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Is a Home Builder Liable to a Remote Buyer for Defects?

When a new home builder enters into a contract with a buyer, the parties will typicaily enter into a contract which will contain certain representations, specifications and warranties. If the contractor fails to properly construct the home, the buyer will have various avenues for recourse, ranging from breach of contract, to breach of warranty, to misrepresentation, to consumer protection laws. It usually will not be difficult for the buyer to demonstrate that the buyer dealt directly with the home builder and relied upon the contract or the representations made by the builder. [The direct relationship between the buyer and the builder is called "privity."]

But what happens if the original buyer re-sells the home, and a latent defect appears only after the re-sale takes place? The new buyer has no privity with the builder: There is no contract or relationship with the builder; the new buyer cannot claim that a representation was made by the builder to the new buyer. Does the new buyer have a remedy against the builder, even without privity?

In the 2017 case of Zajick v. The Cutler Group, the Pennsylvania Superior Court tackled the issue. In that case, the home was built and sold to the original purchaser in 2003. The home was sold five years later to Zajick, who had a home inspection service performed before completing the sale. It wasn't until two-and-a-half years later that she noticed a leaking problem, and was told that the stucco system used to build the home was defective. When the builder refused to fix the problem, Zajick paid to have the repairs made, and then sued the builder. Her claims included breach of contract, breach of warranty and violations of the PA Unfair Trade Practice and Consumer Protection Law (UTPCPL).

The trial court dismissed the contract and breach of warranty claims because there was no privity, but allowed the UTPCPL claim to remain. The court gave Ms. Zajick time to provide evidence that the builder had made misrepresentations to her upon which she reasonably relied. When Zajick failed to timely provide such evidence, the builder moved to dismiss the UTPCPL claim. Zajick responded to the motion by saying that she relied upon the builder's reputation and previous experience with the builder. When the trial court granted the builder's summary judgment motion, Zajick appealed.

The Superior Court upheld the summary judgment dismissal of the case. It acknowledged that, in some cases, even in the absence of privity, the UTPCPL claim may be a basis for recovery by a remote buyer of a product or service, but only if it can be demonstrated that the remote buyer justifiably relied upon a specific representation made to the remote buyer.

To minimize the risk of purchasing a home being re-sold, the remote home buyer should, at the very least i) carefully review the Seller Disclosure form required to be provided under Pennsylvania law, and ii) have an independent home inspection which includes more than just a visual inspection of readily accessible parts of the home.

---Ken Milner