May 23, 2016

Supreme Court Victory for Illinois Home Builders Preserves Home Warranty Agreements

On May 19, the Illinois Supreme Court issued its unanimous decision in Fattah v. Bim, siding with a team of FaegreBD lawyers in a case of first impression impacting Illinois home builders, new home buyers and the residential construction industry at large.

FaegreBD stepped in 48 hours before the deadline expired to further appeal an adverse ruling by a lower appellate court. The Supreme Court’s decision preserves contractual liability protections for Illinois home builders, containing housing costs for buyers.

FaegreBD represented Mr. and Mrs. Bim, residential construction company owners who were sued for breach of implied warranty of habitability (IWH) when a latent defect in one home’s patio materialized. The first owner had validly waived the IWH under Illinois law when she bought the home. Plaintiff John Fattah was the second owner when the defect arose and claimed that the IWH extended to him despite the first owner’s waiver. This issue had never before been decided by an Illinois court.

The trial court enforced the waiver against Fattah, who appealed but failed to serve the Bims with notice of the appeal. The appellate court reversed the trial court’s ruling, holding a subsequent purchaser can still sue a home builder for breach of the IWH even after the first purchaser waived that warranty. That ruling eliminated a key risk-management device home builders use to set new home prices and would have necessarily led to increased prices in Illinois.

Besides recognizing that the appellate court’s ruling undermined the industry practice of exchanging express written warranties for waivers of the IWH, FaegreBD’s team found that the Bims’ due process rights had been violated because the Bims were never served with the appeal and had no notice of the appellate court’s decision reversing their pro se trial victory.

In a public policy-driven decision the Supreme Court reinstated the trial court’s verdict, holding that the IWH may not be extended to a second purchaser when there is a valid, bargained-for waiver of that warranty by the first purchaser. The Court described the alternative as inequitable and unreasonable.

Shawn Doorhy, associate in FaegreBD's construction & real estate advocacy team, led the defense team representing the Bims, which included attorneys Trina Taylor, Harmony Mappes, Nick Nelson, Julie Landy, Brian Lynch, Kevin Morrow and Carrie Sear.

Read full opinion.

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