On November 5, 2012, the Pennsylvania Superior Court reversed
and remanded back to the Bucks County Court of Common Pleas a case
of first impression addressing the reach of Pennsylvania's
implied warranty of habitability for residential home
At issue in Conway v. The Cutler Group, Inc.
(2012 PA Super 242) was the question of whether the implied
warranty of habitability extends beyond the initial user-purchaser
of a home to a second or subsequent purchaser. The appellate court
held that it does.
The Conways purchased a home from another owner and subsequently
experienced water infiltration into their bedroom years later. Upon
professional inspection, it was determined that the infiltration
was the result of various construction defects. The Conways
filed suit against the builder for breach of the home's implied
warranty of habitability.
The implied warranty of habitability, first recognized by the
Pennsylvania Supreme Court in 1972 (Elderkin v. Gaster,
288 A.2d 711 (Pa. 1972)), is meant to protect the consumer by
balancing the relationship between the experienced builder and the
average home purchaser. It warrants that the home is constructed in
a "reasonably workmanlike manner and that it is fit for the
purpose intended-habitation." Indeed, it removes certain
latent construction defects from the doctrine of caveat
emptor and shifts the risk of those defects to the builder.
(See Elderkin, 776-777).
In Conway, the builder argued that the implied warrant
only extends to the initial purchaser and not subsequent owners of
the home. Furthermore, he contended that the alleged defects
did not render the home unfit to live in.
The various Courts of Common Pleas across Pennsylvania have been
divided on the question of whether subsequent purchasers can pursue
claims against builders for breach of implied warranty of
habitability. However, Courts of Common Pleas decisions are not
binding on the Superior Court.
The Superior Court found that the implied warranty is not a
contractually dependent remedy, but rather it exists independently
even absent a contract between the builder and current homeowner,
who may not be the initial user-purchaser.
The court points out that it is not only the new home purchaser
who relies on the skill of the builder to construct a suitable
living unit. Second and subsequent purchasers also implicitly
trust that the home is habitable and free from latent construction
defects. Indeed, regardless of how many times the title changes
hands, the court found that the same assurance exists that the home
is free from hidden structural defects.
Furthermore, the court opined that it would be inequitable to
re-shift the risk of a potential latent defect from the builder
back onto the second or subsequent homeowners – particularly
when hidden defects may not manifest themselves until years
It is important to point out, however, that the Conway
decision does not advocate unlimited liability against the
homebuilder. The plaintiff still has the burden to show that
the alleged defect is latent, attributable to the builder's
design or construction and affects habitability. Moreover, all
homeowners must commence their claims within 12 years after the
completion of construction before the statute of repose
A like kind exchange is the transfer of real estate which involves the sale of real property and a subsequent purchase of replacement property by a taxpayer without triggering capital gains taxes from the initial sale.