Illinois Appellate Court

Clarifies When

Homeowners Can Sue Sub


Implied Warranty of

Habitability when GC

goes Broke

    In 2004 general contractor Platt-Construction Group hired EZ Masonry as a subcontractor on a condominium project in Chicago. The developer went out of business in 2005. When condo purchasers noticed water leaks around windows, ceilings, and vents, the association sued in 2008, initially seeking damages from the developers and Platt. In December 2009 the plaintiffs added EZ Masonry.

    The claim was breach of an implied warranty of habitability. The case traveled up to the court of appeals and back down more than once. At issue here was whether such a claim could be brought against the subcontractor when the GC was still solvent, and if so, when did the two-year statute of limitations apply? The appeals court ruled that the proper time to determine the solvency of the GC was not the date of the filings of the original complaint (in 2008), but the filing of a fourth amended complaint (in 2013).

    Public policy created the implied warranty of habitability, the court reasoned, and start the “clock” running based on the insolvency of the general contractor would be unjust. Latent defects such as leaks may be discovered months or years after they purchase the property.

    EZ Masonry also argued that the GC Platt was not actually insolvent because it was still a corporation in good standing and had been able to fund its defense of litigation that was five years old. “Insolvency” means a party’s liabilities exceed the value of its assets, and it has stopped paying debts in the ordinary course of business.