The Illinois courts have held that under certain circumstances, it is possible to effectively waive the implied warranty of habitability on a dwelling. In the closing days of its September term, the Illinois Supreme Court agreed to decide Fattah v. Bim, a decision from the First District, Division Five which poses the question of under what circumstances such a waiver impacts subsequent owners of the property.

The house at issue was built in 2007 and purchased by a non-party to the lawsuit for $1.7 million. In the parties’ contracts, the buyer agreed to waive the implied warranty of habitability, and to instead rely upon an express limited one-year warranty included in the contract for her sole remedy. The contract provided that the disclaimer of the implied warranty would be binding upon the “Purchaser and their . . . successors, assigns, heirs, executors, administrators, and legal and personal representative.” Three years after buying the house, the original owner sold it to the plaintiff. The parties’ contract at that time provided that the plaintiff was buying the house “as is.”

Four months after the plaintiff moved into the house, the patio collapsed.

The plaintiff sued the developer/contractor, alleging that they had breached the implied warranty of habitability by delivering the house with latent defects which led to the collapse of the patio. The defendants responded with a motion for summary judgment, arguing that the waiver of the implied warranty signed by the original owner was binding on the plaintiff, and that the plaintiff had further waived the implied warranty when he bought the house “as is.”

In an affidavit attached to the motion for summary judgment, the developer/contractor asserted that he had met with the first owner around the time of the second sale and saw “crumbling and subsiding patio stones along the wall” and that the original owner was “well aware” that the retaining wall of the patio was collapsing. He further testified that the collapse of the retaining wall of the back patio “does not interfere with the home’s habitability.” The court denied the motion for summary judgment and the case proceeded to trial. During the trial, the home inspector who had inspected the home at the time of the second sale testified that the retaining wall had been built with 4-inch thick “block” wall with two hollow holes in each brick, as opposed to the 8-12 inch thick concrete that was needed. He explained that it would have been impossible to spot the problem before the collapse without removing some of the paving bricks on the retaining wall. At the close of the trial, the court found for defendants, holding that the combination of the first owner’s waiver and the second “as is” sale barred the plaintiff’s claim.

The Appellate Court reversed. The Court held that although waiver of the implied warranty of habitability is not barred by public policy in Illinois, an effective waiver must: (1) be conspicuous and include the words “implied warranty of habitability”; (2) fully disclose the consequences of the waiver; and (3) be brought to the plaintiff’s attention, and was, in fact, in the agreement of the parties. Given that the defendant could show none of that, and the plaintiff testified without contradiction that he was unaware of the first owner’s waiver when he bought the house, the Court held that there was no basis for finding that the first owner’s waiver was effective against the second. The Court held that the “as is” provision in the second sale contract was not sufficient to waive the implied warranty inasmuch as it didn’t include the three prerequisites discussed above.

The Appellate Court remanded the action back to the trial court for a factual determination on the remaining elements of the plaintiff’s claim for breach of the implied warranty for habitability.

Image courtesy of Flickr by Jim Kelly (no changes).