Subsequent Buyer Can Enforce the Homebuilder’s Warranty

Question: We bought a home in Surprise last year that had been built four years ago. We had a home inspection that discovered some minor problems that our sellers fixed. We have now discovered two significant construction defects, namely, a hole in the roof next to the chimney, and the air conditioning system that does not cool properly in the summer months. The cost for the repair of these two construction defects will be at least $20,000. The sellers have moved back to Illinois, and have not responded to us.   After we contacted the  homebuilder, they sent their foreman to our home. This foreman admitted that there were these two construction defects, but said that the homebuilder only had an obligation to the original buyer of the home. Nevertheless, the foreman said that the homebuilder would offer us $12,000 for full settlement.  Should we accept this $12,000 settlement offer from the homebuilder?

Answer: Probably not. There are four factors that should be  evaluated  before accepting  or rejecting any settlement offer:  (1) liability, (2) damages, (3) right to attorneys fees, and (4) collectability of any judgment.

First, in regard to liability, you as a subsequent owner of the home have a claim for construction defects against the homebuilder for up to eight years after construction of the home. A.R.S. § 12-552. This claim is for your damages due to the homebuilder’s breach of the implied warranty of proper construction. Note: If a reasonable inspection of the home at the time that you moved into your home would have discovered these two construction defects, you have no claim.

Second, in regard to damages, the $12,000 offer seems low, so you might counteroffer at $20,000 with three specific bids showing a cost of at least $20,000 to fix the two construction defects.

Third,  attorneys fees are generally awarded by a judge for a breach of contract, including breach of the implied warranty of proper construction.

Fourth, in regard to collectability, the homebuilder should be collectible.

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