Oregon’s Implied Warranties of Habitability and Reasonable Workmanlike Construction When residential property has construction defects, be it a single-family residence, townhome, or condominium, the owner has a number of potential remedies against a number of potential parties. One of the most significant and important of these remedies is a claim for breach of an implied warranty. What is an implied warranty? An implied warranty is a term that is not expressly written into a contract, but rather is added to a contract by courts to address an important issue. In the landmark Oregon case of Yepsen v. Burgess, 269 Or. 635, 640-41 (1974), the Oregon Supreme Court decided that it was important to protect purchasers of new homes, and implied a warranty of reasonable workmanlike construction and a warranty of habitability into all contracts for sales of new homes. What do these implied warranties mean? When a contractor or developer builds a new home for sale to the general public, the sale is deemed to carry with it an implied warranty that the house is constructed in a reasonably skillful manner and is fit for habitation. This means that the seller of the new home warrants that the home is built in accordance with industry standards, and that the home meets the ordinary, normal standards reasonably to be expected of homes of comparable kind and quality. In essence, this means that the home was built properly and should be free of defects. Courts nationally have repeatedly held that water leakage into a residence or its exterior walls constitutes a breach of both the implied warranty of reasonable workmanlike construction and the implied warranty of habitability. Why are these implied warranties important? These implied warranties are a form of strict liability, meaning that it is not a defense for the builder to claim that he used reasonable care, or any degree of care, in constructing the home. In order to prevail on an implied warranty claim, the homeowner need only show that the implied warranties exist, and that there are defects in the home which breach these warranties. Also, because these implied warranties arise under the contract of sale between the parties, a prevailing homeowner can recover his or her attorneys’ fees if the contract of sale has an attorney fee provision in it. What can prevent an owner from succeeding on an implied warranty claim? The most important defense the builder has to an implied warranty claim is the statute of limitations. A statute of limitations sets the end date by which a lawsuit can be filed, and if it is not filed by that date, the claim is lost forever. Under Oregon law, a breach of implied warranty claim has a six-year statute of limitations. Absent active concealment of the defects by the builder, this six-year period runs from the date of the breach of the contract. Because the defects are usually present when the sale agreement is signed, the six-year period likely begins to run on the date of sale of the home, even if the owner is entirely unaware that the home has defects. Accordingly, it is critical to get a property examined by a qualified professional well before this six-year period expires. That way, if problems are discovered, the proper legal proceedings can be initiated before the implied warranty claims expire. Another potential barrier to an implied warranty claim is that the express warranties provided under the Oregon Condominium Act likely supersede the implied warranties in condominium cases. This means that a project developed under the Oregon Condominium Act would not be protected by any implied warranties, although an Oregon appellate court has not formally decided this issue. However, many multi-family housing projects in Oregon are not developed under the Oregon Condominium Act, and thus are protected by the implied warranties of reasonable workmanlike construction and habitability, provided the claims are timely made. Further, no Oregon appellate court has yet determined whether the implied warranties are available to subsequent purchasers of a home (parties who did not buy directly from the builder/developer). Because of these complicated legal issues, it is always a good idea for a homeowner to seek qualified legal counsel very early in the construction defect process. A breach of implied warranty claim can be a valuable right for a homeowner with construction defect issues, but this claim can be easily lost if the homeowner does not act promptly and correctly to secure this right.
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