Subsequent buyers of a relatively new home may have recourse against the builder if a latent defect manifests itself during their ownership. This is no small matter in southern California where thousands of new homes have been constructed and sold during the past decade. Many of those homes have been resold by the original purchasers who cashed in on the equity build-up brought on by unusually high appreciation rates. Inevitably, construction-related problems are going to surface in some of those homes at a later date -- problems that were not apparent before or at the time of the second (or third) sale.

Last year a California Fifth Appellate District Court of Appeal ruling (Siegel v. Anderson Homes) made it clear that a subsequent buyer may have recourse against the builder for a latent defect that was not discovered during the first ownership. This, though, is subject to a ten-year statute of limitations regarding latent construction defects.

But, what about latent defects in homes not recently constructed, defects perhaps caused by a previous owner? Can a subsequent buyer -- one who discovers the defect -- reach back through the chain of ownership, so to speak, and seek restitution from the party who caused the problem? Probably not.

We frame the issue by considering two somewhat similar scenarios.

In Scenario I, you are the third owner of a seven-year-old tract home. Regrettably, you are struck and injured by a falling cabinet. The cabinet's fall is attributable to the fact that, at the time of the home construction, it was improperly installed. It's your bad luck that it took until now for that problem to manifest itself.

In Scenario II, you are the sixth owner of a thirty-year old home. Seven years ago, two owners back, the party who then owned the house installed new cabinets. Unfortunately, they were improperly installed in the same manner as in Scenario I. Your bad luck: same problem, the cabinet falls, and you are injured.

In the first scenario, as in the Siegel case, you have standing to bring an action against the new-home builder. But, in the second scenario, according to a 1994 California Second District Court of Appeal Ruling (Lorenzen-Hughes v. MacElhenny) it wouldn't be possible to go back to the previous owner who might have been the cause of the problem. In Lorenzen, as well as other cases, California courts have held that, absent fraud, previous owners cannot be held liable to future owners for some latent defect about which they had no knowledge.

In both of these situations we have assumed that no one else in the chain of ownership has any knowledge of the problem. That is crucial. If someone had knowledge and withheld information, then it is to those persons that an injured party should look for restitution.

If you learn of a construction defect in your new home, and you don't pass that knowledge on to the next buyer, then you could be on the hook, not the builder. Similarly, if you know of a problem caused by a previous owner of your older home, and you don't pass that information on to the next buyer, any resultant damage is going to be on your dime, not that of the previous owner.