Home Construction Defects & Builder Negligence Lawsuits

Builder Negligence Lawsuits Filed Following New Home Construction Defects

Under Ohio law, the homebuilding industry is governed by general common law principles and Ohio statutory requirements. Builders are required to perform construction in a “good and workmanlike manner.”

They must use commercially reasonable standards and substantially perform under the terms and obligations of the contract with the homeowner. Since the passage of House Bill 383 in 2012, the good and workmanlike standard for residential construction is also codified into Ohio Revised Code chapter 4722, the Home Construction Service Suppliers Act (“HCSSA”).

Here, the Ohio Legislature has incorporated the standards of the Ohio Home Builder Association for residential construction work, which many times is a higher standard than the Ohio Residential Building Code.

Ohio law recognizes that homeowners are entitled to a well-constructed home, free from material defects that deviate from statewide industry standards published under the Ohio Administrative Code and the Ohio Home Builders Association.

Under the body of Ohio statutory and common law, the following causes of action and applicable statutes of limitations arise in the context of residential home construction:

New Home & Builder Fraud Claims

This cause of action can be used to hold the builder liable as an individual officer on behalf of his corporation. In order to prevail on a claim for common law fraud, a plaintiff must prove the following elements: “(a) a representation or, where there is a duty to disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d) with the intent of misleading another into relying upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance.” Russ v. TRW, Inc. (1991), 59 Ohio St.3d 42.

Home construction defect claims can be brought by any owner, so long as it is not time-barred by the statute of limitations of four (4) years from when the cause of action is discovered. R.C. 2305.09(C).

Builder & Contractor Negligence

Claims are based upon builder’s common law duty to construct the home in a “good and workmanlike manner.” This claim can be brought by any owner, so long as it is not time-barred by the statute of limitations of four (4) years from when the cause of action accrued. R.C. 2305.09(D).

In McMillan v. Brune-Harpenau-Torbeck Builders, 8 Ohio St.3d 3 (1983), the Ohio Supreme Court held that privity of contract is not a necessary element in an action in negligence against a builder.

Vendors of real property will be held liable for damages caused by home construction defects and their failure to build in workmanlike manner and this duty extends to both original and subsequent buyers.

Home Defect Fraud & Negligence

For both common law negligence actions and fraud actions, even if the contract with the home builder’s corporation has not technically been breached, the home builder himself, as an individual, can be held liable if he made misrepresentations on behalf of the corporation. This remedy also allows the corporate formalities to be disregarded if the corporation is underinsured or underfunded.

A corporation’s veil may be pierced and individual shareholders held liable when the following three conditions are present: The corporate form may be disregarded and individuals held liable for corporate misdeeds when (1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner to commit fraud or an illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to the plaintiff from such control and wrong. Belvedere Condominium Unit Owners Assn. v. R.E. Roark Cos., Inc. (1993), 67 Ohio St. 3d 274, 289

New Home Construction Defects

New home construction defects claims are based upon the written contract between the builder and owner, and therefore cannot be brought by successor owners who were not a party to the contract.

Effective September 28, 2012, the statute of limitations for written contracts in Ohio was reduced from fifteen years to eight years after the cause of action accrued. R.C. 2305.06. For causes of action that accrued prior to this date, the period of limitations is eight years from this date or the expiration of the previous limitations period of fifteen years, whichever occurs first.

Ohio uses the discovery rule for when breach of contract claims accrue. This means: (1) when the actual breach of contract or damage to real property occurs; or (2) when it is first discovered, or through the exercise of reasonable diligence should have been discovered, that there is damage to the property. Harris v. Liston, 86 Ohio St.3d 203 (1999). This allows Ohio new home buyers to bring actions for defects that are hidden at the time the home is built.

New Home Warranty Breach

Claims are based upon written statements by a builder who promises to correct work or who warrants his work in any way (a new home warranty). This claim can only be brought by the original owner unless the warranty expressly permits successor owners to have rights to pursue claims. Breach of warranty claims are based in contract, so the statute of limitations for written contracts is applicable to breach of warranty claims.

Ohio Consumer Sales Practices Act (CSPA)

CSPA claims are based upon deceptive consumer practices or unconscionable acts. Claims under the CSPA can only be brought by the owner that contracted with the builder for construction of the new home. The CSPA is not applicable to the purchase of manufactured or spec homes. Effective August 31, 2012, R.C. 1345.01 was amended by the Ohio Legislature to specifically exempt transactions involving home construction service contracts as defined in the R.C. 4722.01.

Only actions for homes built before this date can employ the remedies of the CSPA. The statute of limitations is two years from the occurrence of the act for economic damages, which can include treble damages. The statute of limitations for rescission of a new home contract in violation of the CSPA is two years from the discovery of the violation. Attorney fees are available under the CSPA if the builder knowingly committed an unconscionable or deceptive act.

Home Construction Service Suppliers Act (HCSSA)

Effective August 31, 2012, the HCSSA (R.C. 4722.01 et seq.) covers residential construction on one, two, three family dwellings and accessory construction incidental to dwelling in contract amounts exceeding $25,000.

Claims under the HCSSA arise from failure to construct in a “workmanlike manner” and can only be brought forth by the owner who contracts with the supplier of the home construction services. The HCCSA did not change the time limits in which to bring actions.

Violations under the HCSSA which arise from negligence, fraud or breach of contract must be brought forth within their respective limitations periods as discussed above. The HCSSA limits the home construction defects damages remedy to economic damages plus $5,000.

One other remedy available to an owner for violation of the HCSSA is rescission of the contract. Any action for rescission, revocation of the transaction must occur within a “reasonable time” after the owner discovers or should have discovered the ground for it and before any substantial change in condition of the subject of the transaction. R.C. 4722.08. Thus, there is no specific time period stated, and it is up to a court to decide what is a reasonable time after discovery.

If your new home has been constructed with defects, and have questions about the legal remedies available to recover property damages in Ohio, contact The Lyon Firm at (800) 513-2403. You will speak directly with Mr. Lyon, and he will help you answer critical questions regarding new home construction defects.