Illinois Court Clarifies Law Governing Claims for Breach of Implied Warranty of Habitability against Design Professionals, Suppliers, and Subcontractors When Builder or Seller is Insolvent

The Illinois Appellate Court for the First District issued Sienna Court Condominium Ass’n v. Champion Aluminum Corp., clarifying the prior decision Minton v. The Richards Group of Chicago concerning the availability of certain defendants to claims for breaches of implied warranty of habitability. 2017 IL App (1^st) 143364 (citing 116 Ill. App. 3d 852 (1983)). The First District considered three consolidated appeals brought by a condominium association seeking damages for defects in the design and construction of a condominium building. 2017 IL App (1^st) 143364. Two of the Sienna Court appeals addressed the viability of claims for breach of the implied warranty of habitability against defendants that were not the builder or the seller. Id. at ¶ 48. The First District ruled that a property owner may not assert a claim of breach of implied warranty against design professionals and material suppliers who did not perform construction work. Id. at ¶¶ 66, 69. However, a property owner may assert a claim against a subcontractor of an insolvent developer or general contractor.  Id. at ¶ 81.

The plaintiff, relying upon the First District’s opinion in Minton, asserted that modern Illinois common law is in derogation of the principle that a breach of implied warranty of habitability claim may only to be asserted against a builder or seller. Id. at ¶ 19. The plaintiff argued that the class of defendants liable for breach of implied warranty of habitability was previously expanded by the First District in Minton. Id. (citing 116 Ill. App. 3d 852 (1983)). In Minton, the First District permitted a property owner to proceed against a subcontractor under an implied warranty of habitability theory because the property owner had no other recourse where the builder was insolvent and the defect was caused by the subcontractor. 116 Ill. App. 3d at 855. The Minton court reasoned that the “purpose of the warranty is to protect purchasers” and “an innocent purchaser” without recourse against the “builder-vendor” should be able to look to the subcontractor that performed inadequately. Id. at 854-55.

The plaintiff in Sienna argued that Minton should be applied to permit claims against design professionals and material suppliers where the property owner has no other recourse. 2017 IL App (1^st) 143364, ¶ 19. The First District rejected the plaintiff’s arguments and refused to expand the class of defendants subject to a breach of implied warranty of habitability claim. Id. at ¶¶ 68-69. The Court stated that Illinois common law clearly provides that design professionals and suppliers are not subject to claims for implied warranty of habitability where they did not partake in construction. Id. (citing Bd. of Managers of Park Point at Wheeling Condo. Ass’n v. Park Point at Wheeling, LLC, 2015 IL App (1st ) 123452). The First District refused to use the narrow holding in Minton, which provided for a claim against subcontractors, to negate the holding in Park Point that any entity or person that does not take part in construction, including design professionals and material suppliers, cannot be defendants to a property owner’s breach of implied warranty of habitability claim. Id. at ¶¶ 64-69.

Despite finding that subcontractors may be suitable defendants under Minton, the First District clarified the focus for determining when subcontracts are suitable defendants to a claim  for breach of implied warranty of habitability. Id. (citing Minton, 116 Ill. App. 3d 852; 1324 W. Pratt Condo. Ass’n v. Platt Constr. Group, Inc., 2013 IL App (1st) 130744). The court states that the claim in this instance is permissible not because the property owner did not have an alternate method of recourse, but because the builder or seller was insolvent. Id. As a result, in Sienna Court, the availability of recovery from insurers and an escrow fund did not preclude the breach of implied warranty of habitability claim against the subcontractor. Id. at ¶¶ 80-81.

By issuing the Sienna Court opinion, the First District has made clear that it will not deviate from the set limitations on who is an appropriate defendant to a claim for breach of implied warranty of habitability.