Real Estate Contracts - Fitness and Suitability Flashcards
What is the implied warranty of fitness or suitability?
Who may enforce this warranty?
The implied warranty of fitness or suitability applies to defects in new construction. It protects against latent defects (i.e., defects that are not discoverable from a reasonable inspection) and warrants that the new construction is safe and fit for human habitation.
In most jurisdictions, both the initial purchaser and subsequent purchasers may recover damages. In other jurisdictions, only the initial purchaser can enforce this warranty.
What is the duty to disclose defects?
Most jurisdictions impose a duty on the seller to disclose material defects to the buyer.
Material defects are defects that substantially impact the:
- Value of the property;
- Desirability of the property;
OR
- Health and safety of its occupants.
General disclaimers (e.g., “as is”) do NOT satisfy the seller’s duty to disclose defects.
(note: this is part of the reason why in the torts MEE, the guy who sold and no longer occupied his house was liable to the pedestrian when slate flew off the roof.)
If A conveys to B; C challenges B that he owns the land; B successfully defends against C; is A liable to B under covenant of warranty?
No, because the covenant of warranty requires defense only against suits that turn out to be meritorious.
The covenant of warranty includes a promise by the covenantor to defend on behalf of the covenantee any lawful or reasonable claims of title by a third party. So if the grantee had lost the suit, she could have recovered her legal costs (and the value of the property) from the grantor.
But ironically, by winning against the adjoining owner, the grantee lost her right to recover from the grantor. When she won versus the neighbor, she established that the adjoining owner’s claim was without merit. At that point, the grantor had no obligation to reimburse her for defending this now-known-to-be-valueless claim.
