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Homeowner's Guide to Construction Warranties

Homeowner's Guide to Construction Warranties

What is a warranty?

In its simplest terms, a warranty is a promise or a representation that certain facts are true. A warranty can also include an assurance that if a fact is not true as promised or represented, the person making the warranty will do some affirmative act such as correct the work or pay money. In construction matters, warranties can include that the work is performed in a workmanlike manner, that the materials are of good quality, and that the project is fit for its intended purpose.

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What is the difference between express warranties and implied warranties?

Often times, warranties are expressed in written contracts, addenda, sales materials, and/or marketing or advertising materials. Warranties can also be implied – meaning that they are not expressed in words, but the law implies that certain facts are represented to be true. A construction contractor impliedly warrants: (1) the adequacy or fitness of the material used on a project; (2) all work performed on the project will be in accordance with accepted trade practice; (3) the building will be in compliance with code regulations; and (4) that the completed project will be suitable for its intended purpose.

What warranties are implied in the sale of single family homes?

Habitability: The law implies that any commercial builder warrants that a newly constructed home is free from significant defects that render the home unfit for its intended purpose. Defects which render a home unfit for its intended purposes are evaluated on a case by case basis.

Fitness for a Particular Purpose: The law implies that any commercial builder warrants that new construction is of proper workmanship and reasonable fitness for ordinary residential use.

Workmanlike Constructions: Residential construction contractors and commercial home builders impliedly warrant that the work will be performed in accordance with accepted trade practice and in a workmanlike manner. Even if the construction contract does not contain express representations as to the quality of the workmanship, courts will imply that a commercial builder has warranted that the home was constructed in a workmanlike manner and in compliance with applicable building codes.

Construction Not to Spec: Residential construction contractors and commercial home builders impliedly warrant that the construction was completed in accordance with the plans and specifications. Since all plans and specifications approved by the governmental entity issuing the building require compliance with the applicable building code, it follows that the contractor or builder impliedly warranted that the home was constructed in compliance with all applicable building codes

Warranties for Condominiums

Washington Condominium Act implies the following warranties to a condominium project:

1. The unit will be delivered in the same condition as it was when the buyer entered into the purchase and sale agreement.

2.  The unit and the common elements are suitable for the ordinary uses and are:

  • free from defective materials
  • constructed in accordance with sound engineering and construction standards;
  • constructed in a workmanlike manner; and
  • constructed in compliance with all laws and regulations.

Other Issues Related to Warranties

Insurance Coverage Issues

Virtually every homeowners' insurance policy excludes loss resulting from a construction defect. Yet, in the real world, it is not always clear cut what caused damage to your home. In determining whether an occurrence is excluded from a homeowner's insurance policy, courts apply the “efficient cause rule.” This essentially means that the court will look to the root cause of the chain events that led to the damage to see if that cause is excluded under the insurance policy. As a homeowner, you can easily be caught between a rock and hard place with the residential builder and homeowner's insurer. Often times, insurance adjusters wrongfully assume that substandard construction is the cause of your loss and will hire a building-envelope inspector to confirm their initial assumption. Likewise, residential builders may be quick to blame an environmental condition for the damages independent of the construction. Unlike courts, self-interested people ignore the totality of the circumstances in making a determination as to the cause of damage to your home. As a homeowner, you should consult your own expert before taking a position with either the residential builder or insurance adjuster that the damage to your home is due to a construction defect or something else. Further, you should always have a certified copy of your homeowner's policy reviewed by an attorney before taking a position with the builder and your homeowner's insurer.

Non-Warranty Claims - Fraud and Misrepresentation Claims

In addition to breach of contract claims and breach of warranty claims, an unsuspecting purchaser of a home or new residential construction may have claims for misrepresentation or fraud. The law in this area is very developed and there are a number of elements that an aggrieved homeowner must prove in order to establish misrepresentation or fraud.  In short, a homeowner must show that there was some hidden or latent defect with the property that the homeowner was not aware of – and would not have found by an inspector – when the homeowner purchased the property.


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BAROKAS MARTIN & TOMLINSON

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