Illinois Supreme Court Supports Waiver of Implied Warranty of Habitability: In 1979, the Illinois Supreme Court held that a homebuyer received an implied warranty of habitability, as a matter of public policy. This meant that the home they bought must be built sufficient for its intended purpose as a residence; and the builder would be responsible for latent defects for a “reasonable” period of time after construction. Petersen v. Hubschman Construction Co., 76 Ill. 2d 31 (1979). By: Sue Schultz, Sandberg Phoenix & von Gontard P.C. resident not sold the home quickly (i.e., original buyer had not waived the implied warranty and would have had the benefit of the warranty, had they continued to live in the home when the latent defect was discovered. Redarowicz v. Ohlendorf, 92 Ill. 2d 171 (1982). The Illinois Supreme Court did hold, however, that the buyer and the builder could contract for the buyer to waive the implied warranty, but required that strict requirements be followed, to establish a knowing waiver for which consideration was given. Consideration has, frequently, been given in the form of an express warranty that was for a specified duration (typically, one or two years), and/or a lower purchase price for the home. In 1982, the Supreme Court expanded the benefit of the implied warranty to a subsequent purchaser who purchased the house from the original resident within a short period of time (in the actual case, approximately 1 year), because the builder was in the same position as they would have been, had the original In 2015, the 1st District Appellate Court ruled that the implied warranty of habitability protected a second purchaser, even when the original purchaser had executed a knowing waiver for which the builder provided consideration and the second buyer bought the house “AS IS” from the original buyer. Fattah v. Mirek Bim et al, 2015 IL App (1st) 140171, para. 41. In an opinion filed May 19, 2016, the Illinois Supreme Court reversed this ruling of the appellate court, and held that the implied warranty of habitability does not continue to apply to a second purchaser, if the original purchaser had given a proper waiver for which the builder provided adequate consideration. The Court noted that to hold otherwise would alter the contract for which the builder had bargained. This decision restores the basis for builders to 13 prudently enter express warranties, in consideration for a knowing waiver of the implied warranty by the original purchaser. The ruling is a good reason for all builders to review the contracts and practices you use, to ensure you are properly obtaining a knowing waiver of the implied warranty, if you do offer an express warranty and/or a lower purchase price, in exchange for a waiver of the implied warranty. It is an even better reason for builders who are not presently obtaining waivers to discuss the practice with qualified legal counsel. For those who build in Missouri, it should be noted that Missouri, also, recognizes the implied warranty of habitability – but did not join with Illinois in expanding the protection to a second buyer and limits the warranty to benefit only the first purchaser who had directly contracted with the builder. John H. Ambruster & Co. v. Hayden Company – Builder Developer, Inc., 622 S.W.2d 704, 705 (Mo. App. E.D. 1981) and Clark v. Landelco, Inc., 657 S.W.2d 634 (Mo. App. W.D. 1983). Similar to Illinois, Missouri allows a knowing waiver by the first purchaser; but strict requirements must be followed.
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