September 19, 2014 – Construction Law

Pennsylvania Supreme Court Rules that Subsequent Homeowners Are Not Entitled to Implied Warranty of Habitability

Sep 19 2014

By Christopher A. Barbarisi and Loly G. Tor, K&L Gates, Newark

In Conway v. Cutler Group Inc.,[1] the Pennsylvania Supreme Court reversed a decision by the Superior Court and held that the builders’ implied warranty of habitability does not run to subsequent purchasers of homes, significantly limiting homebuilders’ potential liability to subsequent owners.

In Conway, the homeowners, Michael and Deborah Conway, purchased a three-year-old home from the original owners, who had purchased the home new from the builder. After allegedly discovering water infiltration and construction defects in the home, the Conways filed suit against the builder for breach of the homebuilders’ implied warranty of habitability. The trial court dismissed the Conways’ complaint, finding that the Conways’ claim for breach of the implied warranty was barred due to lack of privity. On appeal, the Superior Court reversed, finding that the implied warranty of habitability should exist independently of a contract between the builder and homeowner because the warranty is based on public policy considerations, is designed to “equalize the disparate positions” of the builder and homeowner, and exists independently of any builder representations.

In reversing the Superior Court, the Pennsylvania Supreme Court considered the history of the implied warranty of habitability and its adoption by the Court in Elderkin v. Gaster.[2] In Elderkin, the Court rejected the doctrine of caveat emptor and instead placed the burden of risk on a builder “‘that a home which he has built will be functional and inhabitable in accordance with contemporary community standards.’”[3] The Court also recognized that the implied warranty in Elderkin was based on the existence of a contract between the builder and the homeowner (which, of course, does not exist with a subsequent purchaser) and was limited to situations where the parties are not in privity. After discussing the varying decisions reached by courts in other jurisdictions on this issue, the Court declined to depart from its position that the implied warranty of habitability is grounded in contract and requires privity between the parties to be enforced. It concluded that whether to extend the warranty of habitability to subsequent homeowners is a question of public policy properly left to the legislature. Thus, unless and until Pennsylvania’s General Assembly decides otherwise, an action for breach of implied warranty of habitability requires contractual privity between the parties, eliminating a potential source of liability to homebuilders.

[1] J-41-2014 (Pa. Aug. 18, 2014).
[2] 288 A.2d 771 (Pa. 1972).
[3] J-41-2014 at *4 (quoting Elderkin, 288 A.2d at 777).

Archive:September 19, 2014