The Pennsylvania Supreme Court ruled that a builder’s implied warranty of habitability extends only to the initial buyer of a home, and not to subsequent purchasers. In Conway v. The Cutler Group, Inc., the Court reversed an earlier decision of the Pennsylvania Superior Court that created more expansive liability for home builders. The Pennsylvania Supreme Court had previously recognized a home builder’s implied warranty of habitability owed to initial buyers (Elderkin v. Gaster, 288 A.2d 771, 777 (Pa. 1972)). Until now, however, it was unclear whether the warranty extended to second and subsequent buyers.

In Conway, the defendant builder sold a new house to buyers who lived in the house for three years before reselling it. After the second buyers discovered water infiltration caused by alleged latent construction defects in the home’s windows, they filed a complaint against the builder alleging breach of its implied warranty of habitability. The builder filed preliminary objections on grounds that it had no contractual relationship with the second buyers, arguing that a showing of privity of contract is required before a plaintiff may proceed with a breach of implied warranty of habitability claim.

The trial court ruled in favor of the builder. The Superior Court reversed, holding that builders are in the best position to avoid and resolve latent construction defects. The Supreme Court has now announced that “a subsequent purchaser of a previously inhabited residence may not recover contract damages for breach of the builder’s implied warranty of habitability.”

Noting that the rationale underpinning the Superior Court’s decision was primarily based upon policy considerations, the Supreme Court explained that the allocation of responsibility for defects in residential structures in the absence of privity was the Legislature’s province, not the courts’.

The Supreme Court’s decision applies only to a situation involving a builder-vendor selling a new home to a purchaser-user. The Supreme Court declined to address or extend the ruling to cover the circumstance where the first purchaser of a new home is a developer-affiliated entity who did not reside in or use the home, but it would appear unlikely that a straw sale would permit a builder to insulate itself from liability.

As a result of the decision, builders should monitor possible future legislation addressing the public policy issues that the Supreme Court identified as falling squarely within the legislature’s domain. As always, when contracting for the sale of a newly constructed home, careful consideration should be paid to the representations and warranties, making sure that the parties’ intent is as clear as possible.