## Facts

- A tenant rented a residential dwelling in Chambersburg, Pennsylvania from a landlord under an oral month-to-month lease for $60 per month beginning in November 1971.
- The landlord filed two landlord–tenant actions seeking unpaid rent (and, in the second action, possession), and obtained judgments in his favor before a justice of the peace.
- The tenant appealed to the Court of Common Pleas and asserted that the landlord’s breach of an implied warranty of habitability barred or reduced rent liability.
- In the possession/rent action, the tenant also sought a setoff for the cost of repairing a broken lock after giving notice and allowing a reasonable opportunity to repair, and asserted a counterclaim for costs to address other allegedly defective conditions.
- The Court of Common Pleas sustained the landlord’s preliminary objections, concluding the tenant’s habitability defense and counterclaim were not legally cognizable.
- The Superior Court reversed, abolished caveat emptor in residential leases, and held that an implied warranty of habitability exists and is mutually dependent with the tenant’s duty to pay rent.
- The Supreme Court of Pennsylvania granted allowance of appeal to review the Superior Court’s ruling.

## Issues

1. Whether caveat emptor should continue to govern residential leases in Pennsylvania.
2. Whether residential leases include an implied warranty of habitability, and whether the tenant’s obligation to pay rent is dependent on the landlord’s obligation to provide habitable premises.
3. Whether existing housing legislation, including the Rent Withholding Act, precludes judicial recognition of an implied warranty of habitability and related remedies.

## Decision

- The Supreme Court of Pennsylvania affirmed the recognition of an implied warranty of habitability in residential leases and abolished caveat emptor in that context.
- The Court held that the landlord’s duty to provide habitable premises and the tenant’s duty to pay rent are mutually dependent.
- The Court rejected the argument that the Rent Withholding Act provides an exclusive remedial scheme that forecloses common-law development.
- The case was remanded for further proceedings allowing the tenant to litigate habitability-based defenses and related claims under the new standard.

## Legal Principles

- Caveat emptor does not apply to residential leases; an implied warranty of habitability is implied in all residential leases.
- Habitability requires premises that are safe, sanitary, and fit for residential use; the standard concerns essential living requirements, not perfection or aesthetics.
- Substantial defects affecting health or safety, including substantial housing or building code violations, may establish breach.
- The tenant’s rent obligation is dependent on the landlord’s compliance with the implied warranty; a substantial breach may support rent abatement or reduction.
- After notice and a reasonable opportunity to cure, a tenant may seek setoff for reasonable repair costs and may assert counterclaims for damages tied to unremedied uninhabitable conditions.
- Housing legislation addressing substandard housing does not bar additional common-law remedies based on the implied warranty of habitability.

## Conclusion

Pennsylvania recognized an implied warranty of habitability in residential leases, abolished caveat emptor for that category of leasing, and treated rent as contingent on the landlord’s provision and maintenance of safe, sanitary, and fit living conditions, permitting habitability-based defenses and remedies such as abatement, setoff, and counterclaims after notice and opportunity to cure.


Pugh v. Holmes, 405 A.2d 897 (Pa. 1979)