Minnesota Supreme Court and the Legislature Revise Homeowner Warranty Rights
By: JOSEPH G. SPRINGER
In a decision filed April 1, 2004, the Minnesota Supreme Court held that homeowners have a longer time period and broader grounds to sue contractors for claims arising under Minnesota’s laws. In response, the Minnesota Legislature changed the home warranty laws effective August 1, 2004.
In Vlahos vs. R&I Construction of Bloomington, Inc., the Vlahoses purchased a home located on Lake Minnetonka from the Rovicks in 1999. The home was constructed in 1990 by R&I Construction of Bloomington, Inc. Between 1992 and 1999, the Rovicks experienced repeated water and moisture problems with the home. The Rovicks disclosed the water problems to the Vlahoses. A building inspector hired by the Vlahoses also found extensive water damage to the home. During a major remodeling project undertaken by the Vlahoses shortly after closing, they discovered significant water damage, including decay of the interior trusses and other load-bearing supports throughout the home.
When R&I refused to correct the problems, the Vlahoses sued alleging breach of the 10-year statutory warranty against “major construction defects” found in Minnesota Statute § 327A.02. The trial court granted summary judgment in favor of R&I and against the Vlahoses, finding that the Vlahoses’ claim was barred by the two-year statute of limitations for claims arising from improvements to real estate because the Rovicks knew about the water problem for many years prior to the Vlahoses starting suit. The trial court further concluded that the claims were not “major construction defects” because the damages occurred after completion of construction. The trial court reasoned that breach of the new home warranties must be determined as of the time of construction and not as a result of forces occurring after construction. The Minnesota Court of Appeals affirmed the trial court on both matters.
The Minnesota Supreme Court reversed and sent the case back to the trial court. The Supreme Court held that a claim for breach of the statutory new home warranties “begins to run when the homeowner discovers, or should have discovered, the builder’s refusal or inability to ensure the home is free from major construction defects.” The Supreme Court also held that “the statutory new home warranty extends to actual damage to load-bearing portions of the dwelling occurring after the completion of construction.”
Although only the ten-year warranty against major construction defects was before the Court in the Vlahos case, the Court’s reasoning would also apply to the statutory one-year warranty on all defects and the two-year warranty for plumbing, electrical, and mechanical systems. In theory, a contractor could be liable many years after the home is completed, so long as the homeowner brings suit within two years after the contractor refuses to complete the repairs.
In response to the Vlahos decision and an earlier decision of the Minnesota Court of Appeals in Koes vs. Advanced Design, Inc. that was affirmed in Vlahos, the Minnesota Legislature amended the statute of limitations for construction claims. The amendment, which became effective August 1, 2004, provides that a suit claiming the breach of the one-, two-, and ten-year statutory warranties that accrues during the ninth or tenth year after the home warranties commence must be brought within two years of the homeowner’s discovery of the breach of warranties. The amendment to the statute further provides that in no event may a suit alleging a breach of Minnesota’s statutory home warranties be brought more than twelve years after the warranty commences. Under the home warranty laws, the warranty commences upon the earlier of the date that the initial owner first occupies the home or the date upon which the initial owner takes title to the home. While in theory under the Vlahos and Koes decisions, a builder could have liability ten, twenty, or more years after selling the property, twelve years is now the maximum time within which a lawsuit must be brought.