Builders Beware: Superior Court Expands Home Builder Liability Under the Implied Warranty of Habitability

By Jacob J. Sulzer, Esq.*

Key Points:

• Home builders may now be liable to subsequent purchasers, beyond the original buyer, for latent defects.
• No contract required between builder and home buyer to support breach of implied warranty of habitability claim.

In a case of first impression at the appellate level, the Pennsylvania Superior Court has drastically altered the parameters of the implied warranty of habitability when applied to home builders. In Conway v. The Cutler Group, Inc., 2012 PA Super 242 (Nov. 5, 2012), the court held that a subsequent home buyer, who did not purchase the home directly from a home builder, could file suit against the builder for breach of the implied warranty of habitability – despite the lack of privity of contract. This is in stark contrast to prior Pennsylvania case law that had commonly held that the implied warranty of habitability only applied to the original purchaser of the home.

Conway involved a home constructed in 2003 by The Cutler Group. The home was originally constructed for the Fields family. Later, in 2006, the Conways purchased the subject home from the Fields. In 2008, the Conway family discovered water infiltration around the windows of their bedroom. Thereafter, the Conways obtained a home inspection which found a number of alleged defects in the home.

The Conways filed a one-count complaint that asserted breach of the implied warranty of habitability against The Cutler Group. The home builder filed preliminary objections, which contended that, as a matter of law, the implied warranty of habitability could not apply. The trial court agreed and dismissed the plaintiff's complaint. However, the Superior Court reversed the decision.

Initially, the Superior Court noted that the Pennsylvania Supreme Court had first recognized the implied warranty of habitability in Elderkin v. Gaster, 288 A.2d 771 (Pa. 1972). The Pennsylvania Supreme Court believed that the implied warranty of habitability was necessary to safeguard the reasonable expectations of home buyers, who depend upon a builder's expertise.

The Superior Court went on to explain that the implied warranty of habitability is based upon public policy considerations and is not a contractually-dependent remedy. It stated, "[w]hile the [implied] warranty of habitability has its roots in the execution of the contract for sale … it exists independently." Conway, 2012 PA Super 242 (citing Redarowicz v. Ohlendorf, 441 N.E. 2d 324, 330 (Ill.1982)).

The Superior Court's analysis is particularly groundbreaking due to the fact that prior decisions held that a subsequent home buyer was not in privity of contract to the home builder and, therefore, could not sue. The Superior Court's new rationale explicitly states that the implied warranty of habitability exists even in the absence of a contract between the builder and the current home owner.

A number of Pennsylvania counties had long forbidden claims from a subsequent home owner, including Adams, Mercer, Washington, Northumberland and Philadelphia counties. Only a handful of counties had allowed subsequent purchasers to pursue claims against builders under the breach of implied warranty of habitability, including Allegheny, Dauphin and Erie counties.

The Superior Court's holding in Conway apparently recognizes that it could trigger a flood of new claims that previously would not have been allowed by law. Therefore, the court concluded its opinion by recapping and clarifying the new parameters of a breach of implied warranty of habitability claim. The court has clearly decreed that it is the plaintiff's burden to show that the alleged defect is latent, attributable to the builder's design or construction and that it affects habitability. Additionally, all homeowners must bring their claims within the twelve-year period set out by the Statute of Repose--See 42 Pa. C.S.A. § 5536(a).

Until Conway, home builders only needed to be concerned with a claim under the implied warrant of habitability brought by the original buyer. Now, any owner within twelve years of the build date may sue if they satisfy the criteria set forth in Conway.

Defense Digest, Vol. 19, No. 1, March 2013