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Most homeowners’ insurance policies don’t cover construction defects, leaving liability for building issues up to developers and contractors. As a result, the vast majority of owners will be left with two basic options for recourse after discovering a construction defect: drawing on the protections embodied in their warranty or pursuing a claim for compensation in civil court.
The Basic Structure Of A Home Warranty
Warranties have two interrelated purposes. On the one hand, warranties protect homeowners who, otherwise, would have no recourse against their contractor or developer in the event of construction defects. On the other, warranties insulate home builders from having to field liability claims for the rest of their (or their corporation’s) lives.
In essence, a good warranty should outline the specific problems, along with the specific fixes, for which a builder will accept responsibility once the construction project is finished. These provisions are designed to protect the homeowner who, in the absence of an explicit warranty, would be on the hook for addressing construction issues on their own. In order to protect builders and developers, warranties also define the period during which the warranty’s provisions will hold true, effectively setting an end date for the homeowner’s protections.
In most cases, warranties also sketch out a structure for resolving disputes between homeowners and their builders in the event that terms of the warranty are contested.
Are Warranties Required By Law?
There’s no law, either state or federal, that requires the inclusion of a warranty in building contracts. Like many aspects of new home construction, warranties are a matter of negotiation – ask for more protections and a homeowner might get it. Despite the absence of state or federal regulations, the home construction industry has developed a standard warranty, an agreement that most home purchasers will be offered as a matter-of-course.
The Industry Standard One-Year Guarantee
Drawing on standard practices in commercial construction, the majority of residential builders now offer buyers a basic one-year (or “limited”) warranty, either as an element of the overall contract or as a separate legal document. In some places, you might see these warranties referred to as “callback” agreements, because, in principle, the homeowner is allowed to call the construction company back within one year of completion and request repairs.
One year may or may not be long enough to notice problems with construction. Most construction defects won’t be apparent from the outset, a fact the domain of construction law recognizes in distinguishing between patent and latent defects, issues that are obvious and ones that are hidden. In any event, it usually takes at least one year after move-in for homeowners to notice problems, in part because seasonal changes in weather, especially humidity, can trigger defects that weren’t apparent before.
Because some problems won’t become evident immediately, most home warranties break out three different phases of their coverage, narrowing what sort of defects they underwrite as time passes. Again, there are no legal or statutory requirements for us to appeal to in this context, so we can only talk about the sort of warranties that have become standard in the construction industry. That being said, here’s how most warranties work now:
- 1 year – covers defects in labor and materials (problems with carpeting, roofing materials, paint, etc.), mechanical systems and major structural defects
- 2 years – covers defects in mechanical systems (problems with HVAC and electrical work) and major structural defects
- 10 years – covers major structural defects (generally defined as problems in the foundation or load-bearing elements of a home, ie what holds the house up)
Here’s an expert tip: get a home inspection before each phase of your warranty ends. Some contracts will grant a home inspection to owners as a right, offering to send an inspector over within the first year after the home’s completion. Of course, these inspectors are hired by contractors, not homeowners, so their motivations are questionable. Most are good, honorable people, but you should follow along and make sure that they’re performing a thorough search. If not, hire your own inspector. It’s a good idea, in any case, to document every potential construction issue you’ve noticed on your own and check the inspector’s findings against what you know is wrong with the house.
What Warranties Don’t (Usually) Cover
In many cases, a warranty’s protections aren’t iron-clad. Many builders’ warranties shift a fair measure of responsibility to homeowners, requiring basic maintenance and upkeep. Fail to perform this basic maintenance and most contractors will have every right to disregard the terms of their warranty and deny you its explicit protections.
Like insurance policies, the vast majority of warranties exclude a number of problems from their coverage, limiting protections to those issues for which a contractor is directly responsible. We’ve already covered one such exclusion, owner neglect, a form of irresponsibility that could invalidate the warranty entirely. Here are four other problems that most warranties leave out:
- acceptable decay of building materials (either those outlined in product specifications, agreed upon by industry standard or caused by environmental changes, like weather and natural disasters)
- deterioration or damage due to “outsiders” (criminals, rioters and animals) or “acts of God” (natural events, like hurricanes, floods and earthquakes)
- defects caused by other contractors that you hired subsequent to the completion of initial construction
- consumer home appliances, including those included in the sale of the home (most of which come with their own warranties, legal documents the builder should have transferred into your name during the sale)
Most warranties also leave out the costs that homeowners will bear if they have to move out while repairs are being performed, even if those repairs are offered according to the terms of the warranty.
Making Good On Your Protections
Notice a problem in your new house? Document it. Do not call another contractor to fix it right away. Seeking outside help could allow your original home builder to invalidate the terms of your warranty. Instead, check your warranty to figure out how you’re supposed to submit claims to your builder. Some documents ask homeowners to submit written claims. Others indicate a telephone hotline to call.
Send your builder notice of the claim as soon as you can. While you should follow the warranty’s explicit provisions, it’s best practice to shoot the builder a written version of the claim no matter what, keeping a copy for your own records. In the event that you’re forced to take the builder to court later on, creating a thorough documented record of your correspondence with the company will come in handy as evidence.
Around thirty states now have “right to repair” (or “right to cure”) laws on the books, which require that, before filing a civil lawsuit, homeowners must give their builders an opportunity to fix the alleged problems. In short, you may have to notify the builder of a construction defect and wait for them to perform (or fail to perform) the necessary repairs before pursuing your other legal options. Pennsylvania, New York and New Jersey do not currently have right to repair laws, meaning aggrieved homeowners can go straight to court with their claims.
More immediately, however, documenting the claim proves to the builder that you’re serious about defending your rights. This advice really extends to every interaction you have with the builder. Document it all. Take dated notes on verbal conversations and keep paper copies of written communications. It’s all potential evidence in a subsequent court case.
A Homeowner’s Additional Rights
Home buyers are under no obligation to accept a warranty just because it’s offered. At the least, it’s a good idea to push for broader protections. While you may not sway the builder’s position, there’s no harm in trying. Additionally, most homeowners are already protected to some extent by legal principles outside of any contract or warranty.
Courts in the United States have a long and healthy tradition of recognizing that homeowners are protected by two critical “implied” warranties. These guarantees aren’t defined explicitly in contracts, but come nonetheless simply by virtue of purchasing a home:
- Good Workmanship – construction and repairs must be performed in a “good and workmanlike manner,” up to the standards that a builder with the knowledge, training and experience required to successfully construct homes would use.
- Habitability – construction and repairs must be performed to produce a “habitable” residence, one that is fit for human habitation, both safe and sanitary.
Most construction defect lawsuits are premised on one or both of these implied warranties, with homeowners alleging that their right to expect good workmanship and a habitable home were violated. Technically, we’ve edged into the domain of negligence law.
Note, however, that it’s possible (albeit difficult) for homeowners to waive their right to make use of one of these implied warranties, the one that requires good workmanship. It’s not easy, but if the builder’s contract outlines in adequate detail the standards by which construction will be performed and the purchaser knows that, by signing the contract, they could be waiving their rights to a general warranty of good workmanship, the implied warranty can be relinquished.
In practice, the vast majority of homeowners will retain the implied warranties that cover their purchase, no matter what the contract says. It’s very rare for an implied warranty of good workmanship to be canceled out. It’s impossible to lose the implied warranty of habitability. Even so, some homeowners will be barred from filing suit because their contract includes a binding arbitration clause. With one of these clauses in place, every dispute that would be heard in the court system is funneled into arbitration instead.