Pennsylvania Limits Homeowner Claims against Builders

Pennsylvania Limits Homeowner Claims against Builders

Apparently looking to stem recent proliferation of homeowner lawsuits against builders for construction defects, the Supreme Court of Pennsylvania issued a decision yesterday limiting the ability of subsequent home purchasers to pursue legal action against the original builder. On August 18, 2014, in Conway v. Cutler, No. 80 MAP 2013 (Pa. Aug. 18, 2014), the Pennsylvania Supreme Court ruled that a subsequent purchaser of residential real estate cannot pursue a claim for breach of the implied warranty of habitability because the warranty is limited to original homeowners in a direct contractual relationship with the builder/vendor. In Conway the second owners of the home experienced water infiltration problems attributable to construction defects. The plaintiffs sued the original builder for breach of an implied warranty, notwithstanding the lack of contractual privity. The lower court dismissed the complaint, holding that privity was required.  On appeal,  the Superior Court reversed the decision. The Superior court reasoned that public policy considerations favor homeowners in real estate transactions, and builders are better suited to bear the risk of latent defects. The Supreme Court didn’t agree.  On appeal, the court rejected the lower appellate court’s reasoning and, while noting a split of authority on this issue nationally, held that the implied warranty of habitability was grounded in contract law, and therefore requires privity of contract between the builder and homeowner for its application. This decision will dramatically impact lawsuits against residential builders in Pennsylvania, and particularly those cases dealing with water penetration into stucco homes. In the majority of these cases, there is no negligence claim under the economic loss and gist of action doctrines, leaving only an implied warranty theory as a viable means of recovery – until now.

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