On May 19, 2016, in Fattah v. Bim, the Illinois Supreme Court held that a subsequent purchaser could not assert a claim for a breach of the implied warranty of habitability where the initial purchaser of the home had previously waived that right (2016 IL 119365 (2016)).

Mirek Bim was the owner of Masterklad, Inc., a business that developed single family homes in Illinois. In 2005, Masterklad constructed a home that contained an area of dirt and gravel underneath a sloped patio. A retaining wall was built around the patio to contain the fill. In 2007, the house was sold to Beth Lubeck. Attached to the real estate sales contract was a "Waiver and Disclaimer of Implied Warranty of Habitability" where Lubeck waived the implied warranty of habitability in exchange for an express one-year warranty.

In 2010, Lubeck sold the house to the John Fattah. In 2011, part of the retaining wall gave away, and a portion of the patio collapsed. Fattah filed a complaint against Bim alleging that Bim breached the implied warranty of habitability by constructing a patio with latent defects.

The circuit court found that even though the patio wall had latent defects, Fattah could not recover because Masterklad had executed an enforceable waiver of the implied warranty of habitability with Lubeck. Fattah appealed. The appellate court reversed the circuit court, finding that Lubeck's waiver did not preclude Fattah from asserting a claim for a breach of the implied warrant of habitability. The defendants appealed.

The Illinois Supreme Court found that extending the implied warranty of habitability to a second purchaser despite a valid waiver of the implied warranty by the first purchaser places too high a burden on the builder of the home. The builder would have no way of knowing when the home was resold, and that liability for the latent defect has reappeared. In this case, extending the implied warranty of habitability to Fattah would mean that Bim paid the price to obtain the waiver from Lubeck by providing an express warrantybut faced liability anyway.

In addition, the court was concerned that allowing an implied warranty that had been waived to extend to a second purchaser would ensure that no builder would enter into waiver agreements in the future, eliminating a commonly used practice in the industry. The court clarified that a second purchaser may receive the benefit of an implied warranty of habitability when acquiring the home during the warranty period, but not when there is a valid, bargained-for waiver by the first purchaser.

The Illinois Supreme Court reversed the ruling of the appellate court and affirmed the circuit court's judgment in favor of the defendants.

This Illinois Supreme Court decision should come as welcome news to builders and developers in Illinois, who can now continue the common practice of negotiating for waivers of implied warranties in their contracts of sale.

The appellate court's ruling had effectively rendered these waivers useless. The supreme court's reversal of the appellate court decision affirms the validity of a waiver of the implied warranty of habitability by refusing to revive the implied warranty even where the subsequent purchaser was unaware it had been waived.

For more information on implied warranties in construction contracts in Illinois, see State Q&A, Construction Laws and Customs: Illinois: Warranties.