Construction Defects: Understanding Your Purchase Contract

construction defectBefore construction began on your new home, a purchase contract was established between you and the builder. The agreement specified the expectations for the construction of the home, closing of the purchase, and likely included plans or detailed specifications to be followed during the building process. What happens, however, if the builder fails to meet the terms of the contact or the home is found to have construction defects? While you may have grounds to file a lawsuit against the builder, it important to first examine your contractual agreement, as it may potentially limit your available courses of action.

Implied Warranty of Habitability

As a purchaser of new construction, you generally have the right to expect that the construction will be completed in compliance within industry standards. Illinois courts have established over time an Implied Warranty of Habitability that offers a level of protection to new home purchasers who find latent defects in the home’s construction and have no other legal recourse. The scope of the implied warranty, however, is fairly narrow and applies only to defects that make the home reasonably unsuited for its intended use.

Express Warranty Offered by the Builder

Your contract may be accompanied by a clearly-defined guarantee of workmanship and materials known as an express warranty. As a condition of this type of warranty, you may be asked to waive your rights under the Implied Warranty of Habitability. In its place, an express warranty can clearly specify all of the terms and conditions of the builder’s potential liability. It may include specific types of covered construction defects, non-covered defects, your responsibilities for maintenance, and the procedures for filing a claim. Additionally, an express warranty typically limits the timeframe in which the purchaser’s rights are guaranteed, often one year.

Binding Arbitration Requirement

It is important to read your contract and express warranty carefully and to have them reviewed by your attorney prior to agreeing to their terms. Either document may include a clause waiving your right to file suit in a jurisdictional court. Instead, if the builder fails remedy a construction defect claim made under your warranty, you may only take your case before an arbitrator. An arbitrator is a third party with industry expertise hired to resolve disputes between purchasers and builders, and is often named by the builder in the contract or express warranty. By signing such a document, you agree that the arbitrator’s decision will be binding and that avenues of additional recourse will not be available.

A DuPage County Real Estate Lawyer Can Help with Your Purchase Contract

If you considering a new construction purchase or have questions about filing a construction defect claim, contact an experienced real estate attorney in Wheaton. Our knowledgeable team can help you review contracts, negotiate terms, ensure your rights are protected throughout the process. Call 630-665-2500 for a confidential consultation today.

 

Sources:

https://www.americanbar.org/content/dam/aba/directories/construction_industry_knowledge_base/meetings/2015-annual/an15-wg-paper.pdf

http://legal-dictionary.thefreedictionary.com/Binding+arbitration

Old Buildings and State-of-the-Art Technology: How to Have the Best of Both Worlds in Your CRE Investment Properties

DuPage County real estate attorneysAlthough simpler times have long since passed, a great many people still feel a sense of nostalgia when they step into an old building. Older, convertible buildings can also be a boon for real estate investors, as they are often priced below market value. Unfortunately, it can be difficult to retrofit these buildings to ensure they offer the state-of-the-art technology that most commercial real estate tenants want and need for their businesses. The solution? Find a way to have the best of both worlds. 

When is Retrofitting an Old Building Worth the Cost and Effort?

Not every building can or should be retrofitted. Consider New York’s Pennsylvania Station as an example. The building, though a historical and architectural work of art, had become dilapidated to the point that it was a safety hazard, and the cost of repair was prohibitive. Without another practical use for the space, retrofitting seemed not only impossible, but also pointless. There are buildings that can be retrofitted, however – ones that would greatly benefit the community, investor, and potential tenant.

Consider a building that can be converted into an eco-friendly, high-tech space in a high-demand location with little additional building space. So long as the possible return on investment (ROI) and demand are high enough, the cost of retrofitting could be well worth the investment. As an added bonus, the investor is able to walk away from the project, knowing they benefited their community and the environment by not requiring a new space or additional resources.

Taking the First Steps – Due Diligence and Determining the Potential ROI

Before deciding to retrofit an older building, investors are encouraged to conduct their due diligence. First, determine the cost of repairs (which can be especially costly in older buildings). Be sure to consider things like bringing the electrical wiring and building structure up to code. Then determine if retrofitting is even possible, and calculate its total cost. It is also important to know what your potential ROI on the property might be. To reach an answer on this, you may want to look at what similar structures have rented or sold for in the area. If no transactions like yours have recently taken place, consider looking at structures in areas with similar demographics. Lastly, ensure you have the assistance and knowledge of a skilled legal professional on your side. 

Contact Our DuPage County Commercial Real Estate Lawyers

Whether you are considering retrofitting an older space or would like to build something completely new, Stock, Carlson, Oldfield & McGrath, LLC is the firm to call. Seasoned and backed by more than 40 years of legal experience, our Wheaton real estate attorneys can assist you with every legal aspect of your next real estate project. Call 630-655-2500 and schedule your consultation wth our offices to get started today. 

Sources:

https://www.crainsnewyork.com/real-estate/commercial-real-estate-conundrum-investors-want-old-buildings-new-tech

https://www.smithsonianmag.com/arts-culture/how-nostalgia-plays-into-our-love-of-buildings-old-and-new-180947649/