Builder implied warranty extends to subsequent purchasers, says Pa. Court

Pennsylvania law provides that a builder impliedly warrants to a purchaser that the home it has built and sold is constructed in a reasonably workmanlike manner and fit for habitation.

The question presented in a recent case is whether this “implied warranty of habitability” extends to subsequent purchasers of the home. In a case of first impression, the Superior Court has held that the implied warranty of habitability does extend to a second or subsequent purchaser of a home.

In Conway v. The Cutler Group, a builder constructed a home for a buyer in Bucks County. Three years later, the buyers sold the property to the Conways. The Conways later discovered water infiltration caused by construction defects. The Conways sued the builder, asserting a breach of the implied warranty of habitability. The trial court granted the builder’s motion to dismiss the case on the grounds that the implied warranty of habitability only extends from the builder to the initial purchaser.

On appeal, the Superior Court reversed the trial court’s decision, holding that the implied warranty of habitability can apply to a second or subsequent purchaser. The Superior Court explained that the implied warranty of habitability exists even in the absence of any contract between the builder and homeowner. The court explained that the implied warranty is a creation of public policy that removes certain latent construction defects from the doctrine of caveat emptor (“let the buyer beware”) and shifts the risk of those defects to the builder.

The court relied upon one of its previous decisions involving a buyer’s right to sue the builder of a condominium, even though the buyer did not purchase his unit directly from the builder. The court reasoned that the builder of the condominium knew or should have known that the initial seller would not be the first user of the condominium. In the instant case, the court explained that the builder is certifying the home as a structure that will be habitable and free from latent construction defects affecting habitability, regardless of how many times title changes hands, because many defects do not manifest themselves for years.

To hold otherwise, the court explained, would be unfair. If a structural defect does not materialize until the home is five years old, and the original purchaser is still occupying the home, the purchaser may recover under the implied warranty of habitability. However, if the same defect materializes when the home is five years old but the original purchaser sold the home after the third year; the current homeowner should not be precluded from recovery.

The court noted, however, that its decision would not lead to unlimited liability against home builders. “It is still the Plaintiff’s burden to show that the alleged defect is latent, attributable to the builder’s design or construction, and it affects habitability.” Furthermore, homeowners must still bring their claims within 12 years of the builder’s completion of work.

Many of today’s construction contracts contain express warranties which are designed to replace or limit the effect of the implied warranties provided by law. A properly worded and conspicuous disclaimer of implied warranties by a builder is enforceable in Pennsylvania and may serve to limit its liability.

A question not answered by the Superior Court is whether such an implied warranty disclaimer would serve to bar recovery by a subsequent purchaser where the original express warranty has expired. Would that create a situation where the original purchaser of the home does not have a remedy against the builder, but a subsequent purchaser does? It remains to be seen.