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By Jason G. Schutte

The implied warranty of habitability(herein warranty) protects the initial buyer of a new house from latent defects that would render the house not reasonably fit for its intended use.[1]  A central concept and justification for creation of the warranty was the Illinois Supreme Court’s observance that buyers of newly constructed houses have little opportunity to inspect a home and that they must rely on the skill and integrity of the builder-vendor of the house.[2]

Our Supreme Court further asserted that a buyer has a right to receive  what he has bargained for and what the builder-vendor has agreed to construct and convey to the buyer – “a house reasonably fit for use as a residence.”[3] The Supreme Court stressed that the warranty arises from the contract for the sale of the property and by execution of the sale agreement between vendor and vendee.[4] Essentially, the warranty is an implied covenant by the builder-vendor that the house/residence which he contracted with the purchaser to build/convey is reasonably suited for its intended use.[5]

Our Supreme Court has stated that the warranty can be waived and such waivers are not against public policy.[6] The court has also stated that the warranty can be extended to a second purchaser of a house.[7]

In the case at hand, Lubeck was the first purchaser of a house in 2007. Lubeck waived any right to assert the warranty against Masterklad, Inc., the builder of the house. Defendant Bim was president of Masterklad. Lubek sold the house to plaintiff Fattah “as is” in May of 2010.[8] In February of 2011 parts of the retaining wall around the rear of the patio of the house gave away, resulting in portions of the patio collapsing.[9] Plaintiff Fattah filed a one count complaint against Bim (Masterklad had been voluntarily dissolved) asserting violation of the warranty.

The trial court dismissed the case, finding that allowing such an action to proceed would violate the policy favoring enforcement of knowing waivers.[10] The Appellate Court reversed.[11]

Analysis by Supreme Court

The Supreme Court noted that plaintiff Bim was not simply seeking to recover damages that would have been available to Lubeck, the first purchaser, but rather the plaintiff was “seeking to recover more than what Lubeck would have been entitled to”  since Lubeck had waived the right to assert a cause of action under the warranty.[12] The court noted that extending the warranty under these circumstances would “significantly alter the burdens and expectations of defendants and would be inequitable.”[13]

The court noted that the builder/vendors of the property who sells a home with a bargained for waiver of the warranty had given consideration exchange for the waiver.[14] Extending the warranty to a second purchaser in the face of a valid waiver of the warranty would result in the builder/vendor losing the financial certainty it had bargained for and assumed it had obtained.[15] A builder/vendor would have a no way of knowing when a latent defect might appear, thus creating liability.  Moreover, in such a case of Lubeck, the builder/vendor might perform under the express warranty provided, and face liability anyway.  This creates and unreasonable situation.[16]

Further, allowing the warranty to be revived at the time a subsequent sale would render such a waiver of the warranty meaningless, ensuring that builder/vendors would not enter into such agreements in the future; these agreements being expressly approved by the court.[17] 

Hence, the Illinois Supreme Court held that a valid bargained for waiver of the implied warranty of habitability between a builder/vendor and a first purchaser prevents a subsequent purchaser from pursuing a cause of action under the implied warranty of habitability against that builder/vendor.

[1] Fattah v. Bim, 2016 IL 119365 ¶ 19;

[2] Id.;

[3] Fattah ¶19 citing Petersen v. Hubschman Const. Co., 76 Ill. 2d. 31 (1979);

[4] Fattah ¶20;

[5] Fattah ¶20;

[6] Fattah ¶21;

[7] Fattah ¶ 1;

[8] Fattah ¶¶4-7;

[9] Fattah ¶7;

[10] Fattah ¶9;

[11] Fattah ¶11;

[12] Fattah ¶¶28-29;

[13] Fattah ¶28;

[14] Fattah ¶29;

[15] Fattah ¶30;

[16] Fattah ¶30;

[17] Fattah ¶33.

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