An unfortunate side-effect from the mid-2000’s construction boom is claims regarding faulty workmanship and defective construction. Because defective construction work is often latent, it may take years before the damage the defect is causing becomes apparent. Therefore, defects for homes built several years ago are just becoming apparently and the cost to remedy these defects is often significant. When defects do become apparent, what causes are available for the property owner?
1. Breach of Contract
Any analysis of a construct defect case should always begin with a review of the relevant contract documents. In a commercial setting, the property owner should review its construction contract with the contractor, who constructed the property. In a residential setting, while there may be a construction contract between the parties, more often it is an agreement of sale for the property that governs the relationship between the parties. The contract may contain an express warranty regarding the work that was performed requiring repairs to defective work to be made. On more complex projects, the contract may include specifications and drawings that set out in detail what the contractor is required to build. On the other hand (as will be discussed in a future post) the contract may contain exculpatory language releasing the contractor from certain liability. Therefore, it is important to review the contract documents to determine the respective obligations of the owner and the contractor.
2. Breach of Statutory Warranty
Most States have a statute governing the creating, construction, and sale of condominiums and other shared ownership communities. These statutes usual contain some form of statutory warranty concerning the work performed by the developer of the condominium. For example, under the Pennsylvania Uniform Condominium Act, which is modeled on the Uniform Condominium Act, the condominium developer (declarant) expressly warranties against structural defects in each of the unit and all of the common elements for two years from the date each is conveyed.
3. Breach of Implied Warranty
In additional to any express warranties, many states recognize an implied warranty of habitability and good workmanship The implied warranty is given not only by the developer but also the general contractor that constructed the project. Under the implied warranty habitability and workmanship, builder-vendors impliedly warrant that a newly constructed home is constructed in a reasonably workmanlike manner and fit for habitation as a residential dwelling. Examples of a builder-vendors breach of the implied warranty include failing to construct a water tight home, failing to construct a home with potable water supply; failing to install adequately sized furnaces in a condominium; failing to construct a water-tight basement, failing to install a crawl space drainage system, and constructing a home with a cracked foundation.
4. Consumer Fraud
Most States also have some form of consumer protection law. Almost all of the states that have these laws make them applicable to real estate transactions. Most consumer protection statutes allow for the award of attorneys fees to the plaintiff and a doubling or tripling (trebling) of damages to the plaintiff. (Both Pennsylvania and New Jersey allow for treble damages.) While some states require a showing of common law fraud before liability under the consumer protection statute will be found, states like New Jersey and Pennsylvania apply a lower threshold and require only a showing of a technical violation of the statute or “deceptive conduction” before liability will attach.
5. Negligent Misrepresentation
The developer and contractor are not the only parties potentially liable for construction defects. Architects and engineers have exposure for liability for faulty designs. Furthermore, architects and engineers should be aware that if their plans and drawings are to be shared with third parties they could be liable under the tort of negligently supplied information. Under this theory, those, like architects and engineers, who in the regular course of their business supply information to third parties are liable if they failed to exercise reasonable care in supplying the information relied upon. Therefore, if architectural plans and drawings are included in a developer’s sales material, which a buyer relies upon in purchasing the property, the architect may be liable to the purchaser if the information contained in the drawings is incorrect. Under this same theory, an owner can also bring a claim against an architect hired by the general contractor for defective plans and specifications notwithstanding the lack of contractual privity.
Depending on the facts of the case, other claims that may be brought in a construction defect case include common law fraud, intentional misrepresentation, negligence, and an action to pierce the corporate veil.
In our next post, we will look at what defenses are available to these claims.