You may think your new home offers years of problem-free living as part of the package, but may be surprised to find out construction laws likely won’t protect you if there’s an issue in the short or long term.
The truth is, most homeowners have few options if there ends up being an issue with their residence. Finding out the slope of the land allows flooding indoors or the siding on the home is failing to protect the structure can be expensive fixes that dig deeply into your real estate investment. Construction defects can impact an entire neighborhood built by the same builder or individual owners. However widespread the damage, if you do end up in court there are some things to know.
1. Possible Outcomes
You may go into litigation wanting your money back, but you should be aware it’s very rare to get a full refund on your home. Just know it’s not like returning a toaster. There is no money-back guarantee on your home. Builders have pages of fine print on their contracts for a reason—to protect themselves in the case of litigation. The contracts are written to benefit them, rather than protecting the buyer so it’s important to pay attention to the fine print.
Unlike typical real estate contracts written by a third party that aim to protect the buyer and the seller, builder’s contracts are mostly unregulated so they can include whatever caveats they want. If you find yourself ready to sign a new construction contract, make sure you not only read the entire contract, but you understand what it means.
Having said that, often builders will work with you. There may be a short-term warranty that covers materials, systems, appliances, flooring, etc. However, the warranties are typically very limited. If the builder is willing to meet in the middle you may be able to get repairs done or receive money to have the damage repaired.
2. Arbitration & Warranty
One large section of any contract will have to do with arbitration. This outlines the options you have if there’s an issue. Again, expect this to be stacked in the builder’s favor. The contract might even state you’re responsible for paying for arbitration.
Also, scour the details of the warranty. You’ll likely be surprised at how little it covers.
3. Suing with Class
Even if the entire neighborhood has the same issues with the builder, each owner has an individual contract so a class action suit, which could save everyone a lot of money, likely isn’t an option. It might even state as much in your contract.
4. Timelines are Crucial
There are a few common timelines in the construction industry. The first has to do with when you take ownership or occupancy of the home. It’s called the statute of repose. On that date, it starts a countdown for builder liability. The term is commonly four to ten years and differs per state. That means you have that many years to make a claim if you notice a crack in the foundation, an issue with the garage door, or leaking plumbing. Some states offer longer statute of repose periods for specific issues or types of buildings.
However, there’s a caveat and it’s the statute of limitations. When you initially notice an issue, you have a specific amount of time to report it. Say you see water trickling into a light fixture during a crazy storm. You casually mention it to your spouse or take a picture. Then it happens again a few years later and a bigger issue is discovered. Because you didn’t report it within the statute of limitations, the statute of repose no longer covers the problem. This statute of limitations timeline also varies per state. Most allow at least one year and the most common is two years. Some states allow six to ten years.
The main points here are to truly understand what your construction contract says and what’s covered. Also, be aware of the statutes in your state in regards to when and how to make a claim if a problem occurs.