New homebuyers often discover imperfections in their newly-constructed homes. Some of these imperfections are construction defects and others are simply part of the construction process. Homeowners may assume they have warranty coverage against construction defects, but they have often signed documents disclaiming or limiting warranty coverage. In a recent case, the Arizona Court of Appeals decided that a disclaimer of implied warranties in a residential construction agreement was unenforceable and found that the homeowner had a viable claim under implied warranties of workmanship and habitability. Zambrano v. M & RCII, LLC, No. 1 CA-CV 19‑0635 (Ariz. Ct. App. July 29, 2021).
Zambrano signed an agreement to purchase a new home being constructed by her builder. That agreement included an express limited warranty and also stated that any “implied warranties of merchantability, fitness for a particular purpose, habitability and workmanship are hereby disclaimed . . .” After closing, Zambrano discovered what she believed to be construction defects, including popped nails in the drywall and foundation problems. She sued her builder asserting a breach of the implied warranties of habitability and workmanship. Relying on the contractual disclaimer, the builder received summary judgment dismissing Zambrano’s implied warranty claim. On appeal, the court discussed the Arizona Supreme Court’s 1979 elimination of the rule of caveat emptor (buyer beware) for newly built homes. Relying on that 1979 ruling, as well as the absence of any subsequent legislation supporting the enforceability of warranty disclaimers, the Zambrano court found that the contractual waiver of implied warranties was unenforceable. The Zambrano court reached its decision despite acknowledging a trend in some states to allow waiver of implied warranties.
The Zambrano decision highlights the differing ways in which jurisdictions have dealt with implied warranties and attempts to disclaim them. In some states, such as Wisconsin, the legislature has enacted laws implying a warranty of workmanship in residential construction contracts which do not include an express warranty. Wis. Stats. § 706.10(7). In other states, the courts have taken an approach similar to Arizona, and have implied warranties on new construction under the common law. See Dobler v. Malloy, 214 N.W.2d 510 (N.D. 1973); Carlson Homes, Inc. v. Messmer, 307 N.W.2d 564 (N.D. 1981). Still other jurisdictions, such as Minnesota, have legislatively imposed express statutory warranties on residential construction. Minn. Stat. Ch. 327A.
A home is a large investment for both builders and homebuyers. Accordingly, due to the varying approaches to warranty coverage, both builders and homebuyers should be careful to familiarize themselves with the warranty laws applicable in their state.
Editor’s Note: The Court of Appeals decision in Zambrano was overturned by the Arizona Supreme Court. See Zambrano v. M & RC II LLC, 517 P.3d 1168 (Ariz. 2022).