Implied Warranty of Habitability

A condominium association claims that various parties involved in the design, construction, and sale of a condominium complex breached the implied warranty of habitability by incorporating latent defects into the units via the design, material, and construction.

The theory of implied warranty of habitability initially arose because the application of the common law principles of caveat emptor and merger meant that a new home buyer had little or no recourse against a builder that constructed a defective residence. Caveat emptor prevented a new home buyer from suing the builder if he failed to discover any defects before taking possession. However, the doctrine of caveat emptor is based on the expectation that the buyer and seller possess comparable skill and experience and could use their own judgments to come to a conclusion. The implication of a warranty of habitability came as a judicial response to the fact that in the twentieth century, new home buyers and sellers were no longer in an equal bargaining position. As the ordinary home buyer no longer had the skill or training to make a meaningful inspection and discover latent defects, caveat emptor fell out of favor.

In this case, the record demonstrates that each Condominium Purchase Agreement disclaimed implied warranties on behalf of the developer-seller and its agents. Though the condominium association argues that the language in the purchase agreement was not called to the buyers’ attention or worded properly, a seller is not required to specifically point out a disclaimer in a written contract or use a particular method to bring it to the buyer’s attention. A disclaimer is deemed legally effective if it (1) is a conspicuous part of the agreement, (2) refers to the warranty by name, and (3) discloses the consequences of its inclusion. The court rules that the included provision meets the criteria of an effective disclaimer.

Generally speaking, only builders or builder-sellers warrant the habitability of their construction work. Engineers and design professionals – such as the defendant architectural firm in this case – provide a service and do not warrant the accuracy of their plans and specifications. Breach of implied warranty of habitability claims against design professionals have consistently been rejected in Illinois and most other jurisdictions. This court holds that the designer’s role did not subject it to a claim for breach of the warranty of habitability of the builder’s work. The developer-seller is also dismissed from these proceedings due to the effective waiver.

The court then must consider whether the wording of the Agreement encompasses the other defendants. The contract defines the seller, but does not define officers, agents, or other representatives. An agent is commonly understood to be a person “who is authorized to act for or in the place of another.” The allegations that the contractors provided development services and held themselves out as knowledgeable developers and contractors do not allege that the contractors were authorized to act on behalf of the developer-seller. Therefore, they do not fall under the scope of “agents” and were improperly dismissed at the trial level. The case is affirmed in part, reversed in part, and remanded for further proceedings.
Board of Managers of Park Point at Wheeling Condominium Association. v. Park Point at Wheeling, LLC, 2015 IL App (1st) 123452 (December 31, 2015).

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