Home builders in Iowa lost an important State Supreme Court ruling last month when the judges ruled 6-0 that subsequent home buyers may recover damages for a breach of an implied warranty.
Craig Schoenfeld, general counsel for the Iowa HBA, says the crux of the case is that Iowa has two competing warranty laws. The state has a 15-year law that is a broad product liability statute that covers structural items such as the foundation.
Iowa also has a five-year implied warranty that covers items such as nail holes and window leaks. The general understanding was that this law only pertained to the original purchaser of a home.
Schoenfeld says lower courts have pointed to both laws to justify rulings for several years, so a clarification was needed.
A district court and appellate court ruled on summary judgment for the builder. However, the State Supreme Court ruled that the homeowners had a right to have an implied warranty case heard. The judges sent the case back to the lower court for trial. At press time, a trial date had not been set.
“This ruling expands the window of opportunity that builders could be open to a lawsuit,” Schoenfeld says. “The court’s ruling can hold sway in lower court decisions,” he adds.
The case centered around Robert and Beverly Speight, who bought their home on Aug. 1, 2000. The Speights were the third owners of the home, which was custom built in 1995 by Walters Development Co.
According to the opinion, sometime after purchasing the home, the Speights noticed water damage and mold. A building inspector determined that the damage was the result of a defectively constructed roof and defective rain gutters. Finally on May 23, 2005, the Speights filed the implied warranty suit against Walters.
The court essentially ruled that the statute needed to be updated to better reflect today’s mobility in which owners of homes change hands more frequently.