In 2003, the Cutler Group constructed a home for Davey and Holly Fields in Bucks County, Pennsylvania. After living in the house for three years, Mr. and Mrs. Fields sold their home to Michael and Deborah Conway. In 2008, the Conways discovered water infiltration around the windows of their bedroom. After determining that the water infiltration was the result of several construction defects, the Conways filed a one-count Complaint against the Cutler Group for breach of implied warranty of habitability. The implied warranty of habitability was first recognized by the Pennsylvania Supreme Court in Elderkin v. Gaster, 288 A.2d 711 (Pa. 1972) and indicates that the builder-vendor impliedly warrants that the home he has built, and is selling, was constructed in a "reasonably workmanlike manner and that it is fit for the purpose intended–habitation."
The Cutler Group responded by filing Preliminary Objections alleging that as a matter of law, the implied warranty of habitability only extends to the first purchaser of a newly constructed home because there was no contractual relationship between the builder and second purchaser of the home. The trial court agreed and dismissed the Complaint.
The Conways appealed to the Pennsylvania Superior Court and the court unanimously ruled in their favor. In finding that the implied warranty of habitability extends to second purchasers of homes, the court focused on public policy considerations and determined it would be unreasonable to limit the rights of homeowners to seek compensation when latent defects in a house might not become apparent until years after the sale.
The Cutler Group then appealed to the Pennsylvania Supreme Court, which reversed the Superior Court's ruling and, on August 18, 2014, declared that an action for breach of an implied warranty of habitability requires contractual privity between the parties. Thus, a subsequent purchaser of a previously inhabited residence may not recover damages for breach of the implied warranty. The Conways argued that extending the implied warranty to secondary purchasers would be a reasonable and equitable result given that builders would still only be liable for latent defects and given that this potential liability would still be subject to the twelve-year statute of repose; however, the court indicated the question of whether and under what circumstances an implied warranty of habitability should be extended to subsequent purchasers of a newly constructed home is a matter that should be left to the legislature.
This decision is beneficial for builders given that it is now unlikely a second purchaser of a home will prevail on a breach of implied warranty claim against them. However, the Court's decision ends with a discussion of public policy considerations and appears to invite a statutory resolution. Thus, we may not have heard the last of this issue in Pennsylvania.
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