What could be better than purchasing a new home directly from a builder? You may have had a say in the house’s design, the location, and best of all, everything is brand new. As the house settles, you will likely encounter minor issues that you can live with (that paint in the kitchen corner isn’t quite perfect…).
But what if you find that there are significant defects in construction – items that need repair or replacement? Perhaps the sliding glass door leaks, or a wall in the bedroom buckles. These are issues that cannot and should not be ignored. The good news is that depending on the circumstances, the builder may be responsible for these defects. This article will discuss your rights against the builder, and the steps that you should take to protect these rights.
Builder’s Breach of Contract Liability in Michigan
If you discover a defect in your home construction, the first place you should look to determine your rights is your construction contract. You likely (hopefully!) signed this contract prior to the building of your home. The contract includes either the detailed plan and specifications of your home or a reference to the plans and specifications of a similar model home. It also includes promises that your builder has made to you, as well as promises that you have made to the builder.
If your home is not built according to the terms of the contract, you may have a claim against the builder for breach of contract. For example, if the contract specifications state that the builder will install a granite countertop in your kitchen, but the builder instead installed a laminate countertop, you may sue the builder for a breach of contract. Not every variation from the plans and specifications, however, is an actionable breach of contract against the builder. Some slight variations, if permitted in the contract or deemed reasonable by construction industry standards, are allowed.
If you decide to sue the builder for breach of contract, you must do so within six years of the date you discover the defect. This limitation differs from a negligence (or other tort) claim, which you may pursue if the property defect results in an injury or creates an unsafe condition. In that case, you must bring legal action within six years of the date you moved in.
Builder’s Express Warranty Obligations in Michigan
Although not required in Michigan, your contract may contain an express warranty from the builder. If it does, read it carefully. It will describe what defects are covered, how long the warranty lasts, your maintenance obligations, and what the builder is required to do to fix the defects. It may also contain a list of items that are excluded from the warranty (sometimes a lengthy list).
It is common for an express warranty to limit or waive other warranties, such as the implied warranties described below. While Michigan law recognizes the right to limit or waive these warranties, courts have refused enforcement of these waivers unless the parties’ intent is clear and specific. It must be obvious to the court that you, the buyer, specifically agreed to the waivers. The builder is not permitted to include the waivers in the “small print” or buried within the legalese of the contract.
The express warranty may also include a procedure to resolve warranty disputes. It is common for construction contracts to require binding arbitration rather than litigation in a court if there is a dispute. If arbitration is required, you may not sue the builder. Instead, you must submit a complaint to an arbitrator – an expert in the construction industry who will listen to both sides of the dispute and issues a binding decision resolving the issue.
The arbitrator will conduct a hearing where both sides will have an opportunity to present their position on the issue. The hearing will be conducted similar to a court trial. At the conclusion of the hearing, the arbitrator will issue a final decision. Significantly, and unlike a court trial, neither party may appeal the decision. Because of this, it is especially important that you feel comfortable with the arbitrators selected.
Builder’s Implied Warranty Obligations in Michigan
Even if your contract does not contain an express warranty, your builder may be responsible for a defect under an implied warranty claim. Michigan recognizes the following implied warranties:
- Implied warranty of fitness for a particular purpose or habitability. This warranty guarantees that the property is suitable for living, or “habitable.” It applies only to builders who not only build but also sell the property to buyers. To make a claim under this part of the law, the buyer must give the builder notice of the defect and an opportunity to repair it before the warranty can be considered breached.
- Implied warranty of workmanlike construction. This warranty requires the builder to perform the work in a skillful, careful, diligent, and workmanlike manner -- that is, a manner that is typically displayed in the same trade or business. Courts sometimes limit this claim, and instead allow breach of contract or negligence claims.
Filing a Complaint With the State
In Michigan, builders are required to obtain a license prior to performing most construction projects. Double check that your builder is properly licensed (on the LARA website). If not, you may contact your local police department to report this violation.
If your builder is licensed, and you have a complaint about your home construction, you may file a complaint against the builder with LARA (www.michigan.gov/builders). Your complaint must be filed within 18 months of either the closing date or issuance of the certificate of occupancy – whichever is later.
Before filing a complaint, however, you must notify the builder of the issue and give him or her an opportunity to fix the problem. The builder must make the needed repairs within 60 days from the date of that notice. If the repairs have not been made, you may file a complaint. If your contract contains a dispute resolution procedure (such as the arbitration procedure discussed above), you must first complete that method before filing a complaint against the builder. (Mich. Comp. Laws Ann. § 339.2412(2)).
If the builder is found to have violated the licensing law, the builder may be fined, ordered to compensate you for losses, or reprimanded in some way. Depending on the severity of the violation, the builder’s license may also be suspended or revoked. (Mich. Comp. Laws Ann. § 339.2411(2)). The most current version of the licensing laws may be found on the Michigan Department of Licensing and Regulatory Affairs website.
Key Steps in Asserting Your Rights Against the Builder After Finding a Defect
If you do discover a defect in your newly built home, act quickly, as in many cases a builder’s liability is limited by time. Start by:
- reviewing your contract, including your plans and specifications, to determine whether you might have a claim for breach of contract
- reviewing any express warranty in the contract to determine whether your defect is covered by the warranty
- following any required steps you must take to make a claim against the warranty, and
- providing notice to the builder of the defect, which includes information as to why you believe the builder is responsible (such as a reference to a warranty).
Even if your contract does not explicitly require notice to the builder or does not include steps to take if there is a defect or dispute, it is a good idea to provide the builder notice of the defect as soon as possible. In many cases, the issue will be resolved without starting formal dispute proceedings. And, it is always a good idea to keep copies of all documentation concerning the issue.
The resolution of construction contract disputes can be confusing. If you encounter an issue, you may wish to seek the advice of a local real estate or construction law attorney to help you through the process.