Indiana Skyline

Indiana

Protect Valuable Property Rights in the event of construction defects and the resulting damage to your condominium or townhome project.


Frequently Asked Questions

Q. WHAT WARRANTY RIGHTS DOES A HOMEOWNER HAVE AGAINST A BUILDER?

A. There is an automatic “common law” implied warranty that a newly constructed dwelling “will be free from defects that would substantially impair the use and enjoyment of the home”. See Russo v. Southern Developers, Inc., 868, N.E. 2d 46, 48 (Ind. App. Ct. 2003). Any significant defect is likely to breach that implied warranty.

There is also a statutory warranty that a builder can provide in lieu of the implied warranty. That statutory warranty is that the dwelling will be free from defects of any kind for two years, free from roof system defects for four years and free from major structural defects (defined as damage to loud bearing elements) for 10 years (Ind. Code  32-27-2-3).

That statutory warranty can be enforced by or on behalf of original purchasers and any other parties who acquired ownership of the dwelling during the period of the warranty in question  (Ind. Code 32-27-2-5).

Q. CAN AN ASSOCIATION ACT ON BEHALF OF UNIT OWNERS IN ENFORCING THOSE WARRANTY RIGHTS?

A. A condominium association, through its board, or its manager with board approval, can initiate legal proceedings with regard to common area defects.  They can also initiate legal proceedings on behalf of two or more unit owners regarding defects within the units themselves (Ind. Code 32-25-9-2).

In order for an association other than a condominium association to initiate legal proceedings on behalf of unit owners, the association may have to take an assignment of claims from the unit owners.

Q. DOES THE WARRANTY BREACH HAVE TO BE DISCOVERED DURING THE WARRANTY PERIOD?

A. As to the common law implied warranty, there is no requirement that the warranty

breach be discovered during any particular time period.  As to the statutory warranty, the breach of that warranty does not have to be discovered during the warranty period so long as with the exercise of reasonable diligence it could have been discovered during the warranty period.

Q. WHAT IS THE STATUTE OF LIMITATIONS PERIOD FOR INITIATING LEGAL ACTION TO ENFORCE THE COMMON LAW IMPLIED WARRANTY OR THE OPTIONAL STATUTORY EXPRESS WARRANTY?

A. An action to enforce the implied warranty must be commenced within six years after the breach was or in the exercise of reasonable diligence could have been discovered. As to the statutory express warranty, it is not clear whether the limitations period for enforcement is six years or 10 years, but it is arguable that it is 10 years from when the breach was or in the exercise of reasonable diligence could have been discovered.

However, regardless of whether the warranty in question is the common law implied warranty or the statutory express warranty, and regardless of when the warranty breach was or could have been discovered, in no event may an action for a latent injury to real property be commenced more than 10 years after completion (Ind. Code 32-30-1-5).

Q. HOW MUCH CAN A CLAIMANT RECOVER AS DAMAGES FOR BREACH OF WARRANTY?

A. The cost of repair or the reduction in value of the home as a result of the defects are

recoverable in an action based on a breach of the statutory express warranty.  It may also be possible to recover damages for loss of use, expert investigative costs, and other foreseeable consequential damages such as attorney fees (Ind. Code 32-27-2-10).  Arguably, the same damages are recoverable in an action based on breach of the implied warranty.  

Q. CAN A BUILDER OR ITS CONTRACTORS BE SUED FOR NEGLIGENT CONSTRUCTION?

A. Unless there is bodily injury or injury to property other than the work of improvement itself, a suit for negligent construction usually is not permitted in Indiana.  However, negligent construction will usually result in a breach of the common law implied warranty and/or the statutory express warranty.  So in most situations homeowners or an association which represents them can seek a remedy for negligent construction by pursuing a warranty breach claim against the builder.

Q. TO OBTAIN A RECOVERY IS IT NECESSARY TO INITIATE A LAWSUIT?

A. No.  In fact, a claimant with a construction defect claim is not permitted to initiate legal action without first giving the builder written notice describing the claim in reasonable detail. The builder then has 21 days from service of the notice of claim in which to respond.  The response can include a request to inspect.

Within 14 days after completion of the inspection, the builder must serve on the claimant an offer to remedy the defect, an offer to pay money, or a rejection of the claim  (Ind. Code 32-27-3-4).

The pre-suit notice of claim process can result in resolution of the claim and avoidance of a lawsuit.  However, where the defects are serious and the cost of repair is substantial, it may become necessary to start legal proceedings.

Q. WHY ARE LEGAL PROCEEDINGS OFTEN NECESSARY TO OBTAIN RESOLUTION OF A CLAIM?

A. There are two reasons why legal proceedings often become necessary.  The first is that there is a tendency on the part of the builder and its contractors to point the finger of responsibility at each other.  In that situation it often takes the pressure of legal proceedings for them to accept their responsibility.

The second reason is that in many, and probably most situations the builder and its contractors will look to their insurers to fund a settlement of the claim.  And the insurers rarely become involved in the dispute resolution process until legal proceedings have been initiated against their insureds.  

Q. IF LEGAL PROCEEDINGS ARE STARTED, HOW LIKELY IS IT THAT THE CASE WILL HAVE TO GO TO TRIAL?

A. Most cases are settled before trial, and construction defect cases are no exception.  So legal proceedings are often the only way of getting the builder and its insurers to resolve the claim.

Q. WHAT HAPPENS IF THE BUILDER HAS GONE BANKRUPT OR OUT OF BUSINESS OR SIMPLY DOESN’T HAVE THE ASSETS TO SETTLE THE CLAIM?

A. Most settlements are funded by developer and contractor insurers. The fact that the builder is out of business, or has even gone through bankruptcy, does not affect the insurance coverage that may exist for the insured’s liability.

Q. WHAT HAPPENS IF AN ASSOCIATION DOESN’T HAVE THE FUNDS TO PAY A LAW FIRM TO PROSECUTE ITS CLAIMS ON AN HOURLY BASIS?

A. Our firm may be willing to handle the matter on a contingent fee basis.  In that event, the attorney fee is limited to a specified percentage of the gross recovery.