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Problems developed at a condominium complex several years after construction because air and water infiltration was damaging interior flooring and finishes. The condominium association filed suit against a number of the parties involved in the design and construction of the complex, alleging that the parties had breached the implied warranty of habitability. The condo association attributed the air and water infiltration to latent defects in the design, materials, and construction of the buildings that were not discovered until 2007.

The architect had completed the drawings in 2000 and, although not discussed in the Appeals court’s decision, the statute of limitations for filing a negligence (tort) claim against the architect had already run. The estimated cost of repairs exceeded $4 million, and the association alleged that the developer-seller, the original general contractor, and the successor general contractor were all either bankrupt or out of business, and thus incapable of satisfying a $4 million award.

The trial court dismissed the claims against several of the parties, including the architect, and the condo association appealed. The Appeals court affirmed the dismissal of the claim against the architect, providing a comprehensive discussion of the warranty of habitability and its application to design professionals. Board of Managers of Park Point at Wheeling Condominium Ass’n v. Park Point at Wheeling, LLC, 2015 IL App (1st) 123452.

 

The Appeals court began by explaining that the implied warranty of habitability arose because under the common law doctrines of caveat emptor (“buyer beware”) and merger, a new home buyer had little or no recourse against a builder who erected a defective residence. The buyer took the property at his own risk and if he failed to discover defects before taking possession, caveat emptor prevented a law suit against the builder. Under the merger doctrine, all agreements between a new home seller and buyer merged in the deed, and once the buyer received the deed, he had no basis for a complaint unless the deed included an express warranty.

However, the doctrine of caveat emptor is based on an expectation that the buyer and seller have comparable skill and experience and bargaining positions. Creating an implied warranty of habitability for the sale of a new residence was a judicial response to the fact that by the middle of the twentieth century, this was no longer true. Home building methods and governmental regulations had become more complex, builders had grown in scale and become specialized, and the ordinary home buyer did not have the skill or training to make a meaningful inspection and discover latent defects.

The term “habitability” is unfortunate because it implies that the warranty is satisfied as long as the house is capable of being inhabited. The warranty is actually more extensive, as it encompasses the holding that a home buyer has a right to receive what was bargained for and what the builder-seller agreed to provide — a house that is reasonably fit for its intended use as a residence.  The court listed the three public policy reasons for the implied warranty: (1) home buyers are unusually dependent on the competency and integrity of the builder; (2) the buyer is making the largest single investment of his or her life; and (3) fairness dictates that the repair costs of defective construction should be borne by the builder-seller who created the latent defects.

Turning to the issue of whether an architect could be held liable under the implied warranty of habitability, the court noted that Illinois and a number of other jurisdictions had already addressed this issue and had concluded that a design professional cannot be sued under an implied warranty theory for providing professional services. The court cited cases in several other jurisdictions where courts have declined to find that design professionals impliedly warrant that their work will be merchantable, fit for a particular purpose, or fit for its intended use. While such implied warranties are customary in the sale of goods (i.e. materials and equipment), most jurisdictions have rejected their application to professional services. Design professionals preparing drawings and specifications for construction projects are performing a professional service, they are not selling goods.

The court quoted extensively from a Minnesota case, where claims were filed against the architect after an addition to a municipal building allowed water to seep into the basement. Distinguishing the architect’s role from that of a builder or contractor, the Minnesota Supreme Court stated:

“… we must bear in mind that the (architect) was not a contractor who had entered into an agreement to construct a house for the (owner), but was merely an agent of the (owner) to assist him in building one. The responsibility resting on an architect is essentially the same as that which rests upon the lawyer to his client, or upon the physician to his patient. The undertaking of an architect implies that he possesses skill and ability, including taste, sufficient to enable him to perform the required services at least ordinarily and reasonably well; and that he will exercise and apply in the given case his skill and ability, his judgment and taste, reasonably and without neglect. But the undertaking does not imply or warrant a satisfactory result.

Architects, doctors, engineers, attorneys, and others deal in somewhat inexact sciences and are continually called upon to exercise their skilled judgment in order to anticipate and provide for random factors which are incapable of precise measurement. The indeterminable nature of these factors makes it impossible for professional service people to gauge them with complete accuracy in every instance… Because of the inescapable possibility of error which inheres in these services, the law has traditionally required, not perfect results, but rather the exercise of that skill and judgment which can be reasonably expected from similarly situated professionals.

Adoption of the city’s implied warranty theory would in effect impose strict liability on architects for latent defects in the structures they design. That is, once a court or jury has made the threshold finding that a structure was somehow unfit for its intended purpose, liability would be imposed on the responsible architect in spite of his diligent application of state-of-the-art design techniques.” City of Mounds View v. Walijarvi, 263 N.W.2d 420 (Minn.1978).

The Appeals court pointed out that the principle that an architect does not warrant or guarantee perfection in his or her plans and specifications is long standing, citing to a Michigan case from 1898. Chapel v. Clark, 76 N.W. 62 (Mich.1898).   The holding in Chapel was that an architect is only expected to exercise ordinary skill and care, and performing to that standard sometimes results in defects or unsafe conditions.”

Extension of the Warranty of Habitability

The Park Point condominium association based their argument that the court should allow a claim against the architect on a previous Illinois case, Minton v. The Richards Group of Chicago, 452 N.E.2d 835 (1983). In Minton, the implied warranty of habitability was extended to the painting subcontractor who caused the alleged latent defects because the buyers had no recourse against the insolvent builder-seller. The condominium association contended that the work of architects is similar to the work of general contractors and subcontractors, noting an architect can create latent defects in a completed building and that the public policy underlying the implied warranty of habitability is to protect new homeowners from latent defects by holding the responsible party liable.

The Appeals court disagreed however, finding that the Minton holding should be limited to subcontractors who were involved with the physical construction or the construction-sale of the property. The court emphasized that the implied warranty of habitability of construction arises between the builder-seller and the buyer because of their “unusual dependent relationship.” The architect’s role in the design of the condominiums did not create such a relationship. The fact that the builders of the condominium complex were insolvent did not justify expanding the Minton holding to an entirely different category of defendant.

Comment:

The Appeals court summarized the case law into two principles. First, the implied warranty of habitability of construction is traditionally applied only to those who engage in construction and sales of new homes. Second, design professionals perform their services pursuant to contracts that set out their obligations, and courts have consistently declined to heighten their express contractual obligations by implying a warranty of habitability of construction.

The Appeals court specifically reject the condo association’s argument that design professionals and builders are similar because both are already subject to the implied obligation to perform their tasks in a “workmanlike” manner. Citing to Black’s Law Dictionary, the court noted a workman is a person who is “employed in manual labor, skilled or unskilled.” Thus the term “workmen” does not include professional persons such as design professionals, and design professionals are not obligated to perform their professional services in a workmanlike manner. Architects and engineers should be careful not to agree to contract provisions that require them to perform their services in a “good and workmanlike manner.” While the phrase is seemingly innocuous, a court could find that it imposes a higher standard than the professional standard of care.

 

 

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 18, No. 3 (March 2016).

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