New-Home Construction Defects in Tennessee: Buyer's Rights Against the Builder

Finding problems in your newly built Tennessee home? Whether legal action is possible.

Imagine that you’ve just moved into a newly constructed home in Nashville, constructed by a builder or developer. From the outside, the house looks fabulous, exactly as it had been promised. But after a couple weeks or months of living there, you begin to notice issues. Perhaps these are cosmetic – the finishes look sloppy, or the mouldings don't meet correctly at the corners. Or perhaps the issues are more structural – the windows were installed outside-in, or the garage door doesn’t raise all the way.

For the price you paid for the home, you'd expect it to be perfect, or at least reasonably close to perfect. Construction defects lower the value of your home. How can you recover against the builder or developer for such defects?

Claims Against a Tennessee Builder for Breach of Contract

When you moved into a newly constructed Tennessee home, the builder or developer likely gave you a stack of written materials describing the place. You in all likelihood signed a contract, outlining your payment and its promise to construct the home according to certain specifications.

Part of your lawsuit against the builder will likely be that it breached this agreement – it failed to construct the house as agreed upon. Here, all of the materials the builder gave you, including photos, descriptions of the home, and emails describing the work, will be useful in demonstrating your rightful expectations at the time you entered into the contract. For example, if the various documents clearly show that you thought you were getting a home with a two-sink master bathroom but the room contains only one sink, this demonstrates the builder’s breach.

Tennessee has a six-year statute of limitations for breach of contract claims under Tenn. Code Ann. § 28-3-109. This means that claims based on a contract with the builder must be brought within this period, or they are barred. An exception to this would be when a homeowner could not have reasonably discovered the existence of the breach until after the period – for example, if the roof caves in after seven years because the builder used low-quality wood and the homeowner couldn’t have reasonably known.

Claims of Negligence

Another possible basis upon which to file suit against a Tennessee builder is for negligence. Ordinary negligence in the context of construction defects is said to be the builder’s failure to exercise the correct standard of care. In Tennessee, in order to establish a claim for negligence, a party must establish that 1) a duty was imposed by law; 2) the builder failed to conform to that standard; 3) there was a causal link between the failure to meet the standard of care and the resulting construction defect; and 4) actual economic damages resulted from the injury to your home.

Tennessee courts hold that builders have an implied duty to perform services required by their contract with homeowners in a skillful, careful, diligent and workmanlike manner, even without a written agreement. Note that Tennessee has a three-year statute of limitations for basic negligence under Tenn. Code Ann. 28-3-104.

Time Limits Created by Tennessee Statute of Repose

A relatively unique facet of construction defect litigation in Tennessee is a law called the Statute of Repose for improvements to real property, Tenn. Code Ann. § 28-3-201.

Under this state law, homeowners have four years in which to file suit after substantial completion of the construction project. If the homeowner waits until the builder has been “off the job” for four years, he or she is probably barred from filing suit for the alleged construction defect, regardless of when the defect was discovered.

This is different from the law in many other states, where the limitation period is tolled (delayed) based on when the homeowner discovers the existence of the defect. This statute is meant to give certainty to builders, so that they need not worry about claims after four years. However, it means homeowners must be vigilant to ensure they do not get blocked by the statute. If you see any signs of trouble, investigate further rather than waiting for it to fully manifest! The four-year window of the statute of repose begins to run regardless of whether the homeowner could have known about the defect in construction.

Mediation, Arbitration, and Shortened Claim Periods

Before filing your lawsuit, check your contract to see whether other steps must be taken first. Many construction contracts contain a dispute resolution clause. That clause may provide that the homeowner is required to go to mediation with the builder or developer before filing suit. Mediation, in this situation, means a facilitated negotiation for settlement, led by a third-party neutral individual. Often, that individual will have experience with construction law, engineering, or building development.

Your contract may also have an arbitration clause. This clause would require that you go to arbitration against the builder or developer instead of litigation in a court of law. In arbitration, either one or three individuals – again, typically with experience in construction – will issue a final determination on your dispute. The advantage of arbitration is that it is usually quicker than litigation, saving you money on legal fees. A potential disadvantage, however, is that the arbitrator's decisions are probably final, that is, non subject to appeal. Tennessee has the unique requirement that an arbitration provision in a contract for the construction of residential property must be separately signed or initialed by the parties. Tenn. Code Ann. § 29-5-302(a).

Finally, take note of any aspects of the contract that shorten your statute of limitations or ability to make claims. It is not uncommon for construction contracts to shorten the amount of time that the homeowner has in which to file a legal claim against the builder. An attorney with experience in construction defect litigation in Tennessee will be able to carefully review the document for these sorts of limitations and tell you whether they can be enforced against you.

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