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Implied Warranty Will Not Extend Beyond Initial Home Buyer

Back in 1972, the PA Supreme Court ruled that an initial home buyer could rely upon an implied warranty of habitability of a home builder. In 1990, the Court extended the implied warranty to cover subsequent home buyers, provided that the original home buyer had not actually resided in the property. In 2012, in the case of Conway v. Cutler Group, the PA Superior Court ruled that a subsequent home buyer could also benefit from an implied warranty of habitability, even if the original home buyer had lived in the home.

In August, the PA Supreme Court unanimously overturned the Superior Court decision in Cutler. The Court ruled that extending the implied warranty was unfair to the home builder, because the home builder may end up being liable for defects which were not a result of its construction, but rather because of an action (or a failure to act) by the initial home buyer, or for some other reason. The Court was also swayed by the fact that there is no "privity of contract" (i.e., direct contractual relationship) between the builder and the subsequent purchaser. Some members of the Court also felt that subsequent home buyers have other protections available to them, such as The Real Estate Seller Disclosure Law.

The Court readily acknowledged that some defects simply don't show up until many years later, well after the original purchaser has left the home. However, the Court also pointed out that, even if there is no extension of an implied warranty of habitability to a subsequent purchaser, the subsequent home buyer is not without remedy: If the subsequent home buyer can prove--even years later--that there was a defect in the construction of the home, the subsequent home buyer may still have a cause of action against the builder. The fact that there is no "implied warranty" will not insulate a builder from claims based upon negligence or other causes of action.

Some will say that this is simply an example of how close questions are often decided not by legal principals, but by the economic and social climate at the time of a decision. With the residential real estate industry still trying to recover from its doldrums, and with courts overburdened by increasing caseloads and shrinking budgets, it is possible that this case was decided by considerations beyond the confines of the courthouse.

--Ken Milner

Categories: Real Estate