Most homebuyers don't understand habitability warranty disclaimers.
Roger Price in discussing the implied warranty of habitability provides a cogent review of the cases (The Implied Warranty of Habitability: A Critical Review, February 2010 IBJ). He discusses contracts prepared by builders that contain "disclaimers" whereby the purchaser waives the Implied Warranty of Habitability. He suggests that a disclaimer will be held to be valid only if it is as clear and conspicuous as possible.
He is unhappy with the common law evolution of this doctrine, which he traces to the mid-19th century in England. He is upset because the Illinois judiciary "has altered more than the allocation of risks among sellers and buyers of housing, all without legislative hearing, much less evaluation or express approval." He concludes that it is time for a legislative response. "The evolution of common law by judicial decree has a long and often honorable history. But in a system of representative democracy, at some point legislators ought to ratify or reject judicial legislation."
He may be sorry if his wish is granted. The legislature in addressing the issue of implied warranty of habitability may decide that a disclaimer should not release the builder who has sold a defective structure.
Most disclaimer paragraphs contain language that is archaic, legalistic, and unintelligible. The Illinois Appellate Court has found most disclaimer provisions to be invalid. One of the few times that a disclaimer provision was held valid was in Breckenridge v Cambridge Homes Inc, 246 Ill App 3d 810, 813, 616 NE2d 615, 616 (2d D 1993). It read as follows:
15. LIMITED WARRANTY: * * * NO WARRANTY, GUARANTEE, OR UNDER-TAKING WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO THE HOUSE AND CONSTRUCTION THEREOF, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE HOW WARRANTY, SHALL BIND OR OBLIGATE THE SELLER. ALL OTHER WARRANTIES, GUARANTEES AND UNDERTAKINGS ARE HEREBY EXPRESSLY DISCLAIMED.
Specifically, but without limiting the generality of the fore-going, SELLER HEREBY EXPRESSLY DISCLAIMS THE IMPLIED WARRANTY OF HABITABILITY CREATED BY THE ILLINOIS CASE OF PETERSEN v. HUBSCHMAN CONSTRUCTION COMPANY, INC, AND ANY OTHER STATUTORY OR COMMON LAW IMPLIED WARRANTY OF HABITABILITY. THE CONSEQUENCE OF SUCH DISCLAIMER BY SELLER IS THAT SELLER'S SOLE AND EXCLUSIVE WARRANTY GIVEN TO PURCHASER IN CONNECTION WITH THIS AGREEMENT IS THE HOW WARRANTY. PURCHASER'S INITIALS ADJACENT TO THIS PARAGRAPH ARE INTENDED AS AND SHALL BE EVIDENCE OF PURCHASER'S ACKNOWLEDGEMENT OF SELLER'S DISCLAIMER OF SUCH IMPLIED WARRANTY OF HABITABILITY AND OF PURCHASER'S ACCEPTANCE OF THE HOW WARRANTY AS THE SOLE AND EXCLUSIVE WARRANTY OFFERED BY SELLER IN CONNECTION WITH THE SALE OF THE HOUSE.
The average buyer who signs a contract containing such a disclaimer does not understand that he is giving up his right to sue a builder for latent defects of a substantial nature.
The typical buyer does not read all of the language of a form contract. The buyer's concerns are filling in the amount of the purchase price, the mortgage contingency provision, and the date of possession and listing the upgrades, if any. Even if she reads the disclaimer provision, she probably does not understand that the implied warranty of habitability simply means that purchasers of residential real estate in Illinois have an implied warranty from the builder/developer that the house is well constructed. If she signs a contract containing a waiver similar to the Breckenridge limited warranty set forth above, it is highly likely that she does not understand that she will not have the right to hold the builder responsible for collapsing foundations, sinking interior floors, substantial water leaks through masonry walls, major roof problems, and other substantial defects.
If the legislature considers this issue, they should simply recognize that a purchaser of residential housing cannot waive his right to sue for breach of implied warranty of habitability. The builder of homes should build a home in a good and workmanlike manner. If latent substantial defects manifest themselves within 10 years of the sale of the house, the builder should remain responsible for his substandard work.
Chester A. Lizak