree to one.

Warranties: written and implied

Many developers provide a written limited warranty, often for one year. Read its exclusions and claim steps, and send claims in writing within its deadlines. A written warranty can be short: in the Supreme Judicial Court’s Albrecht case, the express warranties in the contract survived the deed for only one year, and the buyers’ claim under them was barred.

The same 2002 decision held that a builder-vendor who sells a new home impliedly warrants that it is fit to live in. The warranty cannot be waived or disclaimed, but it is limited: it covers latent defects that raise a substantial safety question or make the home unfit to live in, not every workmanship or cosmetic issue, and whether it applies to a home sold unfinished is a question for your attorney. To recover, a buyer must show that the house was bought new from the builder-vendor, that it had a latent defect that appeared only after the purchase, that the builder’s design, materials or workmanship caused it, and that it created a substantial question of safety or made the house unfit to live in. Later in 2002 the court extended the warranty to new condominium units and allowed the association to bring claims for latent defects in the common areas.

Time limits are strict. The claim must be brought within three years after it accrues and in no event more than six years after the earlier of the home’s opening to use or substantial completion and the owner’s taking possession. If you see cracks, leaks or other signs of a structural problem, write to the builder and talk to an attorney promptly.

New condos and developer control

In a new condo the developer, called the declarant, controls the association at first and owns the unsold units. Under the condo statute the declarant counts as a unit owner and common expenses are assessed against all units, and the developer may not use association funds to pay its own share of common expenses or the costs of construction and marketing. The statute generally requires an adequate replacement reserve fund, separate from operating funds; after the developer gives up control, owners holding at least 67% of the beneficial interest can vote each year to modify that requirement, and lenders may have their own reserve rules.

Ask how the first budget was set, whether it includes a reserve contribution, and how many units are sold. A budget prepared before the building has any operating history may change once the owners take over. Read the master deed for rights the developer keeps, such as adding phases or units, and ask when control passes to the owners. Our condo documents guide lists the rest of the papers to review.