Protecting Yourself from Construction Defects

Imagine you’ve found a site for your dream home in a beautiful new development just outside the city. The developer has built a model home on one lot, and it looks great. He tells you he can work with an architect and a builder to construct a new home for you on the block you’ve chosen. You sign on the dotted line and put down a deposit.
As you watch the house being built it seems like things are going well. But when you finally move in, you discover that the roof leaks and there are cracks in the floors. An engineer tells you there are some major structural problems with your new house. You have to spend a fortune straightening out the mess.

Many people are tempted by the idea of building a new home. The advantages are obvious: you can design a home that suits you down in a spot of your choice. But there are also pitfalls along the way. The number of construction defect cases has skyrocketed in the last few years as houses are being constructed quickly to meet a high demand. Intense competition has led some builders to cut corners with dire results. Your lawyer can help you protect your rights, whether you make a decision to build your own home or buy a newly constructed home from a developer.

Construction Defects

A construction defect is any defect in a new home that exists as a result of a failure to construct the home in a workmanlike manner. Construction defects can be relatively minor—nails that stick out, shoddy fittings, or leaky faucets. But some defects are major and can cost thousands of dollars to remedy. Courts have generally placed construction defects into one of four categories:

• Design deficiencies are problems that arise from the design of a house by an architect or engineer. For example, if the design does not meet the relevant planning code in your area there could be a design defect.
• Material deficiencies arise as a result of a builder or developer using cheap or inferior building materials. For example, inferior drywall or cheap waterproofing membranes can create serious defects.
• Construction deficiencies are a result of poor quality workmanship, which can result in many different kinds of defects, including electrical or plumbing problems.
• Subsurface deficiencies occur when a developer has built on soil without the proper drainage or foundations, resulting in subsidence or shifting.

Some construction defects are immediately apparent; other may not appear until a home has been occupied for months or even years.

Who is Responsible for New Construction Defects?

Developers and contractors are liable for any breach of contract. This means that if one or both of them makes a promise to do something in the contract and doesn’t do it, you are entitled to damages. Specific clauses in the contract may also make them liable for some construction defects.

Developers and contractors may also be responsible for defects under an express or implied warranty. Some courts have held that builders and sellers of new construction make an implied promise that a building has been designed and constructed in a reasonably workmanlike manner and are liable for damages if there are problems with the home. You may also be entitled to damages if a developer or contractor was negligent, i.e. if he failed to exercise the reasonable degree of care, skill and knowledge ordinarily employed by building professionals. In order to show that there has been a construction defect in court, you will need to hire experts who can testify that there is a defect and make recommendations on how to repair it.

You may be entitled to damages to cover the cost of repairing construction defects and any decline in the value of your property. You might also be able to recover damages if you were not able to live in your home for a period of time. You will usually not be able to recover court costs.

Prevention is Better than Cure

You can do several things to ensure that you won’t have to go to court because of problems with your house that are not your fault.

One important step you can take to protect yourself is to check out the people who are involved in building your house: that means the developer who owns the land, the architect who designed your home, and the builder who will build it. Ask for references, and check them carefully. You may want to contact the Better Business Bureau and ask whether any complaints have been lodged against a particular builder or developer. You might also get some candid information from local real estate agents or county planning staff who are familiar with local developers.

Remember that if things do go wrong, the person responsible for the construction defects—the developer, the builder, or the architect—can only pay damages if he has the money. This may sound obvious, but imagine where you’ll be if you try to sue your builder, only to find out that he has no insurance and no assets and is about to go bankrupt. Make sure that your developer, the builder, and the architect have insurance to cover negligent work. You may want to ask for a clause in the contract about insurance too.

You may also want to seek insurance yourself to cover any problems that appear in your new home. Some homes come with a new house warranty from an independent insurance company. These usually cover workmanship and materials for one year and major structural defects for ten years. If you buy new construction that does not include a warranty, you may need to spend some time to find a warranty that covers major construction defects.

The most important advice of all is to make sure all contracts protect you. Make sure that any promises that the developer made to you orally are included in the written contract. Before you sign, read the contract through with your lawyer and ask what changes you could make to better protect your rights. Can you insert a penalty clause requiring the builder to pay you a set amount if the house is not completed on schedule? Can you stipulate that your own building expert be allowed to visit the building at least three times while it is being built? Is the builder obligated to fix any problems that you find (or refund the down payment) before you take title to the new house?

If you do some research and work closely with a lawyer to protect your rights, then you’ll make it much more likely that your new place really will be a dream home.

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