Views From the Expert: They’re Not Who You Think They Are…..Client or Customer?

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It happens hundreds of times every day – new, prospective homebuyers walk into the model home of the new development and after touring all the models, decide to place an order for a new home.  They are also invited to select from the list of available lots and they find an outlying lot with dramatic rock outcroppings in the backyard.  “It’s absolutely perfect!”

They’re Not Who You Think They Are… Client Or Customer?

Like many homebuyers, the purchase of their new home is not under a conventional construction contract between themselves and a builder.  The majority of new homes built in this country are built as manufactured products placed on the market for sale before the lot is graded and sold under a purchase agreement.  This distinction creates a subtle but, nonetheless, huge distinction in the relationship between “builder/seller” and “consumer/buyer”.

The Problem

Quite often, construction lawsuits are filed in purchases like these for failure to adhere to the building standards that developers must follow. 

In virtually every construction defect complaint, plaintiffs’ attorneys compare the materials and workmanship to some or several established benchmarks to demonstrate how the developer and its subcontractors deviated from one or more of the following standards:  

  • the local and state building codes 
  • they have also cited failure to adhere to local customs and practices as a cause of action
  • invariably they will research the building and safety department records for the approved plans and specifications for a claim of “breach” or deviation from specifications as a component of contractual duties.

It is this third category that falls under intense scrutiny by the homeowners’ attorney.  Deviations from the approved plans represent a possible breach of contract or unauthorized substitution of materials and finishes… Right?

Not so fast; in manufactured housing, the developer is not entering into a construction contract, it is selling a product, similar to an automobile manufacturer selling cars.  In a typical construction contract, the plans are incorporated by reference into the contract, but in a “product” purchase, the plans are not a component of the sales agreement.  

Most of all, the developer has no duty to build the house according to every architectural detail in the approved plans.  In a recent dispute in Southern California, the homeowner was planting landscaping materials around his house when his shovel hit the concrete foundation.  

With a lot more digging, he quickly learned that his house was not sitting on the foundation shown in the approved plans, but rather a caisson and grade beam foundation. He quickly researched the subdivision file for his tract at the building department and learned that the approved plans for that model had a conventional footing detail.  Concerned that he did not get the benefit of the bargain or in some way received less, he filed suit for breach of contract.

The actual situation at that lot involved a low quality of supporting soils, so the developer decided to engineer a deep caisson and grade beam foundation to go below the poor soil so the house would be adequately supported.  

The defense team worked frantically to resolve the “breach” issue with offers of compensation without recognizing that the developer was not selling the house that was shown on the plans, it was selling the house represented in the brochure renderings and similar to the model.  

The square footage of the house was approximately the same, it had the same number of windows and doors even though they were from a different manufacturer and other physical features were similar but not exactly like those displayed in the model.

The Solution

Some developers of manufactured housing have started including notices in their sales brochures and in the purchase agreements that call attention to the fact that the approved plans are not part of the sales agreement and that there is a likelihood that substitutions may be made either by choice or necessity to meet the “move-in” or “delivery” schedule. 

Miscellaneous Variations

Here are a few examples of effective substitution notices that should be in your purchase disclosures:

  • Models and Plans:  While the finished product will be substantially similar, Buyer’s Home may vary from the models and may vary from the approved building plans in minor respects, as a result of design changes, field conditions, and/or the discretion of individual workmen.
  • Plan Elevation Variations:  There are exterior differences between house elevations.  Materials, design, ceilings, windows, exterior color, roofing material color, roof ventilation, fireplaces, and garage doors, for example, may vary.  Similarly, field conditions may dictate variations in the detailing of elevations.  Although Seller has provided approximate square footages for lots and house plans, they are intended to be used only as a guide and are in no way to be construed as precisely accurate.
  • Right of Substitution:  From time to time, certain materials and colors become unavailable due to reasons beyond the control of the Seller.  Seller reserves the right to substitute materials when back orders or discontinued materials might result in a delay of construction. 

The Final Analysis

In the final analysis, every builder should recognize the role he/she is playing when a contract dispute arises.  There is a big difference between a construction contract and a sales agreement.  Sales personnel should also make reference to the fact that “some things may change.”  So, ask yourself:  “Are you dealing with a client or a customer?” 

Who Is Bill Dexter?

Bill Dexter is a 40-year veteran of the construction industry and the former Director of the California Center for Construction Education for the College of Architecture and Environmental Design at California Polytechnic State University, San Luis Obispo. As an internationally recognized risk management consultant, his industry training company serves construction organizations nationwide and overseas in the areas of liability mitigation.

Disclaimer: JDi Data’s series of ‘Views from the Expert’ blogs provide information and expanded points of interest for our clients and partners. These are personal blog posts.  The opinions expressed here are the authors’ and not those of JDi Data or any other person.