Builders of Homes Liable to Subsequent Purchaser for Breach of Warranty of Habitability

        Pennsylvania case law had previously decided that there is an “implied warranty of habitability” for new homes purchased from a builder.  An “implied warranty of habitability” is an assurance that the home is suitable for human living. 
        The courts extended that implied warranty of habitability to new homes purchased by a first-time buyer from a seller who was not the builder.  One of the legal principles that had to be overcome was the lack of “privity of contract” (a direct contractual relationship) between the builder and the purchaser. 

        In a recent case, Conway v. Cutler, the Pennsylvania Superior Court for the first time held that the implied warranty of habitability extends from a builder to a second purchaser of a dwelling despite there being no direct contractual relationship between those parties.

        Conway v. Cutler involved defects in a dwelling that the Court found were attributable to faulty construction.  The Court expressed its concern that certain defects which would not be apparent to the ordinary purchaser as a result of a reasonable inspection may nonetheless appear later.  As stated by the Court:

“It seems only fair to put the burden of repairing defects in construction with the person who was (1) responsible for the defects, (2) is in a position to repair them, and (3) is in a position to spread the cost of the repair.”

        The Court concluded that “we see no reason to limit a builder’s implied warranty to his immediate vendee (i.e., the original purchaser).”

        In response to the builder’s argument that this decision was opening the “floodgates” to unlimited liability on home builders, the Court pointed out that it is still the plaintiff’s burden to show that the alleged defect is latent, that it was attributable to the builder’s defective design and/or construction, and that the defect affects habitability.  The Court further pointed out that all homeowners must still bring their claims within the 12-year period set by the applicable statute of repose (time limitation on bringing suit).

        This case may provide additional remedies that were not previously thought to be available to purchasers of “used homes.”  However the barriers of the 12-year statute of repose and the need to prove that the defects were latent and attributable to defective design or construction will still exist.  Also, although not discussed by the Court, builders create limited liability entities (corporations, limited liability companies, and limited partnership) to act as builders/developers of new projects.  It may often be the case that by the time a subsequent purchaser discovers a latent defect, the builder entity has been dissolved or no longer has assets to satisfy the claim.  All the more reason for the purchaser of a recently-built home to determine whether the builder/seller of the home is viable and responsible.

        Because of its significance and broad applicability, this decision has been appealed to the Supreme Court, and we should soon have the final word on the subject.
Stu Cohen


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