Home buyer's bill still needs some tweaking

Rocky Mountain News Editorial

March 29, 2007 

      House Bill 1338 is the latest weapon in the home buyers' (and their lawyers') ongoing battle with homebuilders.

      The measure, which cleared the House on preliminary passage Wednesday, is salvageable. But in its present form it goes too far in redressing the balance of power.

      According to Scott Sullan, a well-known homeowners' attorney, the bill is needed because builders frequently force their customers to sign waivers forfeiting their right to sue for damages that they should be entitled to collect under the Construction Defect Action Reform Act of 2003.

      The bill would effectively void all such waivers as being against public policy. That's fine, but the builders argue persuasively that the bill goes much farther than that.

      First, it would apply not only to future purchase contracts but retroactively, up to six years back. That appears to violate the state constitution's prohibition against ex post facto laws that would impair existing contracts.

      More important, the bill would effectively eliminate the express warranty builders offer home buyers now. By creating "implied," unspecified warranties, it would turn every little bit of buyer's remorse into an opportunity to sue.

      Builders, like the manufacturers of automobiles, computers and appliances, offer specific but limited warranties now.

      They have to, or their liability would be extended beyond all reason. For example: Supposing Abraham Zapruder, the only person to film the assassination of John F. Kennedy, had discovered later that through a flaw in manufacturing, no frames could be developed. Should he have been entitled to sue Kodak for the lost millions he could have earned from the sale of his film? No. His only remedy would have been getting his money back for the cost of the Kodachrome II safety film.

      If manufacturers were liable for implied warranties, they couldn't afford to be in business. And neither could homebuilders.

      This bill would inevitably drive up the cost of homebuilders' insurance and, consequently, the price of dwellings. In that regard, this so-called consumer bill becomes anti-consumer.

      To be sure, proponents have produced plenty of evidence regarding outrageous, even unconscionable, waivers that some homebuilders require buyers to sign at closing. (Free advice: Don't walk into the closing without having reviewed a copy of the warranty in advance.)

      But the waiver problem could have been solved by a floor amendment offered Wednesday. One part would have repealed the power to override existing contracts. Another paragraph said that any waiver affecting the notice-of-claim process required by the construction-defect law of 2003, or the damages available under it, "shall be void as against public policy."

      That would have taken care of the only problem that bill backers insist they mean to target. Regrettably, the amendment was defeated.

      To be sure, the bill could have been worse. The bill's original draft gave expanded rights not only to the original buyer, but subsequent owners. That provision was removed in committee.

      The bill will move to the Senate after final passage in the House. We hope the Senate succeeds where the House failed, and amends the bill to make it reasonable.