As-Is Rider in Real Estate Contract Doesn’t Defeat Implied Warranty of Habitability in Home Sale – Fattah v. Bim Deconstruction – Part II of II)

The Fattah v. Bim (2015 IL App (1st) 140171) developer defendant seemed to have double protection.  Not only did the person it sold the home to (Buyer 1) waive the implied warranty of habitability, but Buyer 1’s buyer – the plaintiff – took the home “as-is” pursuant to a contract rider.

Despite the added layer of protection, the court still allowed the plaintiff’s case to proceed against the developer defendant. It’s reasons:

the “as is” rider was part of the contract between plaintiff and Buyer 1: it has no bearing on plaintiff’s rights versus the defendant;

– even if the “as is” rider did impact plaintiff’s rights versus the  defendant,  the rider wouldn’t negate the implied warranty of habitability;

– that’s because the “as is” rider (in the plaintiff-Buyer 1 contract) didn’t mention the implied warranty of habitability or a waiver of it;

– where a purchaser agrees to accept a house “as is” and the “as-is” provision doesn’t refer to any implied warranties in general and also doesn’t disclose the consequences of waiving an implied warranty, the as-is provision can’t be viewed as a valid disclaimer that a home builder/developer can rely on.

(¶¶ 34-35)

The court also fond that when a purchaser accepts a home as-is, a builder/developer still has to carry its burden of proving the home buyer   knowingly waived the implied warranty of habitability “by showing a conspicuous provision [that] fully discloses the consequences of [the waiver.]”  Since the defendant failed to meet its burden, the as is rider didn’t defeat the earlier waiver of the implied warranty of habitability on the house.

The court further circumscribed the implied warranty waiver signed by Buyer 1.  It held that a waiver of an implied warranty of habitability protects only the person identified in the contract.  It doesn’t extend to unwitting parties (like the plaintiff) unless there is a clear intent for that waiver to apply to a third party.

The as-is rider precludes the plaintiff from pursuing Buyer 1 (who sold the home to plaintiff) for damages based on home defects but it does not impact plaintiff’s rights versus the developer.  The developer defendant was not party to the as-is agreement between plaintiff and Buyer 1  wasn’t a named beneficiary of it.

Now What?

While the plaintiff obtained a reversal of summary judgment in the builder’s favor, he still hasn’t won the case.  He must now carry his burden of proving the defendant breached the implied warranty of habitability.  He must prove: (1) latent defects in the house, (2) that interfere with the reasonably intended use of the house and (3) the latent defects manifested themselves within a reasonable time after the house was purchased.  

The court agreed that the patio collapse constituted a latent defect.  Plaintiff will now have to establish elements (2) and (3) – that the patio defects interfered with plaintiff’s use of the home and that he learned of the defects a reasonable time after he bought the house.

 

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.