Is Contractual Privity Necessary for a Home Buyer to Assert a Claim of Breach of the Implied Warranty of Suitability Against the Developer?

The Colorado Supreme Court addressed this question in Forest City Stapleton, Inc. v. Rogers. (2017 CO 23).

In 1990, a group of Denver citizens formed the Stapleton Redevelopment Foundation to redevelop the old Stapleton Airport. In 1995, the Stapleton Development Corporation was formed and chose Forest City as the Master Developer. As the master developer, Forest City subdivided the land into lots and sold the lots to builders. The builders constructed and sold houses on the lots. Forest City did not build the homes, but it chose the builders and styles of homes to maintain the desired architectural and design aesthetic for the Stapleton community. It also reviewed whether proposed homes were consistent with the guidelines for the development. Forest City, in turn, sold the residential lot at issue in this case to a homebuilder, Infinity Home Collection (“Infinity”). Tad Rogers (“Rogers”) contracted with Infinity to build a home.

When Infinity bought the lot from Forest City, the infrastructure was not finished—no utilities, the lot was vacant, and still had to be graded for home construction. Rogers bought the finished property from Infinity. He paid extra for a basement. After Rogers moved in, he noticed that the sump pump was discharging frequently. Rogers hired engineers to investigate and discovered that the ground water level was higher than he thought. He believed that the high water table beneath his house, combined with calcite coming from the materials used to construct the roads, caused a buildup of calcite in the foundation drain around his house. That buildup made his basement uninhabitable and caused his sump pump to run more than expected. Rogers sued Forest City, claiming breach of the implied warranty of suitability, nuisance, and negligent misrepresentation. Rogers’s breach of the implied warranty of suitability claim alleged that Forest City warranted to him that his lot was suitable for a home with a finished basement, when in fact it was not. The jury rendered a verdict in favor of Rogers’s breach of the implied warranty of suitability claim, as well as his claims for nuisance and negligent misrepresentation.

Forest City appealed, and the Appeals Court was split. Both parties filed petitions for certiorari and the Supreme Court granted certiorari. The threshold question was whether contractual privity was necessary for a home buyer to assert a claim for breach of the implied warranty of suitability against the developer. The Court held that breach of the implied warranty of suitability was a contract claim, therefore, privity of contract must be present. Here, Rogers did not have privity of contract with Forest City, so he could not pursue a claim of breach with Forest City.

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