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A Word of Caution to Owners of New Homes

A Word of Caution to Owners of New Homes

Did you know that by simply filing a claim under your new home warranty, you could be giving up forever your right to sue your home builder for the defects in your new home? A recent New Jersey Appellate Court decision, Frumer v. National Home Insurance Company, confirmed that consequence.

You remember closing on your new home, although looking back it may seem like a blur. Amid the stress and uncertainty of committing to buying a home, you signed what seemed like an endless stream of documents. One of the documents you may have signed was an acknowledgment that you received a “Home Buyers Warranty Booklet,” or similar booklet containing the terms of your new home warranty. Then when you got home, despite your best intentions, you never got around to reading that booklet closely.

This is exactly where the plaintiffs in Frumer found themselves when they discovered major defects in their “new” home shortly after moving into it. After finding water in the basement, leaky gutters, problems with the windows, heating and air conditioning, Mr. and Mrs. Frumer decided to file a claim with the private company who provided their new home warranty. Unhappy with their treatment by this private company under the warranty, the Frumers retained an attorney and instituted litigation against the builder of their new home.

However, the court quickly ruled that the Frumers were prohibited from bringing any litigation based upon these defects. The court based its decision upon language contained in the Home Buyers Warranty Booklet. The Frumers had signed an acknowledgment that they had received this Booklet at closing. The Booklet stated that the Frumers’ new home warranty contained an “election of remedies.” This means that Mr. and Mrs. Frumer could have either filed a claim with the company who carried their new home warranty or instituted litigation but not both. When they filed their warranty claim, the court ruled that the Frumers forever waived their right to sue the builder in a court of law based upon the defects in their new home. The Frumers were forced to settle with what relief was offered under their home warranty.

Whether your new home warranty contains an “election of remedies” is based upon the language contained in your particular warranty. However, New Jersey courts have sent a clear message – they will not save new homeowners who unknowingly waive their right to sue in court by filing a warranty claim.

Should you find yourself in the Frumers’ unfortunate situation, carefully read your new homeowner’s warranty before filing a claim. Consider consulting an attorney to assist you. With careful planning and legal analysis, you may maximize your opportunity to make your new home “new” once again.

– John P. Ciocco, Esquire

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