Skip to main content
Implied Warranty of Habitability Applies to Non-Vendor Builders — Not Just In Illinois
by Erin E. Krejci
The Illinois Appellate Court recently held that the implied warranty of habitability applies to contractors who build residential homes — regardless of whether they are in privity of contract with the plaintiff homeowner. 1324 W. Pratt Condo. Ass’n v. Platt Constr. Group, No. 1-10-0159, 2010 WL 3788057 (1st Dist. Sept. 28, 2010).
In 1324 W. Pratt, a contractor constructed an eight-unit residential building pursuant to its contract with a developer. The developer sold the units to various homeowners. After unit owners had moved in, they discovered water intrusion throughout the building. The water leaks caused structural and property damage and worsened in the fall of 2008 when the Chicago area experienced a series of severe rainstorms.
The developer involuntarily dissolved shortly after the completion of construction. The plaintiff condominium association, lacking privity with the contractor, sued it for breach of the implied warranty of habitability and negligence. Defendant moved to dismiss. It argued that the implied warranty does not extend to a builder such as itself who was not also the vendor. It further contended that the negligence claim was barred by the economic loss rule. Agreeing with these arguments, the trial court dismissed the lawsuit.
The appellate court reversed the dismissal of the implied warranty claim noting that the implied warranty of habitability has been greatly expanded in recent years. In expanding the implied warranty of habitability to builders, the court cited public policy considerations and a long line of cases that confirmed “the primary objective of the implied warranty of habitability has always been to hold builders themselves accountable for latent defects because they are in the best position to ensure that the residences they build are habitable and free of defects that unsophisticated home buyers are unable to detect.” The court noted that the warranty “has roots in the execution of the contract for sale” and that it has been clear that “it exists independently” of a sales contract regardless of privity of contract.
Illinois is not the only jurisdiction to apply the implied warranty of habitability to non-vendor builder. For example, on August 19, 2008, the Arizona Supreme Court ruled, in The Lofts at Fillmore v. Reliance Commercial Construction, that a builder of a new home, whether or not they are also the vendor of the new home, impliedly warrants “that construction has been done in a workmanlike manner and that the home is habitable” and, further, that a direct contractual relationship between a builder and homebuyer is unnecessary for a homebuyer to bring an implied warranty claim against the builder. Like in Illinois, residential homeowners no longer have to be in privity of contract to bring an implied warranty claim against a builder that is not also the “vendor” of real property. See also Flagstaff Affordable Housing Ltd. Partnership v. Design Alliance, Inc. — P.3d —, 2010 WL 476683 (2010). Practically, this means a plaintiff can bring direct action against the general contractor where the plaintiff purchases the residence from a developer, or other entity. There is no practical difference in the elements needed to prove this claim against a developer or general contractor.
These decisions increase liability exposure for residential builders and expand the pool of potentially responsible parties for claims by aggrieved homeowners.