The Michigan Court of Appeals recently concluded, for the first time, that a licensed residential builder may be sued under the Michigan Consumer Protection Act (Act).

The facts of the case are relatively straightforward.

Robert and Marilyn Forton (Homeowners) executed a written contract with Michael Laszar (Builder), a licensed residential builder, for the construction of a residential home. Within a short time after moving into the home, Homeowners noticed several problems and defects in the construction of the home, such as sagging floors, distorted doorways, and cracking drywall. Structural engineers concluded that the problems were caused by structural inadequacies in the foundation support and flooring system, weaknesses in the floor framing, improper ventilation in the crawl space, causing excessive moisture build-up and/or improper installation of the truss system used to support the front entryway.

The Homeowners sued the Builder alleging both breach of contract and violation of the Act. The Homeowners claimed that the Builder failed to complete the home in a "good and workmanlike manner" and the Builder unilaterally deviated from the blueprints approved by the Homeowners.

In Forton v Laszar the Michigan Court of Appeals ruled, for the first time, that a licensed residential builder may be sued under the Act. The Court concluded that the Builder violated the Act by unilaterally deviating from the blueprints approved by the Homeowners, and awarded the Homeowners damages and attorneys fees pursuant to the Act.

The Court reasoned that the Act is a remedial statute designed to prohibit unfair, unconscionable, or deceptive methods, acts or practices in the conduct of trade or commerce, and "trade or commerce" includes residential builders who construct and sell homes for personal family use. Thus, residential builders are subject to claims of unfair or deceptive trade practices under the Act. Whether a residential builder's conduct rises to the level of an unfair or deceptive act or practice prohibited by the Act must be made on a case-by-case basis, depending upon the facts of the particular case.

This ruling is consistent with Price v Long Realty, Inc., decided by the Michigan Court of Appeals in 1993, which held that the Act applies to licensed real estate agents whose conduct violates the Act.

The impact of allowing claims under the Act is that it enables home buyers to seek damages not usually available in simple breach of contract cases. Courts will only award attorney fees if they are proscribed by statute or provided for in the parties' contract. Typically, a building contract does not provide that the home buyer is entitled to attorney fees if he has to sue the builder. The Act has a specific provision providing for the award of attorney fees if the consumer prevails on its claim.

All licensed residential builders are now on notice: a dissatisfied homeowner may sue them for violation of the Act, and recover damages including attorney fees.

Originally appeared in the May 2000 issue of Building Business & Apartment Management.