Alabama Homeowner FAQ: Construction Defect Rights & Builder Accountability

Your home is your most valuable asset. It is essential to be well-informed and thoroughly prepared when protecting your rights against a bad builder. If you purchased a new home and suspect construction defects, or if your builder has been unwilling to respond to your repair requests, we may be able to help you.

Contact McGrath Law Firm, Alabama's Homeowner Advocate

1. No, it is not.  This is by far the biggest misconception we hear over and over and over.  Every new house comes with a one (1) year warranty. However, that does not mean your builder has no responsibilities at the end of the one (1) year.  

2. As long as you report a condition or defect to the builder within the one (1) year period, the builder is responsible for completing the work or curing the defect even after the one (1) anniversary of your purchase.  If you report a defect under the warranty to the builder and they fail to complete or cure the issue, you then have up to another 9 years in which to bring a claim to force the builder to pay the cost to cure.  

3. In addition to warranty claims, homeowners can bring claims for serious defects for up to 9 years after completion.

4. For defects that constitute building code violations in new homes, homeowners can bring claims for up to nine (9) years after the sale. 

5. Builders give many excuses why they are not responsible for fixing your home, and most of their excuses have no legal justification. McGrath Law Firm lawyers focus exclusively on construction and consumer law and have been holding builders responsible for houses they built up to nine (9) years after construction.  We use our years of experience in construction and law to ensure you get the fairest and most just recovery to cure the defects and damage in your home.

By law, all new homes in Alabama come with warranties.  Even if you don’t receive a written warranty of any kind from your builder, the Alabama legislature has enacted a pretty good set of laws to hold a builder accountable for defects.  

For example, new homes in Alabama come with a "warranty of habitability" for the original buyer.  This warranty comes with every new home built in Alabama, excluding manufactured homes and some custom-built homes.

A warranty of habitability provides that each home built in Alabama shall be fit for its intended purpose, that is, being used as a residential dwelling for at least one year. Historically, our courts have determined what makes a home "livable" or "habitable" on a case-by-case basis.Under Alabama warranty of habitability law, a defect generally must become apparent within one year of the home being occupied. At that point, the homeowner must notify the builder (best done in writing) of the defect. 

After notifying the builder, the homeowner has up to six (6) more years after their purchase to bring a warranty claim against the builder. 
Similarly, a home buyer can also bring a breach of contract claim against the builder for up to six (6) years after the purchase. 

Homeowners can also bring claims for negligence, wantonness, misrepresentation, and fraud depending on the circumstances. There is a two (2) year statute of limitations for those claims which can expire as early as the second anniversary of the house being sold. Under certain circumstances, the statute is tolled (or delayed) when the defect or fraud was concealed or not readily apparent to the homeowner.

Not as much as you think. Generally speaking, the statutory or common law warranties and remedies provided by the Alabama legislature were adequate (not great), but they gave homeowners a somewhat level playing field to help them pay for defects. 

Builders feel the warranties and remedies provided by the State of Alabama are far too generous, so they began issuing their own “Limited Warranties” full of fine print, limitations, and exclusions not found in the remedies provided by the State. When a builder provides a home buyer with a “One (1) year” or “Limited” Warranty as part of the purchase, the first thing those “warranties” do is take away all of the rights and remedies the Alabama legislature provided and replace them with a small fraction of the same rights/remedies. What small coverage is provided by these “Limited” warranties is subject to all kinds of limitations and exclusions that did not exist before. 

Frankly, calling these documents “warranties” at all is entirely misleading, and they should be called “waivers”, “exclusions” or “releases”. 

No, it’s not. “2-10” or “Structural” warranties are even more misleading than “Limited warranties” provided by builders and should be rejected when buying a home if possible. 

“2-10” warranties hold the builder responsible for the small scope of things covered by their “Limited warranties” within the first year after purchase, but from years two (2) through ten (10), these warranties release the builder from any further responsibility… forever. -That’s why the builder is willing to pay the cost of providing the “2-10” warranty even though you didn’t ask for it. 

But here’s the worst part: Not only do the terms of the “2-10” warranty purport to let your builder walk away from any liability after just one (1) year, but the only coverage provided by the “2-10” people is defects rendering the residence “unsafe or unsanitary”.  That’s a very, very high bar. -So high, we’ve only seen a “2-10” or “structural” warranty company cover a handful of times out of hundreds of claims. 
To top it off, the “2-10” and “Structural” warranty companies usually require you to pay $250-500 to even file a claim under the warranty. They then use your money to hire one of their captive engineers to briefly inspect the house, declare it “safe and sanitary,” and deny your claim. 

We do not suggest making a claim under a “2-10” or a “Structural” warranty until you understand all of your legal rights. Several local and regional builders have actually taken the initiative to pay the fee and file “2-10” claims when they realize a serious, expensive claim exists in an attempt to avoid liability for the cost of repairs they rightfully owe.

The lawyers at the McGrath Law Firm know all of your rights under Alabama law and how to avoid the hidden and harsh limitations and exclusions in all the builder “Limited”, “2-10” and “Structural” Warranties being sold with new homes. Contact us to ensure you know your rights before assuming the builder is not responsible for a costly defect.

Maybe, but not often.  Alabama is a “buyer-beware” state when it comes to buying a used house, and the buyer’s rights with a used home are drastically limited compared to buying a new home.  There are very limited instances where the buyer of a used home can hold the original builder responsible. 

It is very important to have any used or pre-existing home thoroughly inspected and to delay a closing until you have had an opportunity to have follow-up inspections by specialists (if needed) for structural, environmental, electrical, and HVAC issues. 
We offer inexpensive, initial consultations to educate and advise prospective new and used home buyers. 

The Alabama Home Builders Licensure Board (AHBLB) is located in Montgomery, Alabama. It issues licenses to home builders and enforces the Board’s regulations. The Board has a website (www.hblb.alagama.gov) where consumers can look to make sure their builder is properly licensed. The Board has a complaint procedure for the reporting of illegal contractors.   

The Board also receives and investigates consumer complaints against licensed builders. The Board that reviews complaints is made up of numerous builders and one municipal building official. If the Board finds one of its member-builders guilty of a violation, it can fine or suspend the builder. 

There are times when the disciplinary Board can be very helpful to a homeowner with a serious defect or expensive claim. But there are also times when the Board’s decisions are not helpful and can actually hurt homeowners while protecting unscrupulous builders. 
We can advise you on the benefits and downsides of filing complaints with the AHBLB. 

The Recovery Fund is available for homeowners who hired a licensed builder to build a home.  If the homeowner receives a judgment against that builder but is unable to collect on the judgment, the homeowner can recover up to $30,000 toward the judgment amount, comprising actual economic damages from the Homeowner Recovery Fund.   The homeowner must notify the Board by certified mail within 10 days of filing a civil complaint against the licensed builder and provide the Board with a copy of the complaint filed in court. Upon receipt, the Board will provide the homeowner with a copy of the Homeowner’s Recovery Fund Regulations, which includes the procedure for making a claim against the fund.

If the builder was not licensed by the Board when the work was undertaken, the homeowner is not eligible. 

Source: www.hblb.alagama.gov

Outside Madison County and throughout most of North Alabama, there are no inspection departments, including Limestone, Marshall, Morgan, and Jackson Counties. We can’t count how many builders outside these counties answer lawsuits saying, “there is no building code in our county”. 

In truth, every house built anywhere in Alabama is required to meet the building codes, whether they are inspected by a county or city inspector.  

Yes, anyone building homes for sale in Alabama is required to be licensed by the Alabama Homebuilders Licensure Board.  In addition, anyone contracting to work on an existing house (additions, remodeling, repairs, etc.) for over $10,000 is also required to have a home builder's license from the AHBLB. 

We cannot stress the importance of verifying your builder is properly licensed when buying a house or hiring anyone to work on your existing home. The scourge of illegal, unlicensed, and uninsured builders is widespread and appears to be getting worse.   
Before you contract with a builder, we strongly recommend you verify that they have a current license on the HBLB website and obtain certificates of liability insurance directly from their insurance agents for not only your builder, but also each subcontractor they hire.

Short answer - NO! However, Building Departments like the City of Huntsville, City of Madison, City of Athens, City of Decatur, and Madison County all require home builders to be insured before issuing a building permit. If in doubt, home buyers can call these building inspection departments and verify their builders are licensed and insured. 
In that same vein, if your home is being built in one of the jurisdictions with a building inspection department, almost all of the inspection departments also require proof of insurance from the subcontractors working on your house – which is also important. 
Everyone must know builders are not required to carry general liability insurance by the Homebuilders Licensure Board.  It is equally important for everyone to know that there is no state license or insurance requirement for subcontractors, either. 

We cannot tell you how heart-wrenching it is when homeowners facing huge repair bills discover their builder has no insurance coverage.  These days, if a builder has any assets, they are almost always hiding them behind fancy-sounding company names to protect those assets from being seized in a lawsuit. These families might have avoided foreclosure or bankruptcy if they had taken a few easy steps to verify their builder had liability insurance when he built their house. 

Any builder that hesitates to provide you with a liability insurance certificate sent directly from their insurance agent that lists your name should be avoided at all costs.  The same applies for all of their subcontractors, too.  Any legitimately insured builder can provide you with these certificates by calling their insurance agency.  

McGrath Law Firm strongly recommends that you read your entire sales/construction contract thoroughly, even multiple times. These contracts are written by teams of lawyers representing builders and real estate agents, so naturally, most of the fine print is not for your benefit.  Primarily, we recommend that you search the contract for an arbitration clause and “Limited Warranties” filled with legalese, exclusions, and limitations.  If your builder wants you to sign these kinds of contracts, we recommend you refuse to sign the contract unless they remove or cross out these terms.  Any builder who insists on an arbitration clause and a complicated warranty should be viewed with great scrutiny. No two things prevent more homeowners from holding builders responsible for their mistakes than arbitration clauses and warranties filled with exclusions and waivers.

There are pros and cons to each: 

Builders generally resist fixed-price contracts.  They commonly choose inferior materials and cheaper, unskilled labor to increase their profit margin.  While homebuyers may feel more secure knowing the firm price of their new home, this type of contract can be particularly dangerous due to its potential for construction defects.  If you are considering a fixed-price contract, the contract should list as many details and specifications as possible to prevent shortcuts, substitutions, and cheap building practices. Another suggestion is to include a geotechnical inspection of the footing before the concrete foundation is poured and payment only after it is approved. Another structural inspection of the framing by an engineer before the sheetrock goes up is extremely helpful in catching and eliminating defects before they become larger, more expensive problems.

Cost-plus contracts typically pay the builder a percentage of the cost of the entire house for managing the construction process.  (For instance, “cost-plus 10% means the builder will be paid $10,000 if the house costs $100,000 in materials and labor).  These agreements must be written very carefully because the builder actually benefits as costs rise.  Most home buyers interview several builders and, in large part, choose their builder based on the amount of the bid they submit.  Virtually all of the cost-plus contracts written by builders disclaim any liability if the actual costs exceed their bid.  In the past several years, we have seen more and more examples of builders submitting low bids just to beat their competitors for the contract and have no hope of actually finishing the project for anything close to the bid price.  Once the contract is signed, the homeowner finds out the hard way that the builder never had any realistic hope of staying on budget, and they have limited choices.  
For these reasons, a carefully drafted cost-plus contract is essential to protect you from financial ruin. Be extremely wary of any contract language saying the builder’s bid cannot be relied upon or language excluding any and all statements, promises, prices and representations not specifically written down in the contract. (also called a “merger clause”) 

McGrath Law Firm recommends taking the following simple steps before purchasing a home to reduce your risk of encountering a construction defect.

1. Ask your builder for references-lots of them. Then take the time to call these people.

2. Check whether your builder builds homes within the city limits of your area (like East Limestone). City and county inspection departments often have more stringent requirements, which marginal builders will avoid because their houses are substandard. A builder who does not build inside the city limits may do so for this reason.

3. Ask to see proof of liability insurance. Make sure the policy will extend through the time it takes to complete your construction. Insist that the policy limits exceed the entire contract value of the house you are building. Make sure the policies include riders for “completed operations” and “work performed by subcontractors”.

4. Go to the Alabama Home Builders Licensure Board and review the monthly reports of disciplinary action to see if your builder has been disciplined or had their license suspended. Consumers can also write the Board and request an “affidavit of licensure” detailing the builder’s entire history of licenses, renewals, and complaints.

5. Do not pay large amounts of money as a deposit, earnest money, or “construction commitment fees”. $5,000-15,000 should be more than enough earnest money for any legitimate builder to begin construction. 

6. Pay us a small fee to conduct a statewide search of the AlaCourt database to find any prior lawsuits. 

7. Refuse to sign an arbitration clause. Any builder who insists on an arbitration clause should be viewed with great scrutiny. No single factor prevents more homeowners from holding a builder accountable for their mistakes than an arbitration clause.

Many homeowners are told that arbitration with their builder benefits them because it is faster, cheaper, or better than holding their builder, realtor, or pest control company responsible in court. 

Arbitration offers no benefit to consumers or homebuyers compared with access to the court system. Stated another way, the entire intent and purpose of arbitration is to prevent homeowners and consumers from obtaining the kind of justice they can obtain from a judge or jury. 
Arbitration is more costly and almost always results in lower settlements and recoveries than cases filed in court.

Before you purchase your home, thoroughly review the sales contract, warranty, and all other documents.  The McGrath Law Firm recommends that you refuse to sign any arbitration clause.  Unfortunately, arbitration clauses prevent many homeowners from holding a builder accountable for construction defects.

Always strike out the "As-Is" language in any contract, even your real estate agent's contract, if you are buying a new home.

Almost every real estate contract or builder’s contract says something to the effect that the property or the house is being sold “as-is” and that you, as the buyer, are not relying on any statements or representations about the quality or specifics in the house.  Always strike as-is language out, and ask the seller to provide complete disclosures of any known or suspected defects. If your builder or realtor resists, tell them that is the law in 48 other states and to get a disclosure form from one of those states. In order to have any recourse, you almost always have all the disclosures written down and signed if you want to hold them responsible later. 

Simply stated, anything that is not written down on the contract (the minimum square footage, a fence or gutters will be installed later, or exactly how landscaping will be completed, etc.) is generally not enforceable after closing unless it is written down and signed by the seller or their agent.

Although you’d like to think a “new” house means it was built carefully and correctly, and that a separate inspection wouldn’t be necessary. Unfortunately, we have represented hundreds of families in the last 31 years who bought a new house with serious hidden or latent defects or building code violations that were not visible to builders, municipal, and even private home inspectors. 

Unless your contract requires it, there is no legal requirement for a buyer to have a new home inspected. Ideally, we suggest a structural inspection by an engineer before the sheetrock is installed, but there’s no downside to hiring a private home inspector before closing either.  

Home inspections are only as good as the inspector. The licensing requirements to become an inspector are horribly inadequate and do not require any prior experience or formal education in construction.

Some inspectors have extensive homebuilding or construction experience to assist them in inspecting your home. Others took the weekend online course, inspected their own home and their instructor’s home, and wallah – they become home inspectors. For that reason, you should question home inspectors and their qualifications before hiring them. 

Most home inspection contracts provide the buyer no guarantee or recourse if the inspectors fail to identify or report a defect.  Virtually every home inspection service in Alabama specifically limits the home inspector’s liability to the cost of the inspection fee if the inspector fails to observe or report a costly defect. In other words, if you paid $400 for the inspection, $400 is the most your inspector will ever have to pay you for failing to report a defect.

Ironically, Alabama law requires home inspectors to carry two (2) kinds of insurance (general liability and errors and omissions). However, the insurance companies that insure home inspectors require inspection contracts to limit the damages they’ll ever pay to the amount you pay them. 

Virtually all home inspection contracts also require anti-consumer arbitration (click here to read more about arbitration). For these reasons, we always advise homeowners to strike out the damage limitation and arbitration provisions of a home inspection contract and if the inspector refuses to inspect, … find another inspector.

Selecting a home inspector is difficult too. As we alluded to above, some inspectors are not as qualified as others…  

The new or used homebuyer also needs to be aware of the relationships between home inspectors and real estate agents. 

The vast majority of home buyers rely on their real estate agent to refer them to a reliable home inspector.  In that same vein, many home inspectors rely on referrals from realtors to make a living.  In some cases, inspectors who are dependent on a steady stream of real estate agent referrals do not look for or report defects likely to kill a sale and cost that agent a commission. 

We have file after file where an inspector listed 25-30 minor, inexpensive items that made the homeowner feel confident the inspector had been thorough, but left out the costliest or most serious defect for fear of the buyer backing out and the agent not receiving a commission. 

Finding a skilled home inspector who accepts responsibility for the contents of their report and will honestly report all of the adverse conditions in a house to you is not an easy task.

We recommend that you take three steps before hiring a home inspector: 
- Ask lots of questions about the qualifications, especially about construction experience
- Ask for non-realtor references, lots of them, and actually call those references
- Review the inspection contracts carefully before signing. Do not choose a home inspector that limits their liability to the cost of the inspection fee and requires arbitration. If the inspector is not willing to strike those provisions, we recommend you call someone else.

It depends. There are three different ways real estate agents represent clients.  They may work for a seller, a buyer, or sometimes both. 

Before you hire a real estate agent in any capacity except as your exclusive agent, be sure you are completely aware of the pitfalls and limitations of what a real estate agent has to tell you.  

Real estate agents working for builders can only represent the builder in the sales process and have no obligation to tell you about issues, problems, or how to lower the price you pay. When you meet a real estate agent representing the builder, that agent’s goal is to find a homebuyer who is willing and able to buy the home at the price and terms set by the builder.  The builder’s real estate agent has no obligation or duty to tell you anything adverse about a house at all.  Agents selling houses for builders receive a great deal of training to use vague language and to avoid giving direct answers to direct questions, much less in writing. 

Many homebuyers hire their own real estate agents to assist them in the home-buying process-which we recommend because they have an obligation to find the best price and terms for you. However, even a buyer’s agent is motivated by commissions, which are paid only when the sale closes.  In other words, even when you hire your own real estate agent, it is still in the seller’s agent’s financial interest to move the sales process along as quickly as possible in order for them to turn the sale and move on to the next client. 

Homebuyers should take care to find a skilled and well-respected real estate agent willing to ask questions, push for concessions, get promises in writing, insist on repairs being completed before closing, and generally perform due diligence to protect you in purchasing a new home. 

Just as with any other business, there are always real estate agents whose primary motivation is commissions and not aggressively protecting your interests. From our perspective, there’s never been a worse time to buy a new house in the Huntsville/Madison County area: New neighborhoods are being built on land that has been passed over for years as unsuitable for development; Skilled labor has never been more scarce, and building houses fast, cheaply, and to the lowest possible standard allowed is more important than quality or craftsmanship.  

All builders and homes are not equal, and an experienced, reputable real estate agent should be willing to tell you which builders, houses, and neighborhoods to avoid.   

Unless you select and pay the closing attorney yourself, the closing attorney always represents the builder/seller and is NOT there to protect your interests.

The most common misconception among homeowners is that the closing attorney represents them and looks out for the buyer’s interests.  Homeowners commonly conclude, “because a lawyer is involved, everything must be ok.”

A closing attorney is NOT your attorney and is not specifically protecting your right to a defect-free house, unless you select and pay the attorney yourself. 

Closing attorneys make money by closing as many sales and writing as many title insurance policies as possible.  Builders represent more closings and revenue to a closing attorney in the future.  As a result, the closing attorney’s interests are aligned with the builder's, who hopes they will continue to close their sales at the same law firm.

The duties of a Closing Attorney include:Reviewing the specific terms of sales contractsEvaluating legal documents such as the title policy, deed, mortgage, survey, and closing statement.Explaining the terms of loansEnsuring a clear title is transferredReviewing charges to ensure that they are in line with estimatesProviding the Buyer a HUD-1 Settlement Statement, which summarizes the financial aspects of the purchase transaction.Providing information about any title or ownership facts that affect the property.

Note!  Typically, the closing attorney is only looking for items that affect the title.  They are not specifically concerned with latent or undiscovered defects in the home.  If you are buying a new home, the closing attorney will not find any information that affects the property’s condition, and they certainly have not lived at the property to discover any possible defects!

In fact, one of the documents given to the homebuyer for their signature in almost every closing is a waiver and complete release of liability for the closing attorney and the title company.  This new release was implemented a few years ago and is now used universally.

The Home Builders Association of Alabama (HBAA) and the Huntsville-Madison County Home Builders Association are NOT a judicial or regulatory body. 

Being a member of the homebuilders association in and of itself means nothing about the skill or experience of your builder.  Membership is open to anyone who fills out the application and pays the membership dues. 

The Home Builders Associations are not organizations that will help a consumer or hold a builder responsible for defects or damage in your home. 

By the same token, the Better Business Bureau is also of little use in a construction or home construction dispute, based on our experience.

The Better Business Bureau is most consumers’ first stop when researching a builder's credibility.  Homebuyers should recognize that while the BBB does promote a set of ethical best practices for businesses, it does NOT have any legal or policing powers.  If a consumer calls the BBB to inquire about the reputation or business practices of one of its members, the BBB will only disclose if there are any “unresolved” complaints against the business, and typically nothing more. The BBB simply provides consumers with information and alerts them to marketplace fraud or sales scams in their region.  

Homebuyers should be mindful that while their builder may have a suitable BBB rating, that is of little value.  Not all complaints are reported to the BBB, and if your builder is new to the market, latent defects found in their homes may only be starting to appear.

The BBB is most commonly thought of as a resource for consumers to bring their grievances and get assistance in resolving disputes.   Unfortunately, the BBB is composed of and financed by its local business members, including home builders.  We have seen precious few examples of a complaint to the BBB ever resulting in a change of heart or a satisfactory resolution for the consumer in a contested matter.

Frequently, the BBB attempts to induce a consumer to waive their rights to pursue a claim in the judicial system by agreeing to arbitrate it with the BBB instead.  The offer sounds attractive: it provides the services of a citizen arbitrator, usually for free, and promises a faster resolution than the court system.  Unfortunately, the BBB only offers its arbitration services for free if the builder business is one of their members.  Virtually none of the BBB arbitrators have any legal training; most are either current or former members of the same BBB, giving them a bias or incentive to rule in favor of their friends and fellow members. 

We have represented numerous families through the BBB arbitration process, almost always against their will and with disappointing results. We do not recommend agreeing to use the BBB for any dispute resolution services beyond filing a complaint and leaving it “unresolved,” in hopes of preventing another consumer from the same fate.

If you are compelled to arbitrate, the American Arbitration Association is a much more reliable service, and all of their arbitrators are licensed attorneys. Again, we recommend avoiding arbitration entirely if possible, but especially avoid BBB arbitration. 

Preparing for Your Initial Consultation With McGrath Law Firm

McGrath Law Firm recommends gathering the following materials:

Builder Information: Your builder’s name, address, and contact information for anyone you have communicated with.
Timeline of Events: Important dates, including when you first noticed the defect, when damage began affecting your home, and when you contacted your builder.
Communication Records: A timeline or log of calls placed to your builder.
Photographs: Photos documenting construction defects and any related damage to your home.
Purchase Documents: Your home’s purchase agreement and escrow documentation.
Inspection Reports: Copies of inspection reports and repair estimates.
Warranty Information: Your home warranty and all related documentation.
Written Correspondence: Copies of letters, memos, text messages, and emails exchanged with your builder.

Schedule Your Initial Consultation
Scroll to Top