Construction defects are common occurrences in construction. Often, a party contracting for work requires a warranty against construction defects for a specific time. Warranties may be either expressly given or implied through operation of the law.
A contractual warranty provision typically provides a period in which the contractor has a duty to correct defects through supplemental performance. A typical warranty clause often covers defective work, materials and equipment, but excludes defects caused by abuse, alterations to the work, improper or insufficient maintenance, improper operation, or normal wear and tear. Normally, a contractor does not warrant the sufficiency of the plans prepared by design professionals and is only required to faithfully implement them. If provided in the contract, warranties may provide an exclusive remedy, prohibiting the owner from seeking monetary damages or replacement of major building systems.
New York General Business Law Article 36-B established implied warranties upon the sale of a new home. The Act's warranties include that the home will meet or exceed the “specific standards of the applicable building code”. If the code does not provide a relevant standard, the home must be constructed with workmanship and materials that meet or exceed locally accepted building practice standards. General Business Law § 777(3). General Business Law § 777-a(1) also provides the following assurances for new homes:
a. one year from and after the warranty date the home will be free from defects due to a failure to have been constructed in a skillful manner;
b. two years from and after the warranty date the plumbing, electrical, heating, cooling and ventilation systems of the home will be free from defects due to a failure by the builder to have installed such systems in a skillful manner; and
c. six years from and after the warranty date the home will be free from material defects.
Unless the parties indicate otherwise, the implied warranty does not extend to discoverable patent defects if the buyer inspected or refused to inspect the home prior to taking title. The warranty extends to goods sold incidentally with the home, such as refrigerators and stoves. The warranty applies only to “new” homes as defined under the act. It does not apply to “custom” homes, defined by NY GBL § 770(7), which are constructed on property already owned by the homeowner. Garan v. Don & Walt Sutton Builders, Inc., 5 A.D.3d 349 (2d Dep't 2004).
Before commencing litigation, the owner must provide the builder written notice and a reasonable opportunity to repair the defect. Furino v. O’Sullivan, 137 A.D.3d 1208 (2d Dep’t 2016). If a builder makes repairs, the limitation period is extended for one year after the last date on which repair work was performed. General Business Laww § 777(3).
Contractual warranties in New York construction contracts are governed by the six-year statute of limitation in CPLR 213. Unless the construction contract provides otherwise, an action for breach of contract can be commenced at any time within six years of substantial completion of construction.
Construction defects do not result in a forfeiture of a contractor's right to be compensated; they diminish the amount to which the contractor is entitled. Arc Elec. Const. Co. v George A. Fuller Co., 24 N.Y.2d 99 (1969). In general, the proper measure of damages for breach of a construction contract is the cost to either repair the defective construction or complete the contemplated construction. Haber v Gutmann, 882 N.Y.S.2d 780 (3rd Dep’t 2009). Where the cost of correcting a minor defect would be grossly disproportionate to the value of such work, the court may award damages based on diminution of value rather than the cost of correction. Jacobs and Young, Inc. v. Kent, 230 N.Y. 239 (1921). However, where a defect is so substantial as to render the building unusable, the proper measure of damages is the market cost of correcting and completing the work rather than the diminution in value. Rivers v Deane, 209 A.D.2d 936 (4th Dep’t 1994).
About Author
Sophie Wang graduated from the University of California, Berkeley School of Law in 2013, where she served as an editor of the Berkeley Business Law Journal. Read more.
Questions? Contact us today.
Related Articles
