January 25, 2016

State Laws You Should Know

Implied Warranty Law

Bill Ward, Executive Vice President, HBAI

Illinois has no state statutes regarding the warranty of residential structures. What protects new home buyers in Illinois is the doctrine of the implied warranty of habitability; a creature of the judiciary that is narrowly tailored to protect residential dwellers from latent defects that interfere with the habitability of their residences.

The Implied Warranty Law in Illinois is the product of a series of court cases over the past 50 years that provides new home buyers certain protections not granted in state statute. New home construction (Peterson v. Hubschman) and major room additions and remodeling projects (VonHoldt v.Barba & Barba) are subject to implied warranty standards in Illinois. The warranty runs with the home and subsequent purchasers who reside within the timeframe of the warranty are protected, as well (Redarowicz v. Ohlendorf).

Everything in a new home is warrantied for the first year of occupancy. Any defects, structural or otherwise, must be remedied by the builder. All structural work is then warrantied for another ten years. There is also a three year period for discovery after the ten years where if a homeowner discovers a structural defect, it can be under warranty if proven it happened in those first 11 years. Altogether, home builders issuing contracts without a disclaimer for the waiver of the implied warranty are liable for the structure of their homes for up to 14 years.

From time to time, bills are introduced that mandate a ten year warranty on the purchase of a new home. HBAI opposes this even though it shortens the time of liability. We do this because Illinois allows contractors to place limited liability language into their contracts. Most builders limit their liability by placing a disclaimer for the waiver of the implied warranty into their standard contracts. This provision is negotiable between the builder and the buyer, and it provides a negotiating tool in the bargaining exchange. Builders may discount the price of the home, for example, if the contract limits the years of liability for the structure of the home.

Arbitration may be used when builders and home owners disagree on whether a defect should be cured by the builder. This is an effective and thrifty way to resolve a disagreement between the builder and the owner. Many circuit court judges refuse to hear a case of this nature unless an arbitration tribunal has made judgment on the matter. Arbitration is not always required and DOES NOT preclude either side from going to court. If either side is unhappy with the outcome of the arbitration, they are welcome to petition the courts for judgment.

One case that could greatly affect the application of the implied warranty law is to be heard soon in the Illinois Supreme Court. In the case of Fattah v. Bim, John Fattah of Glenview claimed that defects to his patio should be repaired by the builder, Mirek Bim. But Fattah did not buy the home from Bim; the original owner was Beth Lubeck, who signed a contract with Bim that contained a disclaimer to waive the implied warranty.

The circuit court ruled in favor of Bim, finding that Fattah’s claim was barred by a disclaimer of the implied warranty signed by Lubeck. Fattah then filed suit in Appellate Court. Bim never received notice of the Appeal and the Appellate Court ruled in favor of Fattah due to Bim’s failure to provide written or oral argument.

Bim has now moved the case up to the Illinois Supreme Court where they are asking the Appeals Court decision be dismissed because the case was the court actions were a violation of Bim’s due process rights. HBAI plans to file an Amicus Brief on behalf of Bim by November 4, 2015. Attorney John P. Cooney has been selected by HBAI to write the brief on behalf of our Association. Legal assistance is being provided by NAHB and they will join us in the Amicus Brief. HBAI will also be contacting each of our local associations to request that they join in as well.

Builders in Illinois could be greatly harmed by prospective liability cases should Bim lose his case at the Illinois Supreme Court. Cooney believes builders could be liable for homes built going back to 2001. HBAI is dedicated to protect the contractual rights and privileges of its builders. Hopefully, we will hear soon that the Appellate Court decision has been struck down and that our builder’s current contracts protect them from unforeseen liabilities.

Feel free to contact me at billward@hbai.org if you have any questions or concerns regarding this matter.