Holding Your Builder Responsible for New-Home Defects

by Ilona Bray

Many buyers choose newly built homes only to move in and discover damage that was built in.

Before you moved into your new home, your local town, city, or municipality most likely inspected it and issued a certificate of occupancy. That indicated that the home was, at a minimum, livable. However, many new homeowners are unhappy to discover that the certificate doesn’t guarantee that everything is in working order or even complete. As discussed below, you may need to assert your rights under one of various warranties.

Are the Defects Covered by a Builder’s Warranty?

At least a year’s worth of seasonal changes are often needed to put a new house to the test. For example, only in winter might you discover that water seeps into the basement or around window frames, that the landscaping was badly graded and leads to mudslides, or that you’ve got a mold problem. And guess what: Your homeowners’ insurance probably doesn’t cover construction defects.

That’s why most home builders issue their new owners a warranty (often called a “limited warranty”) on their work, either within the sales contract or as a separate document. (Interestingly, such warranties aren’t usually required by state law.)

The warranty’s maximum term is typically broken up into one-, two-, and ten-year terms, based on the type of needed work. You’ll probably get a one-year warranty for labor and materials, two years for mechanical defects (plumbing, electrical, heating, air conditioning, and ventilation systems), and ten years for structural defects. The result is that the best parts of the warranty expire quickly — your carpeting, tiles, paint, and roofing, for example, may not be covered after the first year.

If you received a warranty, read it over to determine its length, who’s supposed to handle problems (the builder may have bought third-party insurance), and what’s covered and excluded. Pay special attention to your own responsibilities — you may have been given a detailed list of maintenance obligations. Ignoring these gives the builder a perfect excuse to deny you protections under the warranty.

Typical exclusions from a builder’s warranty include:

  • Damage owing to your own abuse, misuse, neglect, failure by you or your homeowners’ association to provide maintenance (such as cleaning the gutters, draining your water heater, touching up caulk or grout, or dealing with pests), or failure to maintain adequate ventilation and humidity levels in the home.
  • Deterioration of construction materials within expected levels, including warpage or shrinkage within industry standards, or changes due to weather conditions, natural disasters, or soil movement or settling.
  • Damage caused by outsiders (such as rioters, vandals, animals, or airplanes) or “acts of God.”
  • Damage caused by people you hired to work on the property.
  • Your housing costs and expenses if you have to move out while repairs are being made.
  • All home appliances or equipment that are consumer products, such as your refrigerator and dishwasher, some of which come with their own warranties (which the builder should have transferred to you).

Get an inspection before every warranty expiration date. Some defects are hard to detect, so it may be worth paying a professional to point out what the builder needs to fix. In fact, many builder’s warranties or contracts say they’ll send a quality-control inspector within the first year to check on your house. Keep track of the date yourself, and make sure the builder’s inspectors truly seems to be scouting for trouble — if not, hire your own. In preparation for any inspection, make a list of every problem you’ve observed. Something as apparently minor as a cracked tile could indicate a major problem, like a shifting foundation.

Can You File a Builder’s Warranty Claim?

If the defective or damaged item is covered by the builder’s warranty, read what it says about procedures for filing a claim. Many warranties require you to send written notification to the builder, while others give you a hotline to call. In fact, sending a letter to the builder is a good idea regardless of what the warranty says. This shows that you’re serious about asserting your rights, and creates evidence that you might later want to use in court. Send the letter by certified mail with a return receipt, so the builder can’t later claim not to have received it. Also keep notes (legible ones) on your every conversation with the builder, including the dates. You can use this information to confirm, in your letters to the builder, what you agreed to. And they might also be good to show to a judge someday.

Be prepared to act quickly. Sometimes you can protect your rights just by notifying the builder of problems within the warranty period. However, some warranties are cleverly written to let the builder string you along without making the repairs until the warranty period has run out and you’ve lost your rights. (Don’t bring in any outside contractors to do repairs yet, as this could allow the builder to cancel the benefits of the warranty.)

Has your builder gone missing? A few builders are fly-by-night operations that close up shop, leave town, and change their name as soon as the work is done — or near to done. For cases like these, go straight to a lawyer for help.

What About Unfinished Work?
If items in your new house simply remain uncompleted, what happens next depends on what you agreed to at the closing. Your contract may have allowed you to do a closing inspection of the home, at which time you and the builder should have created a punch list of items yet to be done. The seller has a contractual obligation to fix the items on that list, and you should keep insisting on follow-through. Don’t assume that the home warranty covers uncompleted items — some warranties specifically exclude them.

Are Defects Covered by a Manufacturer’s Warranty?

If your builder isn’t accepting responsibility for a problem, figure out whether a manufacturer’s warranty might apply — for example, to an appliance, windows, roof shingles, or other product. You may be able to argue that the product itself failed, in which case a manufacturer that stands behind its product will provide replacements and repairs. The catch, however, is that the product needs to have been installed properly — and improper installation in new building is often the very core of the problem.

Does Your State’s Law Offer Extra Protection?

Warranty or not, you may get added protection from the laws in your state. In New Jersey, Texas, and various other states, the laws give homeowners an automatic warranty of their home’s habitability and good workmanship. Some states may require you to give the builder a chance to make repairs before suing.

Laws passed by legislatures aren’t your only hope (though they’re the easiest to find). In most states, such as Colorado, Illinois, New York, and Washington, the “common law” (court decisions on individual cases that then set the rules for everyone else) may also protect you. Such states’ courts have said that, just by the act of building you a house, the builder provides “implied warranties” that the house is habitable (safe, sanitary, and fit for use) and was built in a workmanlike manner, in compliance with local building codes. And even without an implied warranty, you may be able to sue a builder on another legal ground, such as fraud, breach of contract, or negligence.

What if you signed a warranty saying you were waiving (giving up) your rights under state law? Not all of these agreements are binding. Consult an attorney for an individual analysis.

For More Information

To find these laws and implied warranty rights, you won’t necessarily have to do legal research. Many states have consumer protection agencies to help advise you on builder problems. Check whether your state agency has published an explanatory pamphlet online.