From 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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Tags: , , , builders, construction, estate, homes, law, New, new construction, real, Real Estate Law

The Orlando Sentinel had an extremely interesting article today about the Miami Condo Bust. The article detailed the dangers that go along with pre-construction investing real estate speculation.

How’s this for scary:

“Just how many other speculators face the same dilemma in the nation’s most glutted condo market will become clear during the next two years. That is when 25,000 new condo units, most of them rising in or near Miami’s downtown, will flood an area already saturated with 23,000 condos listed for sale. An additional 40,000 units have been approved, but analysts doubt the majority will break ground.

Orlando and other Florida cities — Naples, Fort Myers, Tampa and Sarasota among them — also have huge condo gluts. With 4,440 condos listed for sale, Orlando has an unprecedented 29-month supply, and last month sales plummeted 64 percent lower than a year ago.

If anyone out there who fell for this mass hysteria wants to complain, you’ve only got yourself to blame. Did anyone really think that the population of Miami was going to grow fast enough to keep up with the construction? With a crane on every corner, Miami looks like it is preparing for all of Iraq’s refugees at once.

Regardless of whether people fell for the hype or not, the big question now is whether or not these condos will ever get sold.

I think we’re in for a few years of a falling (crashing) or flat market in Miami. Buyer’s have a ton of leverage and can basically set their own price at this point. If anyone wants to get out of their penthouse, give me a call, I’ve got $10 Grand I’m willing to send your way.

Tags: condo-boom, condo-bust, construction, crane, Miami, miami-condo-market, miami-condominiums, Miami-condos

A few days have passed in 2007, and there are a few stories I think are worth a look. Enjoy!

• Manhattan real estate market remains strong
  The Manhattan Market is INCREDIBLE! “The average price of a Manhattan apartment rose to more than $1.14 million in the fourth quarter of last year, up 5 percent compared to the same period the year before, according to two reports released Wednesday.” In addition, “The average price per square foot in Manhattan rose to $1,050, topping $979 in the fourth quarter a year ago and setting a new high.” WOW!
• Construction activity dips as housing falls for record eighth straight month
  “Housing has been in a slump this year after a prolonged boom that was fueled by the lowest mortgage rates in more than four decades. However, that boom triggered increased speculation, driving home prices up sharply in many parts of the country.”
• 2007 Predicted to be Poor Real Estate Year in California.
• Subprime Lender Implosion: Bad Omen For Housing Market
• Foreclosures Skyrocket in 2006 according to Default Research. This is nothing new, but there are a few things in the report that are worth reading.
• “The Beginning Of The Domino” In California
  A look at how the California market is begging to topple (compiled from various news sources).

Tags: construction, estate, foot, Foreclosures, housing, manhattan, market, per, price, real, spending, square, US

CNBC is reporting this morning that US Housing Starts declined in October 14.6% to the lowest level in 6 years, while building permits were down a whopping 6.29%. Guests on the network, James Wilson and Jan Hatzius (Goldman Sachs Economist), predicted that housing will be a drag on GDP in ‘07. Hatzius attributed the problem to bloated inventories and weakening sales from the home builders. Wilson predicted that builders will start marking down prices significantly, and that the worst is yet to come in the housing market. “The bottom has not hit yet.” He predicted that the Fed will keep interest rates steady until summer, when they will likely start easing.

Bloomberg reports, “Builders broke ground on 1.486 million new homes at an annual rate, down 14.6 percent from September’s 1.74 million pace, the Commerce Department said today. Building permits dropped to a 1.535 million pace, a record ninth straight decline and the lowest since December 1997.”

For those looking to buy a home, this is nothing but good news. The irrational exuberance that has been plaguing our housing market has finally really started to dissipate. With builders quickly dropping prices on their new homes, and previously owned homes staying on market for longer and longer, it is finally starting to look like a buyers market once again. Don’t get too excited yet, though. With thousands, if not millions of people in homes they can’t afford thanks to risky loans, it looks like the market will only continue to decline until foreclosed homes have truly hit a feverish pace. We need to see everything balance out before we’re close to the bottom of this giant real estate bubble. Buyers will likely be rewarded if they can continue to show patience.

Tags: bubble, builders, construction, estate, fed, foreclosure, homebuilders, housing, interest, rates, real

Bad news overall for the U.S. economy and mostly due  to weak construction spending and weak home sales, according to a report Wednesday by Reuters News Service.

According to the report, U.S. manufacturing growth “came close to stagnating” last month and experts are saying this downturn is housing led.

Figures reported by Reuters are telling: “U.S. construction spending fell 0.3 percent in September led by a sixth straight monthly drop in private residential building. Pending sales of existing homes dropped 1.1 percent.”

“The broader economy is now slowing, and slowing sharply, one senior economist tells Reuters.

Tags: construction, Economy, housing, manufacturing, slump

By definition, news is –well–about new and sometimes unexpected things. Such is the case apparently with U.S. housing starts which surprised some experts by rising last month by an estimated 5.9%, according to a Commerce Department report.

Bob Willis,writing for Bloomberg and reported in the Detroit Free Press, says some believe “the housing slump may be nearing an end.”

Willis writes that “stepped-up construction in the Midwest and the South made up for declines in the Northeast and West.”

Before this surprise increase, housing starts in the U.S. had reached a three year low. But,for the first time in a year, Willis reports, there is an increase of home builder confidence.

Tags: builder, construction, housing, mortgage, rates, starts

Although the stock market’s Dow Industrials has flirted with an all-time-high for the past several days, and oil has maintained its decline, the housing market continues to look weak. Here are a few highlights from Today’s MarketWatch report:

- “Banc of America Securities said Friday it expects pending home sales to decline between 3% and 4% in August from the previous month after its monthly survey of real estate agents revealed disappointing traffic trends.
- Merril Lynch economist David Rosenberg wrote Friday, “residential construction is officially in recession, as the home-building stocks predicted long ago.”
- A.G. Edwards analyst Gregory Gieber estimates the inventory overhang of new homes in the 190,000 area.
- The Dow Jones U.S. Home Construction Index, which follows housing stocks, is off 28% over the previous 12 months.”

In addition, we’ll find out about pending home sales data on Monday, which should give a good idea of how many of those houses that are on the market have gone under contract.

That’s all for now . . . enjoy the weekend!

Tags: construction, dow, home, housing, oil, pending, sales