Business North - Business Law
		with Matthew Hanka

We remain optimistic in Northeastern Minnesota and Northwest Wisconsin with new employment and expanded economic development on the horizon. Despite the national economic downturn, people continue to relocate and build homes in this area.

With the arrival of spring, many local residents will consider building new homes or completing major home improvement projects. Why build now?

The crop of quality area builders, and the fact that national construction downturn has produced a general cost reduction in materials means this may be the perfect time for your project. Statutory warranties and consumer protection statutes are further advantages to home construction in Minnesota and Wisconsin.

In Minnesota

With regard to Minnesota’s protections, Minnesota Statutes Chapter 327A provide for mandated warranties covering essentially any new dwelling or major home improvement project. Minnesota’s statutory warranties provide that in any sale of a completed home, and in every contract for the sale of a completed home, the builder must warrant its work. I use the term “builder” loosely, but according to the warranty provisions, a “builder” includes any statutory “vendor” of a home, meaning any person, firm or corporation constructing homes for sale.

Minnesota’s statutory warranty periods begin from the statutory “warranty date,” the earliest of (1) the date of the initial owner’s first occupancy of the home (often signified by a “certificate of occupancy”); or (2) the date on which the initial owner takes title. Further, the statutory warranties survive the passing of legal title in the home. This means that a subsequent purchaser also may benefit from the warranties.

In general, just like a new automobile warranty, the effective period of a new home warranty depends on the type of defect for which repairs may be required. In Minnesota, the builder (or vendor) shall warrant that during the first one-year period after the effective warranty date, the dwelling shall be free from defects caused by faulty workmanship and defective materials due to noncompliance with building standards (MN. Stat. § 327A.02 subd. 1(a). Essentially, this one-year warranty is the broadest in scope, almost like a bumper-to-bumper warranty for an automobile. While the one-year period is broad in coverage, the warranted condition should be tied to some defect caused by a breach in building standards, including the Minnesota State Building Code.

The second mandatory Minnesota warranty for a new dwelling is a two-year period starting from the warranty date that covers defects caused by faulty installation of plumbing, electrical, heating and cooling systems due to noncompliance with building standards (MN. Stat. § 327A.02 subd. 1(b). The two-year warranty section grants mandatory coverage on specified items, and obviously is not as broad in scope as the one-year warranty.

The third mandatory Minnesota warranty for a new dwelling is a 10-year coverage that again begins from the warranty date. The 10-year coverage warrants that the dwelling shall be free from major construction defects due to noncompliance with building standards (MN. Stat. § 327A.02 subd. 1(c). The statute defines a “major construction defect” as actual damage to the load-bearing portions of a dwelling that affect, or are likely to affect, the use of the dwelling for residential purposes. Such issues may be serious structural problems requiring evaluation by a building professional or engineer.

To this point, the discussion has related to Minnesota new homes. But how about that addition you are planning at your existing Minnesota home? Depending on the scope of the addition, you could be in luck. Minnesota Statutes Chapter 327A also prescribes “home improvement warranties,” covering work involving major structural changes or additions to a residential building (MN Stat. § 327A.02 subd. 3. “Home improvement” means adding to, repairing, remodeling, altering, converting, or modernizing a residential building. The home improvement warranty periods essentially mirror those covering newly constructed homes.

The great majority of area homebuilders want to satisfy their customers. They recognize customer support is critical in a community where word-of-mouth advertising offers some of the greatest business rewards. As with most product warranties, the law recognizes a builder should be given an opportunity to evaluate and remedy the potential problem. The Minnesota statutory warranties address this by limiting liability for the construction issue to loss or damage reported by the customer in writing within six months after discovery of the problem (MN. Stat. § 327A.03(a). As with most large business transactions, timely communication with a builder about a potential home problem is very important.

In Wisconsin

In Wisconsin, formal warranties may be left to the discretion of the contracting parties. However, newer Wisconsin laws provide for a statutory framework for resolving complaints involving residential construction defects, generally called the “Right to Cure Law” (WI. Stat. § 895.07. The Right to Cure Law provides timetables and steps to help resolve disputes and misunderstandings between a consumer and contractor in a protective effort to avoid litigation. The law applies to written or oral contracts to construct a new dwelling or remodel an existing one.

Prior to commencing legal action against a contractor, a claimant must give the contractor a written notice of the alleged defect and an opportunity to repair it (WI. Stat. § 895.07(2)(a). The contractor then has 15 days to provide a written response in which the contractor may provide any of the following: (1) a detailed written rejection of the claim, specifying the reason for rejection; (2) a written offer detailing a proposed remedy to the defect at no cost, and a timetable for completion; (3) a written offer to settle by paying money; (4) a written offer that includes a combination of repair and money; or (5) a proposal for inspecting the dwelling.

Some builders and contractors provide warranties and protections over and above the statutorily mandated items described above. Nevertheless, Minnesota’s one-, two- and 10-year statutory warranties and Wisconsin’s “Right to Cure Law” provide peace of mind, and added incentive to utilize one of the area’s many talented contractors to build you a new home, or complete an addition at your existing home.

Even with these protections, however, one should use a reputable, licensed and insured contractor that can honor its statutory obligations.

Matthew H. Hanka is an attorney at Fryberger, Buchanan, Smith & Frederick, P.A., practicing in the areas of construction and insurance law and civil litigation. You can reach him in the firm’s Duluth office at 218-722-0861.

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