For the first time, the Superior Court of Pennsylvania has extended the protection of the implied warranty of habitability to the second or subsequent purchaser of a newly constructed home in Conway v. The Cutler Group, 2012 Pa. Super. LEXIS 3480, at *19 (Pa. Sup. Ct., Nov. 5, 2012). The implied warranty of habitability, first announced by the Pennsylvania Supreme Court back in 1972, provides the purchaser of a newly constructed home with implied warranty protection from the home's builder-vendor that the home is constructed in a reasonably workmanlike manner and fit for habitation. This judicially created doctrine shifts the risk of a latent defect in the construction of a new home from the purchaser to the builder-vendor. Some latent defects that affect the habitability of a home do not materialize until years after the home is built. The state Superior Court has now decided that the risk for these defects should be borne by the builder-vendor of the home regardless of whether the original purchaser or a subsequent purchaser discovers the latent defect.
The Pennsylvania Superior Court began its opinion by outlining the history of the doctrine of the implied warranty of habitability and stating that the judicially created doctrine equalizes the bargaining power between a builder and a purchaser of a home. Typically, a home purchaser has little experience or knowledge in assessing a home's quality of construction, and even a thorough home inspection may not uncover some latent defects. Although many home builders provide some kind of express warranty or guaranty in an agreement of sale, a builder is not required by Pennsylvania law to include in an agreement of sale an express warranty or guaranty about the quality of construction of a new home.1 For the last 40 years, Pennsylvania courts have applied the doctrine of implied warranty of habitability to place on the builder-vendor the burden of repairing for the home's first purchaser latent construction defects.
In the Conway case, the Superior Court rejected the builder's argument that a contractual relationship is required for the protection of the implied warranty of habitability. Relying on the premise that the implied warranty of habitability exists independent of contract law, it concluded that requiring a contractual relationship to trigger the implied warranty of habitability presents potential inequities when a latent defect first appears several years after the purchase of a newly constructed home and after the first purchaser has resold the home. The Superior Court decided that a subsequent purchaser could assert a claim against the home's original builder-vendor based on the breach of the implied warranty of habitability even though the subsequent purchaser did not have a contractual relationship with the builder-vendor.
Pennsylvania home builders still have some defenses to a claim of breach of implied warranty of habitability. First, to assert successfully a claim of breach of implied warranty of habitability, a plaintiff has to demonstrate that the defect is latent, attributable to the home's design or construction, and affects habitability. Also, Pennsylvania law—specifically, the "statute of repose"—limits the time to initiate a suit against a builder to 12 years after the completion of construction. Thus, any suit against a builder alleging breach of the implied warranty of habitability brought more than 12 years after the completion of construction is likely barred.
The Conway decision may have significant consequences in expanding a home builder's liability exposure. As a technical matter, Conway does not extend the time period during which a builder-vendor faces the prospect of a claim for breach of the implied warranty of habitability. However, to the extent that a new home is resold sooner than 12 years after it is first built, the Pennsylvania Superior Court's decision that an implied warranty of habitability claim does not require a contractual relationship to exist between the builder-vendor and the suing homeowner expands, as a practical matter, the possibility of claims against the builder-vendor arising out of a home's original construction. Although Pennsylvania case law allows a builder-vendor to obtain from its home purchaser an express waiver of an implied warranty of habitability claim using clear, unambiguous language that is sufficiently particular to put the purchaser on notice of the right that the purchaser is waiving, a significant question left unanswered by the Conway decision is whether, and how, an express waiver given by the first purchaser of a home affects the rights of a subsequent purchaser of the same home under an implied warranty that will now extend to that subsequent purchaser. This question will remain open until it is answered by a future court decision. Until then, builder-vendors of new homes in Pennsylvania should consider what steps might be taken to respond to the Superior Court's expansion of the implied warranty of habitability. As of the writing of this Alert, no appeal has been taken from the Superior Court's decision.
For Further Information
If you have any questions about this Alert, please contact Marc D. Brookman, David I. Haas, Christopher Bender, any member of the Real Estate Practice Group or the attorney in the firm with whom you are regularly in contact.
Certain limited statutory warranties are established for newly constructed homes in condominiums, cooperatives and planned communities.