August 9th, 2011 at 11:41 pm
One of the most common misunderstandings I hear in our business relates to the required warranty given by a builder to the buyer of new construction. On many occasions, including in lawsuits filed against us, we hear that our agents promise a buyer that any problems with the home will be fixed by the builder because they are required to give a 10 year warranty on the home. Unfortunately, that statement is not true, and is instead a misunderstanding of the law in this area. In truth, the law works as follows: First, the California Civil Code provides for a mandatory ONE YEAR warranty on fit and finish items. That law includes a dispute resolution process which gives the builder the opportunity to make repairs before the buyer can file a lawsuit. It is set forth in Civil Code sections 895 through 945.5, which can be found on the CAR website. This warranty and dispute resolution process is incorporated into the CAR new construction agreements. The 10 year period, on the other hand, is not a warranty, but is instead a statute of limitations. It was passed to ensure that a builder would not be subject to claims for construction defects forever. As a result, Civil Code section 941 states that no action may be brought against a builder “more than 10 years after substantial completion of the improvement but no later than the date of recordation of a valid notice of completion.” So, the 10 statute is actually a protection for the builder, cutting off claims against it. It is not a protection for the buyer, and is clearly not a warranty. Therefore, please make sure you never represent to a buyer that they get a 10 year warranty for new construction. They either get the statutory 1 year warranty, or a more extensive warranty that would have to be set forth in their contract with the builder/seller.
As always, please let us know if you have any questions.
Like what you see here? Sign up for more! Our free e-newsletter informs you of listings in your community, insider real estate tips, the latest in home trends, and more.
