Unconscionability of Construction Warranties

William O. Kessler, Edmonds Lawyer

About a week ago, the Washington Supreme Court released an important opinion regarding construction warranties for new homes. See Tadych v. Noble Ridge Construction, 2022 WL 15027140 (Wash. 2022). The Court held that a contractual one-year time limit for a new home buyer to bring a construction defect suit was substantively unconscionable and, therefore, void and unenforceable. This opinion may muddy the waters of many construction warranties.

Tadych v. Noble Ridge – The Facts

The Tadychs entered into a written contract with Noble Ridge Construction Inc. to build them a custom home. The contract included a “warranty” provision which said that any claim, including claims for latent defects, were barred one year fromthe date of first occupancy or from the date of completion, whichever is earlier.

The Tadychs occupied their new home in April of 2014. Therefore, under the contract, the Tadychs had until April 2015 to file any claim arising from the construction project. In February 2015, after the Tadychs experienced some home shift and unlevel flooring, they hired a litigation expert to review the architectural plans and photos. The expert thought the ventilation system did not conform to code. The Tadychs forwarded this concern to Noble Ridge Construction, which assured them that their build was “on the leading edge of… science.” Id at *3. Through 2016, as the Tadychs experienced additional issues with the house, Noble Ridge repeatedly promised to do additional repairs. Regardless, they failed to perform any such repairs.

In 2017, after several months of silence from the contractor, the Tadychs hired another construction expert to inspect their home. The expert concluded the house suffered from significant construction defects. Soon thereafter, the Tadychs filed suit. Both the trial court and the court of appeals dismissed the Tadychs’ claim based on the one-year contractual limitation period.

Tadych v. Noble Ridge – The Takeaway

The Washington Supreme Court held the one-year contractual limitation period substantively unconscionable and, therefore, void and unenforceable. In their analysis, the Court compared the contractual limitation against an otherwise-existing statutory right, RCW 4.16.310. Under RCW 4.16.310 an aggrieved party would be able to bring their claim within six years of substantial completion of construction or of termination of the construction services, whichever is later. Comparatively, under the construction contract provision in Tadych, any claim, including claims for latent defects, were barred one year from the date of first occupancy or from the date of completion, whichever is earlier.

The Tadychs brought suit 3 years after discovering the construction defects. Under RCW 4.16, their suit was timely. The court held “the one-year limitation provision provide[d] a substantially shorter period than the Tadychs were otherwise statutorily entitled to, benefiting the contractor at the expense of the rights of the homeowner.” Id at 8. Included in their unconscionability analysis, the Court noted that (1) the Tadychs were laypersons; (2) Noble Ridge drafted the contract; (3) no separate consideration was given for the warranty limitation; (4) and that the warranty was not conspicuous.

Considerations

On one hand, perhaps a one-year warranty is adequate. Freedom-of-contract would say yes – the contract says what it says. If the Tadych warranty had been a one-year warranty with a proviso that any lawsuit needed to be filed within say 6 months after the one year expired, maybe the result of this case would have been different. On the other hand, perhaps one year is too short a warranty for new construction. Some contractors specifically ask buyers not to notify them of minor issues, because otherwise they would be inspecting properties multiple times for such matters.

Regardless of your view, the Supreme Court’s ruling in Tadych cries for the legislature to provide some minimum level of protection – namely, warranty length – to both confirm which construction warranties remain effective, and to further incentivize builders to perform adequate quality work.

For any questions regarding construction warranties, email us at info@beresfordlaw.com, or call us at (425) 776-4100

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