It is no secret that building envelope construction defects are prominent throughout our region. This issue affects thousands of properties and multiple builders. These defects are truly latent, with no visual cues or outward manifestation of water infiltration. Homeowners often discover the defect when they see scaffolding at their neighbor's home and wonder if their home is similarly impacted. When invasive tests are finally performed, they often reveal a costly problem that in most cases requires removal and replacement of the entire building envelope, microbial growth remediation, window and door replacement as well as interior work. Real estate transactional practitioners and construction attorneys are left to navigate scopes of repair and sort through the shifting causes of action on behalf of the builders, subcontractors and the homeowners who are impacted.

Practitioners should be mindful of recent changes in the law affecting subsequent purchasers and spoliation. For those who purchased property from someone other than the builder (a subsequent purchaser), the landscape has improved, forcing contractors and builders to reassess the number and types of potential claims leveled against them. From the spoliation perspective, all parties must be especially mindful of new pitfalls relating to mere photographic evidence. Lastly, when considering whether to have an invasive moisture test performed, the Seller's Disclosure Law must be considered, along with timing concerns.

For builders and subcontractors, Conway v. Cutler, a case that eliminated the cause of action for breach of implied warranty of habitability for subsequent purchaser homeowners, served to curtail the number of available potential claims. Under Conway, subsequent purchaser families who had otherwise timely and viable claims, faced serious challenges and were discouraged from pursuing recovery because they lacked privity with the builder.

A Seat at the Table for Subsequent Purchasers

However, this landscape changed in August 2016 when the Superior Court in Adams v. Hellings Builders, held that fraud and claims under Pennsylvania's Unfair Trade Practices and Consumer Protection Law (UTPCPL) may be successfully asserted by third parties (including subsequent purchaser homeowners) against contractors who made misrepresentations to the original purchasers. According to Hellings, the absence of technical privity is not a bar to recovery when reliance is specifically foreseeable and damage proximately results. In this regard, courts have specifically determined that the existence of a third-party purchaser of property is foreseeable. The Hellings court held that when fraud creates or conceals a latent building envelope defect, transfer of the defective chattel or realty to a third party does not absolve the builder from liability for damages caused by the fraud. Instead, the focus turns to whether reliance on alleged misrepresentations such as, general advertisements, branded marketing materials, statements on a website, or statements in the original agreement of sale, were specifically foreseeable.