Proposed legislation threatens to increase costs of new homes
Bradley W. Andersen
is a shareholder with the multiservice law firm, Schwabe, Williamson and Wyatt.
On March 8, the Washington State senate passed ESSB 5550, which requires builders to provide 10-year warranties on new homes or remodels. These warranties would extend to subsequent purchasers, create new sources of liability for contractors, subcontractors, architects, engineers and other building professionals, extend when building professionals can be sued and expose builders to all "incidental and consequential damages." The bill now moves to the house.
Senator Brian Weinstein of Mercer Island, a trial attorney who sued companies in asbestos litigation, crafted the bill. Dubbed a "homeowners’ bill of rights," the bill actually threatens to harm those wishing to buy homes by dramatically increasing the cost of construction. This in turn will affect the quality of communities by reducing the number of families that can afford homes.
In a nutshell, ESSB 5550 mandates builders of new and remodeled homes to provide warranties lasting up to 10 years and extends from 6 to 10 years (and even longer) the deadline on when a homeowner can bring a lawsuit. Under the bill, a contractor would have to warranty the home or remodel from all defects for two years; defects in heating, cooling, electrical, plumbing and ventilation systems for three years; defects caused by water penetration for five years; and structural defects, which is defined to include the dirt around the home, for 10 years. These warranties would also transfer to subsequent homeowners, regardless of the number of times the home is bought and sold. Therefore, the builder would be contractually liable to parties not privy to the original contract.
In a "cart before the horse" fashion, Weinstein’s bill also creates a task force to investigate whether problems exist within the industry and to recommend ways to address them. Imposing such drastic changes in the law before determining that a problem exists seems short-sighted and imprudent. Although the bill appears to benefit home buyers, the reality is that the added and confusing regulations will only increase the cost of construction, which, in turn, will reduce the number of families capable of becoming homeowners.
Current law provides adequate protection for homeowners. In addition to breach of contract claims, the courts recognize an implied warranty of habitability to require builders to comply with applicable building codes and to build in a workmanlike manner, suitable for habitation. The courts have found that deviations from the fundamental aspects of the applicable building code can be a basis for a breach of warranty claim.
Moreover, nearly every home builder provides "new home" warranties. While some "bad apples" may exist, the vast majority of contractors build homes free from significant defects. Indeed, a recent report by the Washington Policy Center reveals only 1.5 percent of registered contractors were accused of producing shoddy work. This percentage shows that few problems exist within the industry, and exposes the gratuitous nature of ESSB 5550. This bill serves only to dramatically increase the cost of construction for everyone.
While minor legislative changes may help to protect consumers from unscrupulous or reckless builders – most of whom don’t survive anyhow – ESSB 5550 goes too far by mandating the most extreme and far-reaching warranties in the nation. The bill would subject good builders and their customers to a dramatic increase in insurance costs and costly litigation. One need only look to the fiasco in California to see how an increase in insurance costs can inflate the housing market to prevent families from buying homes.
Communities with family-owned homes are stronger in terms of economy, health and education. By increasing building costs, ESSB 5550 threatens to weaken our communities by reducing the number of families that can afford to purchase their homes. Home builders are also a huge source of employment. Higher building costs will mean less builders, which in turn will mean less employees.
Lawmakers should consider ESSB 5550’s consequences before implementing such a drastic and unnecessary change in the law.
The author can be reached at bandersen@schwabe.com or 360-905-1431.
