Is a Home Builder Liable for Reduced Living Area?

Question: We contracted with a builder for the purchase of a new 5,000-square-foot home in North Scottsdale. After we moved into our new home, we discovered that an outside wall of the home was located almost a foot closer than indicated on the plans and specifications. As a result, there are 200 square feet less of living area in the home. The homes are worth over $300 per square foot in our community. Do we have a claim against the builder for $60,000 because of this loss of 200 square feet?

Answer: Probably not. The builder of a home is only liable for breach of contract if a new home contains substantially less square footage of living area than stated in the plans and specifications. The Arizona Court of Appeals has ruled that there was a breach of contract by the builder of a home when the square footage of the home per the plans and specifications was 2,089 square feet, but the actual square footage of the home was only 1,793 square feet. This difference of more than 14% was deemed substantial. Your difference of 4% (200 square feet divided by the 5,000 square feet in the plans and specifications) is probably not substantial.

Note: If a home is not a new home, there is bold print in the AAR standard residential purchase contract for resale homes that requires the buyer, if square footage of the home is important to the buyer, to verify the square footage during the inspection period.