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Buying New Construction? Don’t let those builders push you around!!

by Joshua M. Marks, Esq. on October 29, 2007 · 4 comments

  

new contractorFrom the concrete streets of metropolitan cities to the sprawling suburbs in most areas around the country, new construction is present in the form of townhouses, condominiums, single homes and the ever-so-popular “over-55 communities.”

While many of these properties are esthetically impressive complete with over-sized family rooms, open kitchen areas, and every upgrade/option imaginable, there are also the unfortunate, yet inevitable pitfalls associated with new construction such as delayed completion dates, cost overruns and building defects. With respect to the latter, buyers of new construction should be informed of their legal rights in the event that construction defects impede their use and enjoyment of the property.

Responsibilities of a Vendor
Traditionally, a vendor of property is responsible for the quality of the property sold only to the extent that the vendor expressly agrees to be responsible. In years past, the notion was that a seller and buyer dealt with one another at “arm’s length” and, therefore the buyer should only be afforded the specific protection for which he/she contracts. However, in the context of new construction, the laws started to change over the past few decades. In states such as the Commonwealth of Pennsylvania, a well-established body of case law has evolved that has afforded protection to buyers in the form of implied warranties.

The “implied warranty of habitability” and “implied warranty of reasonable construction” exist between a builder-vendor of new construction and a buyer regardless of whether any mention of such warranties is actually written into the contract of sale (those huge 25-plus page contracts that builders make you sign!). These warranties, which automatically exist between builder-vendors and buyers, represent that the property is suitable for living and is constructed with a reasonable level of skill and workmanship. Further, these warranties apply whether the buyer purchases the new home prior to, during or after completion of construction.

There is Legal Recourse on New Construction Properties
So, what does this mean for those of you who are about to purchase a plush, new townhouse on a golf course? It means that you may have legal recourse in the event that the builder has improperly constructed your home and/or constructed the home with defects that make the property unfit for living. Some examples of defects that could trigger these warranties and potentially provide you with a cause of action against the builder-vendor include: severe water leakage leading to mold growth, faulty plumbing, contaminated water supply, improper foundation and faulty landfill/site development.

Even though the courts in Pennsylvania (and some other states) have consistently found that these implied warranties afford buyers of new construction protection from faulty workmanship, BEWARE…a builder-vendor could attempt to disclaim such warranties in the contract of sale. The Pennsylvania courts have ruled that a builder-vendor CAN disclaim these implied warranties but the disclaimer language must be clear, unambiguous and set forth in the contract. This means that the builder-vendor will not get away with burying the disclaimer somewhere in that bible-sized contract of sale. However, if the disclaimer language is clear, easy to find in the contract, and easy to understand, then there is a good chance that a court would uphold the disclaimer. Under that circumstance, it would be unlikely that you would prevail in asserting a claim that the builder breached one or both of these warranties. For this very reason, it is your absolute responsibility to thoroughly read your contract of sale (or at least hire a highly skilled real estate attorney to read through it for you!!). The last thing that a judge wants to hear is that you didn’t realize the builder-vendor disclaimed the implied warranties because you failed to read your contract of sale.

So, here is a little recap:

  1. Builders of new construction have an obligation to make sure the property is built in a reasonable, workmanlike manner and fit for living.
  2. The implied warranties of habitability and reasonable construction protect buyers regardless of the warranty provisions in the contract of sale.
  3. A builder can disclaim these warranties by using clear, unambiguous language in the contract.
  4. All buyers should thoroughly read through the contract of sale.
  5. If your new home has significant defects and is unfit for you to live in, then you should consult an attorney to see if you have valid claims against the builder.

You are now ready to go looking for that beautiful new home…just remember, if your house has major defects, don’t back down from that big, bad builder—the law looks to protect buyers of new construction and you need to pursue all of your legal remedies!!

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{ 4 comments… read them below or add one }

Rick Marnon, Howell October 29, 2007 at 6:41 pm

The new construction side of things in Michigan has pretty much come to a hault. Builders have been leaving the state, or they are going under. It’s difficult to compete when the cost of materials is going up, and the foreclosure rate being so high. Why would you buy new over pre-existing right now.
Rick Marnon, Howell
http://oaklandlivingston.com

Reply

Healthy Eating October 29, 2007 at 10:01 pm

My builders on my house charged me an extra $50 000 on top of their original quote. People need to be more wary to this. Also yes Michigans new construction will soon stop, there is only so much people can do to an area.

Reply

cfolland October 31, 2007 at 12:14 pm

It is important to have a proper contract at the beginning that protects your interests, otherwise you are in a tough position. Developers and Realtors like to get a signature on the contract first and negotiate later, but be firm, and take the contract to your real estate attorney first for review.

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Zac Davis May 9, 2008 at 2:58 pm

I hate builders that quote you thousands of dollars cheaper than what it actually costs you. I agree that a proper contract is important, and that you should read through the entire thing.

Reply

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