Warranties come in two flavors, express (written in the contract) and implied, either by court decision or by state law. Forty-six states and the District of Columbia enforce an “implied” warranty on nearly every construction project. All states enforce the terms of any express warranty in the contract.
In Minnesota, nearly every residential contract has to include three paragraphs of express warranty: a one year guarantee on materials and workmanship, two years on plumbing, electrical and HVAC and ten years on any "major construction defect". Minnesota also implies a guarantee that work will comply with the building code. Minnesota’s Housing Statutory Warranties Act also:
- Prohibits waiving or disclaiming these warranties.
- Covers both the first owner and subsequent owners for a period of the warranty.
- Any contractor who ignores the law can be assessed a penalty of up to $10,000.
- Claims for breach of warranty must be made in writing within six months of discovery.
- Breach of warranty entitles the owner to sue for repair or collect the cost of repair.
- On home improvement jobs, the warranty begins running when work is completed.
With that background, consider the case
of Liberte Construction v. Dustin Smith, decided last month by the Minnesota
Court of Appeals.
Wind and hail damaged Dustin Smith’s
Brooklyn Park home, including roofing, siding and gutters. Liberte bid $62,755 to make repairs. The contract included a warranty.
You decide. Does this warranty comply with Minnesota’s Housing Statutory
Warranties Act?
LIBERTE DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, EXCEPT AS SPECIFICALLY EXPRESSED HEREIN.
Liberte warrants that for the one-year period from and after the substantial
completion of the Scope of Work, the home improvement shall be free from
defects caused by faulty workmanship or defective materials due to
noncompliance with building standards. This Agreement and warranty shall not be
assigned except by or with the written permission of Liberte.
Smith signed the agreement and made
a $19,000 initial payment. Liberte started work.
A month into the job, Smith and the
owner of Liberte did a walk-around inspection. Smith found some problems with siding
and roof tiles. A month later, the City of Brooklyn Park did its first
inspection. Cardboard shims under siding corners had to be replaced with proper
shims. A second inspection a month later found no correction. A month later, a
third inspection found proper shims. But a section of siding was loose.
Over ten months after the contract completion
date, a city inspector returned to the property for the fourth time. This inspector
found siding had been installed with drywall screws, not siding screws. One
corner of the siding was loose. The inspector also found more cardboard shims. Again,
the job failed inspection.
Liberte agreed to start repairs that
month and asked for payment upon satisfactory completion. Smith wouldn’t agree
to let Liberte do any more work on his home. Liberte filed to foreclose on its $35,719.18
mechanic's lien and for breach of contract. Smith counterclaimed, citing breaches
of contract, statutory warranty, express warranty, and implied warranty.
At trial, Smith's expert testified
that work Liberte did was so defective that the only proper repair was to start
over. The trial court (1) awarded $12,000 to Liberte for breach of contract; (2)
denied recovery on the express warranty because the job never got to substantial
completion; (3) awarded Smith $28,697.75 in damages for Liberte's breach of
implied warranty; (4) awarded Smith nothing for breach of an express warranty and
(5) quashed Liberte's mechanic's lien.
What’s Wrong with this Case?
I don’t question the result. Smith
got what he paid for. A defective roofing and siding job at a $60,000 discount.
My complaint: Neither Liberte nor Smith played by the rules. Minnesota’s Housing
Statutory Warranties Act lays out a set of procedures designed to avoid
disputes like this. From the court’s report, neither Liberte nor Smith did what
the law requires: (1) Liberte’s contract omitted the required warranty terms.
(2) Smith didn’t give written notice when he discovered defects. (3) Liberte
didn’t inspect those defects within 30 days. (4) The dispute wasn’t referred to
Minnesota’s list of qualified neutrals for resolution. (5) Smith kicked Liberte
off the job before substantial completion.
My advice: To avoid headaches and unnecessary
expense, follow the rules. That begins with a good contract. The best resource
is Construction Contract Writer. The trial version is free.
