WHAT ARE THE DAMAGES FOR CODE VIOLATIONS IN HOME CONSTRUCTION?
By Roger C. Justin

A recent case out of the Minnesota Court of Appeals, Noack v. Colson Construction, Inc., addressed the issue of what damages a homeowner can recover if construction of the home was not according to code. Noack is one of the many cases in the judicial system dealing with water intrusion into a residential dwelling. In Noack, the home was of stucco construction and evidence was presented regarding several code violations. These violations included the failure to use two layers of Grade D tar paper behind the stucco, the failure to install weep screeds, the failure to install appropriate flashing on the windows and doors, and failure to comply with minimum thickness requirements for the application of the stucco. Of course, the only way to remedy all of these violations would be to remove all of the stucco from the home and redo that application.

The homeowners and contractor defendants presented different evidence as to what damages the homeowners sustained as a result of these code violations. The homeowners brought forth evidence that to bring the home into compliance with code would cost between $220,000.00 and $240,000.00. The contractor defendants on the other hand, testified that although the construction was not up to code, only a small portion of the home actually suffered from water intrusion and only that portion needed to be repaired. The contractors put forth evidence that those repairs could be done for approximately $23,000.00. The jury came back with a finding that the homeowners had suffered $55,000.00 of damage as a result of the code violations. The homeowners appealed this decision to the Minnesota Court of Appeals, arguing that because there was a code violation the award, as a matter of law must include the amount necessary to fully remedy that violation. The Court of Appeals found otherwise.

The homeowners had argued that they were entitled to damages under two theories. First, that the contractors had been negligent. The Court held that even if the code violations constituted a breach of the contractors’ duty of care to the homeowner, a negligence action requires resulting damage to establish a claim of negligence. The Court of Appeals refused to find that the code violation standing by itself was such an injury.

The Court also addressed the question of whether the violation of Minn. Stat. § 327A.05 provided a remedy for the homeowners. Minn. Stat. § 327A contains the statutory warranties which follow each home to the homeowner. The Court looked at the language of § 327A which stated that “upon breach of any warranty imposed by § 327A.02 subd. 1 the vendee shall have a cause of action against the vendor for damages arising out of the breach, or for specific performance. Damages shall be limited to: (a) the amount necessary to remedy the defect or breach; or (b) the difference between the dwelling without the defect and value of the dwelling with defect.” The Court found that Minn. Stat. § 327A would have allowed the jury to find the amount of damages were the costs to remedy all violations, but that the statute “certainly does not entitle appellants to such an award.”

This decision may be helpful to contractors who find themselves in the same position as did the defendants in Noack. If damage is localized, or if there are code violations but no damage to their structure, contractors may be able to negotiate settlements with homeowners which stop short of replacement of the entire home exterior. Obviously, that could save the contractor quite a sum of money. However, the decision is not a surefire defense to an improper construction claim. For one thing, the homeowner could very well convince a court or jury that the reduction in the value of the home is in fact the amount it would take to fully replace the stucco. It may also result in more intense inspections of the home to find structural damage throughout, rather than identifying only one or two problem spots. Finally, Noack does nothing to address the question of what the Department of Labor and Industry’s position would be in relation to the contractors’ responsibilities in this situation. It is possible that the Department would agree with the Court of Appeals and find that agreeing to pay for just the damaged portion complies with Chapter 327A. It is also possible the Department would claim that violations of code must be remedied, and to remain licensed, the contractor must remedy those violations. Finally, it is also possible that this case will move on to the Minnesota Supreme Court and be modified there. In any event, the current status of Minnesota law does not contain an absolute obligation by a contractor to remedy or make payment to every homeowner for every code violation.

Roger Justin practices in the areas of employment, business, real estate/construction litigation.

This article is a general discussion of legal issues and is not intended to be legal advice. We would be pleased to review the specific facts and law regarding any given legal matter.