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PA Supreme Court Overturns Implied Warranty Claim Ruling

Judges at the Supreme Court in Pennsylvania have overturned a verdict in an implied warranty claim meaning that home buyers – who were not the original purchaser-owners – can no longer claim compensation from a builder if construction defects are discovered at a later date.

In September 2003, the Cutler Group built a home for David and Holly Fields in Jamison, Pennsylvania. Three years later, the Fields sold the property to Michael and Deborah Conway, who – in 2008 – discovered water coming into their master bedroom through gaps around a window frame.

The Conways engaged the services of an engineer and architect, who determined that the leaking window was one of several construction defects that had manifested since the Conways took ownership of the property. The Conways subsequently made a claim for compensation against the Cutler Group, alleging a breach of implied warranty of habitability.

The initial trial dismissed the implied warranty claim on the grounds that an implied warranty (the guarantee on the materials use in the construction of the property) does not extend to a secondary purchaser. The Conways appealed the decision and, last year, the Pennsylvania Superior Court ruled in their favor based on its 1990 decision in Spivack v. Berks Ridge, in which the warranty was extended beyond the original purchaser.

The Cutler Group appealed to the Supreme Court, who reversed the Superior Court´s ruling on the basis that in Spivack v. Berks Ridge, the original purchaser of the property had never lived in it and therefore there was no “builder-vendor/purchaser-resident contract”. Instead the judges referred the Conways legal team to the courts verdict in Elderkin v. Gastor – a 1972 court case in which an implied warranty claim was dismissed on the grounds that there was no “contractual privity [extension of the original contract] between the parties”.

The “Elderkin Ruling” has been the benchmark ruling in Pennsylvania in respect of claims which allege a breach of implied warranty of habitability and the three Supreme Court judges – Justice Seamus P. McCaffery, Justice Max Baer and Justice Correale F. Stevens – unanimously agreed that the Real Estate Seller Disclosure Law already provides protection to subsequent home purchasers from defects that affect the habitability of a property.

Judge McCaffery also noted a split between states across the country on the issue of implied warranties of habitability; with the Supreme Courts of Iowa and Rhode Island allowing secondary home owners to make an implied warranty claim for compensation, while the High Courts in Vermont and Connecticut have ruled that implied warranties expire with the selling of the property by the original purchaser-resident.