New-Home Warranties: The Basics

Your clients may have legal recourse if their newly constructed home is faulty.

March 1, 2009

Imagine that you represent a potential buyer who's looking at a large, newly constructed home in a beautiful location. The buyer asks you several questions about the builder's reputation and whether the home is well built.

Although you certainly don't want to give advice on construction quality — unless you're a general contractor yourself — you can add value for your client by knowing the basics of new-home warranties.

New-home warranties fall into three categories:

  • Statutory. These are warranties specifically required by law. Some states, including Indiana, Louisiana, Maryland, Minnesota, Mississippi, New Jersey, New York, and Virginia, have passed new-home warranty acts that require builders to provide protections to home buyers. These warranties range from two years for the quality of workmanship and materials to 10 years for structural defects.
  • Implied. These are warranties inferred by legal precedent set in past lawsuits. Today, most states have case law that protects new-home buyers from faulty workmanship. One of the most common implied warranties is the implied warranty of habitability, which guarantees that the house will be free from defects that substantially impair its use and enjoyment. Such a warranty often covers significant defects in the plumbing, electrical, roofing materials, and structural systems such as the foundation. This warranty may also include a guarantee to the initial buyer that the materials, products, or fixtures that make up the home (such as the plywood or siding) are free from defects.
  • Express. These are written warranties provided by the home builder. A builder may decide to provide express warranties about the home in the purchase contract, even in the absence of a law requiring it to do so. The express warranties might read something like: "The builder of this home hereby warrants the quality of the completed structure for two years from the date of completion." Specific express warranties often benefit a home builder because the builder may attempt to disclaim all implied warranties by providing specific ones. For example, if a builder provides an express warranty covering structural defects for a period of five years from the date the home is completed, it will probably try to disclaim implied warranties that cover the same defect for a period of seven years. However, most courts hold that a disclaimer of an implied warranty is void because it defeats the purpose of the warranty: to protect consumers from faulty workmanship.

What About the Second Owner?

In some cases, clients will want to know if new-home warranties extend to a subsequent buyer. In general, the express warranties discussed in this article apply only if a home is being sold by the builder and the buyer is the first occupant of the home. However, there is a trend toward letting implied warranties pass from the original owner to a second or third owner if the warranty has not expired. If the implied warranty remains in effect, it typically covers only latent defects — defects that aren't discoverable by a subsequent buyer's reasonable inspection.

Acting on a Warranty

If buyer clients believe that they may have a claim against a builder under a statutory, express, or implied warranty, there are several important steps they should take: Read the warranty, if there is one, provided by the builder; call the builder and try to resolve the dispute; provide written notice to the builder of the defect in the form of a letter; give the builder a reasonable amount of time to resolve the problem; seek legal advice if the dispute cannot be resolved; and contact the state consumer protection agency or state attorney general's office.

What the buyers should not do is hire a professional to repair the alleged defect and then file a claim against the builder for the expenses incurred. Unless the defect was causing an emergency, such as a flood from a plumbing leak, the home owner should have the problem repaired only after the builder has failed to respond or fix the problem.

Avoid Warranty Disputes

  • Read the contract carefully to determine what legal warranties it contains.
  • Avoid nitpicking. Don’t bring a claim for minor discrepancies in the finished home.
  • Recognize that most builders use disclaimers in the hope of preventing actions against them for defects.