It is not uncommon for new construction to come with a home warranty from the builder. A common misconception with these warranties is that anything that goes wrong with the house will be covered by such a warranty. Unfortunately, that is not typically the case. Most warranties offered on new construction will cover only specific items, such as: foundations, flooring, siding/shingles/clapboard, insulation, roofing, doors and windows and shutters (visit specialists for more information), plumbing, electrical, heating and cooling, and septic. These warranties may lead to a false sense of security for potential buyers. Not only are these warranties limited in duration, they often do not cover defects relating to appliances, shrinkage or expansion of the house and related cracking, insect damage, and damage caused by inadequate ventilation.
According to MA case law, (Albrecht v. Clifford), there is an implied warranty of habitability in every Purchase and Sale agreement between a builder/seller and a buyer. This is a warranty that cannot be waived. The Supreme Judicial Court stated: “To establish a breach of the implied warranty of habitability a plaintiff will have to demonstrate that:
(1) the new house was purchased [by plaintiff] from the defendant-builder-vendor [seller];
(2) the house contained a latent or non-obvious defect;
(3) the defect became apparent only after the purchase;
(4) the defect was caused by the builder’s improper design, material, or workmanship; and
(5) the defect created a substantial question of safety or made the house unfit for human habitation. In addition, the claim must be brought within the three-year statute of limitations and the six-year statute of repose [i.e., within six years after completion of an improvement to property].”
While the law in Massachusetts provides additional recourse to buyers for potential defects in new construction, a buyer of new construction should always carefully review warranty paperwork with their real estate attorney prior to agreeing to any terms. This can be a significant negotiation, as the builder will seek to limit his or her liability and the buyer would be seeking to expand the builder’s liability.
Additionally, the Albrecht decision reinforces the view that a buyer’s primary complaint should be against the builder. However, to reduce risk to you as a Realtor®, you should always encourage your buyers to obtain inspections from appropriate professionals, including home inspectors, structural engineers, architects, etc., irrespective of the age of the house.
The information provided above by the Massachusetts Association of REALTORS® Legal Department is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at firstname.lastname@example.org.