Minnesota Court of Appeals Provides Home Owners With Extended Warranty - For Free
By: CHRISTOPHER J. DOLAN
May 2003
In an unexpected decision with great consequences for home buyers and the construction industry, Minnesota’s Court of Appeals ruled in Koes v. Advanced Design, Inc., 636 N.W. 2d 352, that so long as a homeowner notifies a contractor within six months after discovering a defect in a new house and brings an action within two years after discovery, there are no time limits to statutory warranty claims.
Advanced Design constructed a home for Koes. Koes moved into the home in June 1997. Koes first recognized a problem with the home’s drain tile and heating system in early July 1999. Koes first notified Advanced Design of the problem in September of that year. Evidence suggested that the drain tile and the heating system had been improperly installed. An expert for Koes stated that the installation of the drain tile was one of the worst he had ever seen. Koes sued Advanced Design for damages.
This action arose out of Minnesota’s statutory new home warranties set forth in Minn. Stat. § 327(a).02. In every sale of a new home, the seller must warrant to the buyer that during the two-year period after closing, the house will be free from defects caused by faulty installation of plumbing, electrical, heating and cooling systems. The law also provides that a builder is not liable for any loss or damage that is not reported in writing within six months after the owner discovers or should have discovered the loss or damage.
The legislature provided an exemption from the statute of limitations governing services for construction to improve real property found in Minn. Stat. § 541.051. The exemption provides that the normal two-year statute of limitations (Minn. Stat. § 541.051) does not apply to actions based on breach of a statutory warranty set forth in Minn. Stat. § 327(a).02, so long as the action is brought within two years of the discovery of the breach.
Koes reported the defect after the warranty period but before the expiration of the limitations period set forth in Minn. Stat. § 541.051 and within the six month requirement set forth in Minn. Stat. § 327(a). Prior to this decision, most people interpreted Minn. Stat. § 327(a) to require a homeowner to bring the action within the warranty period. The court of appeals interpreted the law much more broadly, concluding that the problem did not have to be discovered within the warranty period. The homeowner must simply establish that the problem existed during the warranty period and bring the action within two years after discovering it.
The construction industry is concerned about defending a flood of statutory warranty claims and is lobbying the state legislature to amend the statute to make clear that all claims must be brought within the warranty period. We will keep you posted on any changes in the law.