Iowa Supreme Court Limits the Implied Warranty of Workmanlike Construction
The Iowa Supreme Court, in Rosauer Corporation v. Sapp Development, L.L.C., held the implied warranty of workmanlike construction does not apply to the sale of vacant land. 856 N.W.2d 906 (Iowa 2014). As such, the developer could not maintain an action against the seller of the lot without a dwelling.
Rosauer Corporation (“Rosauer”) is a home building and landscaping corporation. It purchased vacant land from Sapp Development, L.L.C. (“Sapp”), upon which Rosauer intended to develop town homes. After purchasing the vacant land, Rosauer discovered the land had soil compaction problems that required Rosauer to perform significant landscaping, grading, and fill work to make the land developable.
Rosauer sued Sapp for damages based upon multiple theories, including breach of the implied warranty of workmanlike construction. The trial court dismissed the lawsuit, and the Iowa Court of Appeals affirmed. Rosauer then appealed to the Iowa Supreme Court. The Iowa Supreme Court affirmed. The court held, because the land Rosauer purchased did not contain a residential structure, Rosauer could not establish a claim for breach of an implied warranty of construction.
In the context of construction contracts, Iowa recognizes an implied warranty of workmanlike construction that applies to house construction. This warrants that a builder constructed a home in a good and workmanlike manner, and the home will be reasonably fit for its intended purpose. To establish a claim under this implied warranty, a plaintiff must demonstrate several elements, including an intent to use a structure as a home, a purchase from a builder-vender who performed construction with an intent to sell, and a structure that is unfit for its intended purpose or defectively built. The Iowa Supreme Court noted these elements contemplate land that includes a structure. Accordingly, Rosauer could not satisfy these elements because the land Rosauer purchased was vacant.
The Iowa Supreme Court further noted the public policy of the implied warranty is “to redress the disparity in expertise and bargaining power between consumers and builder-vendors in recognition of the difficulty of discovering latent defects in complex modern residential structures.” The court found this public policy did not apply to land sales between “developers able to protect themselves through express contract terms and simple soil tests.”
A full copy of the opinion is available here.