Tag Archives: limited warranty

CONSIDER THE LIMITED WARRANTY FROM YOUR HOMEBUILDER

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When purchasing a home from a homebuilder, there is an important consideration when it comes to the limited warranty you receive around the time you close on the home. That limited warranty likely includes an arbitration provision requiring you to arbitrate your disputes, such as construction defect claims, against the homebuilder. That arbitration provision will most likely include all claims, including statutory claims (such as a statutory violation of a building code claim), requiring you to arbitrate, as opposed to litigate, your disputes against the homebuilder. This is an important consideration. If the arbitration provision does not allow you to arbitrate all of your claims, and eliminates your rights to legitimate statutory claims, the arbitration provision could be unenforceable.

By way of example, in a residential construction defect dispute, Anderson v. Taylor Morrison of Florida, Inc., 223 So.3d 1088 (Fla. 2d DCA 2017), the appeal turned on whether the arbitration provision in the homebuilder’s limited warranty was valid. The homeowners took possession of their home in 2009. In 2015, the homeowners served a Florida Statutes Chapter 558 notice of construction defects that included a statutory violation of a building code claim under Florida Statute §553.84. The limited warranty included an arbitration provision that specified it was the “exclusive remedy” for all disputes arising out of or related to the warranty or issues with the home and property. When read together with the warranty’s disclaimer that precluded claims not covered by the warranty “whether in contract, tort, or otherwise,” the statutory building code violation claim could not be remedied through arbitration because it fell outside the warranty’s coverage.

The homeowners sued the homebuilder for construction defects that included the statutory violation of building code claim. The homebuilder moved to compel arbitration under the limited warranty. The homeowners argued the arbitration provision was void against public policy because it barred recovery of all statutory and contractual claims.

The appellate court held that because the arbitration provision limited the homeowners to warranty claims but barred their statutory claim, it violated public policy and was unenforceable. The arbitration provision did not merely diminish the homeowner’s statutory remedy for a building code violation but eliminated it by confining them to warranty claims subject to arbitration. In this case, the homeowners were therefore free to litigate their building code violation claim due the unenforceability of the arbitration provision.

However, since this case, most homebuilders have modified their warranties such that all claims, including statutory claims, are subject to arbitration with disclaiming language in the limited warranties that must be considered.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

CONSIDER ARBITRATION PROVISION IN HOMEBUILDER’S WARRANTY AND PURCHASE-AND-SALE AGREEMENT

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When you enter into a contract with a homebuilder, particularly a tract homebuilder, please consider two things when it comes to dispute resolution: (1) your purchase-and-sale agreement likely contains an arbitration provision, and (2) your limited warranty agreement you get in connection with closing likely also reinforces the arbitration provision, especially with warranty claims governed by the limited warranty agreement. This dispute resolution is important because it means the homebuilder wants disputes resolved through the arbitration process and NOT through the litigation process (where the nature of disputes and allegations are public).

Look, there are pros and cons with arbitration, no different than litigation. Arbitrating a dispute is not necessarily a bad thing, and with certain disputes, ideal. There is no right to appeal in arbitration, but the dispute should resolve itself quicker than litigation, and you’ll have more control over the decision maker, i.e., the arbitrator.

In a recent case, Osborne v. Drees Home of Florida, Inc., 49 Fla.L.Weekly D215a (Fla. 5th DCA 2024), a buyer purchased a home from a homebuilder.  The purchase-and-sale agreement and limited warranty contained arbitration provisions.  The buyer, years later, sold the home to a subsequent buyer / purchaser and assigned the limited warranty it received from the homebuilder.  The subsequent buyer then sued the homebuilder under theories of negligence and violation of Florida’s building code for defective stucco, windows, and painting. (There was no contract between the subsequent buyer and the homebuilder.) The homebuilder moved to compel mediation under the limited warranty agreement.  The trial court granted the homebuilder’s motion; however, the appellate court reversed.

“[T]here are three elements for courts to consider in ruling on a motion to compel arbitration of a given dispute: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.”  “The general rule is that where an arbitration agreement exists between the parties, arbitration is required only of those controversies or disputes which the parties have agreed to submit to arbitration.”  “[T]he question whether the parties have submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability’ is an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.”  To determine whether a dispute must be submitted to arbitration, the scope of the arbitration provision governs.  The scope of an arbitration clause is a pure matter of contract interpretation, and the determination of whether an arbitrable issue exists requires the court to examine the plain language of the arbitration agreement.  “Although any doubts regarding the scope of an arbitration clause should be resolved in favor of arbitration, where the contract provision is not doubtful, arbitration should not be ordered.” 

Osborne, supra (internal citations omitted).

The appellate court found the defect claims raised by the subsequent buyer were NOT covered by the limited warranty agreement, where the only warranty remaining was structural (load bearing) in nature: “Because the [plaintiffs’] claims are not within the scope of the Limited Warranty’s arbitration provision and the [plaintiffs] have not otherwise agreed to arbitrate their claims, we reverse the order compelling arbitration…..” Osborne, supra.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.