Implied Warranty of Habitability: Are Design Professionals At Risk?

Posted on October 28, 2010 by Garrett Kern

 

In 1324 W. Pratt Condominium Ass'n v. Platt Const. Group, Inc., 2010 WL 3788057 (Ill.App. 1 Dist.), a condominium association sued  a construction company it retained to build an eight-unit residential condominium. The condominium association asserted that the construction was performed in a faulty manner which resulted in roof leakage and damage to personal property of condominium residents during a series of severe rainstorms in September 2008 in Chicago. The rainstorms were alleged to have substantially worsened the leaks and exacerbated the mold problem. 

The First District Appellate Court of Illinois held that the construction company’s designation as a “builder” rather than a “builder-vendor” did not protect it from the condominium association’s claim that it violated an implied warranty of habitability in the construction of the condominium building. As a result, the Appellate Court found that the trial court’s dismissal of that count was in error. However, the trial court’s dismissal of the negligence count was upheld pursuant to Moorman doctrine as the “sudden or dangerous occurrence” exception was deemed to not apply, because the storms did not cause the damage requiring repair of the building and individual units. Because the leaks and mold were present before the storms of September 2008, the First District held that the storms did not cause the damage.

What can we take away from the 1324 W. Pratt case and its analysis of the implied warranty of habitability? The First District, at least, has eliminated the limited application of the implied warranty of habitability to only those builders who are also vendors as that limitation would “defeat the warranty’s policy goals of holding builders themselves accountable for latent defects in new homes and placing the costs of repairs on the builders who created the defect.” 

The 1324 W. Pratt case may also be read to imply that the implied warranty of habitability may be applied to design professionals. As discussed in more detail here, the application of the implied warranty of habitability against design professionals is unclear at best. The warranty, as defined in the opinion, applies against a lessor or builder of a residential unit where latent defects thereabout interfere with the inhabitant’s reasonable expectation that the unit will be suitable for habitation. This definition would seem to absolve design professionals. However, the doctrine seeks to assign liability for the damage upon the entity responsible for that latent defect. Certainly, a design professional is in the cross-hairs for damages attributable to a latent defect (i.e., a fault in the property that could not have been discovered by a reasonably thorough inspection before the sale) resulting in damage. Design professionals’ contributions are often subtle and hidden by the builder’s construction. 

 

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Illinois Supreme Court Considers Amended Home Repair Remodeling Act

Posted on October 8, 2010 by Garrett Kern

 

The First District Appellate Court, in K. Miller Construction Company, Inc. v. McGinnis, 394 Ill.App.3d 248 (1st Dist. 2009), decided that a claim for quantum meruit (unjust enrichment) could be made against a homeowner by a contractor even if the contractor failed to comply with the Illinois Home Repair Remodeling Act  (815 ILCS 513/15) which requires that contracts for more than $1,000 on home improvements be put in writing or deemed unlawful by a statute. As we reported here, Miller was a contractor that worked on the renovation of the McGinnis home. Prior to completion of the project, but after some work had been performed, the homeowners refused to continue paying Miller’s invoices which were then more than $123,000 and demanded that he finish the job before any more payments were made. Though the homeowner approved of the work upon completion, the project construction price increased to more than $500,000 by the time Miller was done. The homeowners, however, refused to pay more than $177,580.33 and Miller filed suit to recover payment. The trial court dismissed claims made by Miller for a mechanic’s lien and breach of a time and materials oral contract because the terms of the Act provided that such contracts were unlawful, at the time, if not in writing for home repair. 

The case was appealed. The Appellate Court unanimously agreed that Miller’s claim for breach of contract and foreclosure of mechanic’s liens could not go forward because the Act imposed a writing requirement for remodeling work costing over $1,000 and necessarily barred the enforcement of an oral contract. However, the Appellate Court was divided with respect to whether the contractor could recover in quantum meruit. Due to the fact that the Appellate Court permitted Miller to go forward on a quantum meruit claim, the homeowner appealed to the Illinois Supreme Court. The Supreme Court granted petition for leave to appeal and rendered its opinion on September 23, 2010.    In rendering its decision, the Illinois Supreme Court simply looked at the rewritten Public Act 96-1023 which was effective July 12, 2010 (after the project at issue). Public Act 96-1023 rewrote the Illinois Home Repair and Remodeling Act stating that any violations of the Act were to be remedied by an action under the Illinois Consumer Fraud Act. The Supreme Court ruled that the amendment made it quite clear that entering into an oral contract, rather than written, does make this contract unenforceable. Similarly, the Supreme Court held that quantum meruit would still be available to the contractor even in the absence of a written contract. 

This is the first case following the amendment to the Illinois Home Repair Remodeling Act and it is a clear indication that the Court is going to permit contractors to sue to recover on oral contracts for home repair work. 

Despite the ruling, it continues to be the best practice for contractors to use written contracts and otherwise comply with the Illinois Home Repair Remodeling Act in order to avoid the pitfalls of claim resolution and litigation.

 

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