Illinois Appellate Court Limits — for Now — Subsequent Purchaser’s Ability to Seek Damages from Design Professional Under Implied Warranty of Habitability
In our last edition, we discussed the Illinois Appellate Court’s restriction of a builder or developer’s attempt to limit the application of the Implied Warranty of Habitability. The court’s recent ruling in a case involving similar issues, but lodged against a design professional rather than a builder, indicates that — for now, at least — architects, engineers and similar professionals have a somewhat higher level of protection against alleged deficiencies.
As a quick reminder, the aptly named Implied Warranty of Habitability is a warranty that is implied into every contract involving the sale of a dwelling from a builder to a buyer, that a house will be reasonably suited for its intended use when completed and transferred to the buyer. This warranty only applies to latent defects that interfere with a buyer’s legitimate expectations and that manifest themselves within a reasonable amount of time after the house is purchased.
In Fatah v. Bim, 2015 IL App (1st) 140171, the First District Illinois Appellate Court allowed a subsequent purchaser to maintain claims against the original builder for latent defects because the subsequent purchaser had no knowledge of, and was not a party to, a waiver of claims agreement between the builder and the original buyer.
In a recent opinion from the First District Illinois Appellate Court, the court addressed claims by a homeowner’s association against a design professional, among others. In Board of Managers of Park Point at Wheeling Condominium Association v. Park Point at Wheeling, LLC, et al., 2015 IL App (1st) 123452, the homeowner’s association complained of water and air infiltration that it claimed was caused by latent defects in the design and construction of common elements, including walls, windows and doors that leaked. The homeowner’s association sought to hold each of the developer, contractor, subcontractor and the architect responsible for the deficiencies under a claim for breach of the Implied Warranty of Habitability.
The court looked at the public policy reasons behind the Implied Warranty of Habitability Doctrine and at how the doctrine has been expanded over time. The court discussed the three public policy reasons for adopting the Implied Warranty of Habitability: (1) the modern home buyer is unusually dependent upon the competency and honesty of the builder rather than on the buyer's own ability to discern latent defects, (2) the buyer is making the largest single investment of his or her life, and (3) in fairness, the repair costs of defective construction should be borne by the builder-seller who created the latent defects.
In addressing the expansion of the doctrine, the court noted that the class of defendants who impliedly warrant the habitability of their construction work has expanded only somewhat from the builder-sellers of new homes, but, in each such instance, the implied warranty of habitability claim centered on the quality of construction work. Moreover, it noted that engineers and design professionals do not warrant the accuracy of their plans and specifications.
As a result, the court found that two principles became clear:
“First, the implied warranty of habitability of construction is traditionally applied to those who engage in construction. Second, architects do not construct structures, they perform design services pursuant to contracts which set out their obligations and courts have consistently declined to heighten their express contractual obligations by implying a warranty of habitability of construction.”
While it appears that, for the time being, design professionals are protected from claims under Illinois law for breach of the Implied Warranty of Habitability, one can only wonder if the result would be different under a different set of circumstances. For instance, the implied warranty was only extended to subcontractors when a court was faced with a fact pattern that resulted in the buyers having no recourse against an insolvent builder-seller. (See Minton v. The Richards Group of Chicago, 116 Ill. App. 3d 852, 452 N.E.2d 835 (1983).) If the court is faced with a situation where the design professional is the only solvent defendant available for recourse, would it maintain the current balance of equities?