Mark and Valerie bought a new home in an Indiana subdivision in the early spring. In late May, while they were away for the holiday weekend, it rained on and off for three days. When the couple returned home they found water leakage around the windows, damp and discolored carpeting, and roofing material on the lawn that had apparently blown off during the storm.
They notified their builder, who sent a crew out to inspect and repair the damage. All seemed to be well until several months later, when the couple discovered mold growing in multiple locations in the house. At that point, they contacted an attorney about filing suit.
Indiana Law Protects New Home Buyers
New home buyers like Mark and Valerie would have typically signed a contract with the builder of their home, and been the first people to live there. Under Indiana law, new home buyers such as them should reasonably expect that the home will not have any substantial problems that would prevent them from using and enjoying the home. The law calls this the implied warranty of habitability.
An Indiana statute requires builders of new homes to give buyers a New Home Construction Warranty. This warranty must provide that for the first two years of ownership, the home will be free of problems caused by:
- poor workmanship
- defective materials, and
- improper installation of
- cooling, or
- ventilating systems.
The statute also states that the roof must be free of problems caused by installation for four years, or the builder may be responsible under the warranty. Additionally, the builder must guarantee the owner that there will be no major structural defects in the home for ten years.
What if the original homeowners sell? While the law specifically applies to the buyer of the new home, later in the statute it also provides that the warranties transfer to the next owner of a home. The first owner is supposed to tell the second owner about the warranty and how much time remains in the warranty period.
What Should New Home Buyers Facing Defects Do First?
New home buyers are required to give the builder at least 60 days’ written notice before filing any type of lawsuit. The notice to the builder should include a specific description of the problem. The owner then needs to give the builder reasonable access to the home to make repairs.
When the Builder Doesn’t Make the Repairs
If the builder does not repair the problem, new home owners like Mark and Valerie then can file a lawsuit for defective construction. The owners must list all the flaws they have found with the construction of the home.
If the lawsuit is successful, the court can order the builder to repair the items that are defective. The judge may choose instead to require the builder to pay the new home owner the amount it will cost to repair the problems, or to pay the difference in the value of the home with the problems and without.
The builder could also be held responsible for any costs and problems the new home owners have that are foreseeable as a result of the defects. The new home owner may also be able to recoup attorneys’ fees from the builder if the contract between the builder and the new home owner provides for payment of these fees.
Does the Builder’s Warranty Always Apply?
Builders can ask new home owners to waive the requirement to provide them with a new-home construction warranty if the builder has adequate insurance to cover potential damages. The statute requires that the homeowner sign a Notice of Waiver of Implied Warranties, expressly stating that the homeowner is waiving the statutory rights and accepting the builder’s express warranty regarding the construction of the home and has received information about the insurance coverage for construction defects.
This waiver can be voided, though, if the new home owner is able to show that the builder-provided insurance coverage did not cover a defect that would have been covered under the statutory warranty.
How Home Buyers Learn About the Statutory Warranty
The contract between the builder and the new home owner should include a notice to the homeowner that the builder has 60 days after receiving written notice of any problems with the construction to fix the problem. If the problem is not fixed to the owner’s satisfaction within 60 days, the owner can then file a lawsuit.
Other Types of Claims New Home Buyers Can Bring
New home buyers in a situation like Mark and Valerie's can potentially file suit for multiple other claims against their builder. These are some examples:
- Breach of Contract: The contract to build the house likely contains several promises about the quality of the construction of the home. The builder’s failure to meet these promises is the basis for a claim against the builder.
- Negligence: In order to win a claim of negligence, the new home owners need to prove that the builder owed the homeowners a duty, that the builder failed to perform that duty, and that as a result, the new home owners were physically harmed or injured in some way. An example where this could be argued is when a builder and his crew leave large sheets of drywall out overnight without properly securing them with a tarp. It rains. The next day, the builder and his crew install the slightly damp drywall in the house. Months or years later, the house is infested with mold caused by the installation of the damp drywall. The owners may have medical problems as a result of living in an environment with mold.
- Fraud: The new home owners could also claim fraud, arguing that the builder intentionally installed defective materials in the house or intentionally skipped critical steps when building the house. An example of this would be if the builder failed to wrap the wood structure of the house with the insulating and moisture repelling plastic before finishing the exterior with siding or brick.
- Promissory Estoppel: New home owners could also argue promissory estoppel, claiming the builder should pay the costs the new home owners incurred in relying on the builder’s promise that the home was well constructed. An example of this could be the costs of a painter if the new home owners had the walls painted, and the walls cracked significantly as a result of foundation instability. Another example would be if the new home owner installed a new ceramic tile floor, only to have the expensive tile damaged because the floor was not level.
For a full analysis of your potential legal claims against a new home builder in Indiana, speak to an experienced real estate attorney.