Illinois Appellate Court Refuses to Extend the Implied Warranty of Habitability to Architects

October 18, 2016 Firm News

A Laurie & Brennan article featured in the Construction Law Corner Fall 2015 eNewsletter.

by Carolyn L. Morehouse

In a recent decision issued September 30, 2015, the Illinois Appellate Court held that the implied warranty of habitability does not extend to architects.   In Bd. of Managers of Park Point at Wheeling Condo. Ass’n v. Park Point at Wheeling, LLC, the plaintiff-condominium association filed suit against the condominium developer-seller, the general contractor, the subcontractors and architect, alleging various latent design, material and construction defects.   See 2015 IL App (1st) 123452.   Among the claims asserted was plaintiff’s claim against the architect for breach of the implied warranty of habitability.

The implied warranty of habitability runs from the builder-seller of a new home to the purchaser, and is violated where the home is not reasonably fit for its intended use as a residence.   In reaching its ruling, the Park Point court examined the history and underlying public policies of the implied warranty of habitability.   The creation of this implied warranty was a judicial response to the harsh effects of the common law principles of caveat emptor and merger, which prohibited a new home buyer from seeking recourse against the builder of a defective residence.   The Illinois Supreme Court has previously recited three public policies underlying the warranty:

  1. the modern home buyer is usually dependent on the competency and honesty of the builder rather than on the buyer’s own ability to discern latent defects;
  2. the buyer is making the largest single investment of his or her life; and
  3. in fairness, the repair costs of defective construction should be borne by the builder-seller who created the latent defects.

The doctrine was first recognized in Illinois in 1972 in a landlord-tenant tenant case, Jack Spring, Inc. v. Little, 50 Ill.2d 351 (1972).   In 1979, the doctrine was expanded to the purchasers of new homes against the builder-seller, Petersen v. Hubschman Construction Co., 76 Ill. 2d 31 (1979).   In 1980, the warranty was extended to the purchasers of new condominium units, and included construction defects in the common elements of a condominium complex.   See Tassan v. United Development Co., 88 Ill. App. 3d 581 (1st Dist. 1980); Herlihy v. Dunbar Builders Corp., 92 Ill. App. 3d 310 (1st Dist. 1980).   The implied warranty of habitability has also been applied to allow subsequent purchasers to recover against the original builder-vendor for latent defects which are discovered within a reasonable time after purchase.   See Redarowicz v. Ohlendorf, 92 Ill. 2d 171 (1982).   It has also been extended to contractors responsible for latent defects in the construction of a home addition.   See VonHoldt v. Barba & Barba Construction, Inc., 175 Ill. 2d 426 (1997).

In 1983, the Illinois Appellate Court significantly expanded the implied warranty of habitability to allow homeowners to assert claims for breach that warranty   directly against contractors or subcontractors where the builder-developer was insolvent.   See Minton v. Richards Group of Chicago, 116 Ill. App. 3d 852 (1st Dist. 1983).   Observing that “the purpose of the implied warranty is to protect innocent purchasers,” the Minton court held that “where the innocent purchaser has no recourse to the builder-vendor and has sustained loss due to the faulty and latent defect in their new home caused by the subcontractor, the warranty of habitability applies to such subcontractor.”   Id. at 885.

In a series of recent cases, the Illinois Appellate Court has continued to expand the reach of the implied warranty of habitability and the application of Minton.   These recent cases arose out of the construction of a residential condominium building in Chicago.   See 1324 W. Pratt Condominium Ass’n v. Platt Const. Group., 404 Ill. App. 3d 611 (1st Dist. 2010) (“Pratt I”); 1324 W. Pratt Condominium Ass’n v. Platt Const. Group., 2012 IL App (1st) 111474 (“Pratt II”); 1324 W. Pratt Condominium Ass’n v. Platt Const. Group., 2013 IL App (1st) 130744 (“Pratt III”).   In Pratt I, the Court held that the implied warranty applied to the builders of residential homes regardless of whether they are involved in the sale of the home.   In Pratt II, the Court held that a waiver of the implied warranty of habitability was limited to the contracting parties, and did not apply to subcontractors who were not parties to the agreement containing the waiver.

In Pratt III, the Court clarified the meaning of “insolvency,” holding that the date for determining insolvency of the developer or general contractor is the date of the latest amended complaint.   This holding permits homeowners to pursue claims against subcontractors where the developer or general contractor becomes insolvent during the course of the litigation.   The Pratt III Court also defined the meaning of “insolvent,” finding that a party is “insolvent” when its liabilities exceed its assets, and it has stopped paying its debts in the ordinary course of its business.

In defining the extent of the implied warranty of habitability, Illinois courts, including the Park Point Court, have consistently relied on the history of, and public policies underlying, the doctrine.   In reaching its decision, the Park Point court characterized the implied warranty as a warranty of “the habitability of construction work.”   2015 IL App (1st) 123452 at  ¶ 12.   The Court noted that the class of defendants who are subject to the warranty has had only limited expansion beyond the builder-sellers of new homes.   The Court emphasized that the fundamental reason for imposing the implied warranty of habitability is based on the “unusual dependency of the buyer/homeowner.”   Id. at  ¶ 12.   A builder depends on its own ability to construct and sell a sound home, and a developer depends on his ability to hire a contractor to build a sound home.   The homeowner has no control over the developer’s choice of builder, and the developer is in the best position to know which contractors can perform adequate work.   In both cases, the home purchaser is an ordinary person not knowledgeable of construction practices, who must rely upon the integrity and skill of the builder (or the developer who has chosen the builder) to a substantial degree.

The Court concluded that only builders or developers warrant the habitability of their construction work.   In contrast, engineers and design professionals provide a service and “do not warrant the accuracy of their plans and specifications.”   Architects do not guarantee “a perfect plan or a satisfactory result,” and are only liable where their conduct falls below the applicable professional standard of care.

The Court also observed that most foreign jurisdictions have refused to extend the implied warranty of habitability to architects.   In reviewing these cases, the Court concluded that the implied warranty of habitability of construction has been limited to those who engage in construction.   Unlike builders and developers, architects do not construct buildings.   Instead, they perform design services pursuant to contracts which set forth their obligations.   As a result, courts have repeatedly declined to increase those contractual obligations by implying a warranty of habitability.

In Park Point, the plaintiff argued that Minton should be extended not only to subcontractors, but also to architects.   In support of its argument, the plaintiff argued that the work of architects is similar to the work of builders, general contractors and contractors.   The plaintiff emphasized that either a contractor or an architect may be liable for latent defects in a completed building, and that the public policies underlying the implied warranty (i.e., protecting new homeowners from latent defects) are served by extending Minton to architects responsible for design defects.

The Park Point court rejected the plaintiff’s arguments.   Relying on its earlier discussion of the history and public policy purposes underlying the implied warranty of habitability, the Court reiterated that the implied warranty is based on the “unusual dependent relationship” between the builder-seller and the purchaser, which does not exist between the architect and the purchaser.   The Court also noted that the implied warranty of habitability is based on the quality of construction work, and shifts the cost of repairing latent defects from the unsophisticated homeowner to those who contributed to the actual construction of the home.

The Court rejected the plaintiff’s argument that architects and builders were similar because their work results in a tangible structure and, and they both must perform their work in a “workmanlike” manner.   To the contrary, unlike builders, “[a]rchitects are professionals who design and create plans and specifications for the construction of buildings or structures.”   Id. at  ¶ 28.   In contrast to architects, builders are responsible for the physical implementation of the architect’s plans, and the provision of all material, labor and equipment necessary to construct the building.   It is the contractor’s job to create the tangible structure–not the architect’s.   The Court also observed that architects are not legally obligated to perform their skills in a “workmanlike manner.”   Only builders, contractors and craftsmen are held to a “workmanlike” standard.   The Court concluded that Minton claims are properly limited to those who are involved in the sale or physical construction of a residence, and that the extension of   a Minton claim against an architect, which had no role in the construction or sale of the property would be “a considerable extension of the law.”

By refusing to extend Minton to architects, Park Point may leave some aggrieved homeowners without recourse against an architect for design defects in their home.   However, the Park Point decision is unlikely to be the last case addressing the application of the implied warranty of habitability to architects or other design professionals.   It is expected that the plaintiff in Park Point will seek leave to appeal the decision to the Illinois Supreme Court.   There are also consolidated appeals currently pending before the First District of the Illinois Appellate Court addressing similar issues.