Court Finds Common Law Implied Warranty in Subdivision Roadways and Other Systems

COURT FINDS COMMON LAW IMPLIED WARRANTY IN SUBDIVISION ROADWAYS AND OTHER SYSTEMS

By: Larry R. Leiby, Esq. and Robert S. Tanner, Esq.

About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. For more information, please visit www.mkpalaw.com.

In Lakeview Reserve Homeowners, Etc. v. Maronda Homes, Inc., 2010 WL 4257559 (Fla. 5 th DCA 2010), Lakeview Reserve Homeowner's Association ("HOA") sued Maronda Homes, Inc. and T.D. Thomson Construction Company (collectively, "Developer"), alleging latent defects in roadways, retention ponds, underground pipes, and drainage systems throughout the subdivision. The legal theory that the HOA asserted against the Developer was a breach of implied warranties of fitness and merchantability.

As its name suggests, an "implied warranty of fitness and merchantability" is just that: a warranty that is implied, as distinguished from a warranty that is expressly stated. For centuries, the law did not recognize implied warranties. The prevailing rule always had been caveat emptor, or "let the buyer beware," which some believe made sense in times "when parties were thought to usually be on equal footing and neither had significant advantage in discerning potential defects" in goods or property that was the subject of the transaction. In more recent times, the courts and legislatures have observed that sellers often are in a position superior to consumers to know of or to discover defects and have used that observation to justify imposing "implied" warranties upon the seller for the benefit of the buyer. Of course, such warranties have limitations. In terms of the sale of new homes, the common law implied warranty of fitness and merchantability extends to the first purchaser for "improvements immediately supporting the residence, such as water wells and septic tanks."

In the Lakeview case, the Developer argued that the allegedly defective roadways, retention ponds, etc., did not immediately support the residences in the subdivision and, therefore, the buyers should not be able to claim protection of implied warranties. The trial court agreed and granted summary judgment in favor of the Developer. The HOA appealed.

The appellate court noted that the basic reason for implied warranties in connection with real estate was the "inability of the ordinarily prudent homebuyer to detect flaws in the construction of modern houses" and concluded that the HOA, acting on behalf of the persons who bought homes in the subdivision, should not be expected by the law to have the expertise to evaluate the complicated and integral building systems at issue in the case. Rather, the buyers and the HOA were forced to rely upon the expertise of the Developer who had the expertise as well as the opportunity to inspect those systems during construction. The appellate court found that the roadways, retention ponds, underground pipes, and drainage systems did "immediately support the residences" in that, without them, the residences were not habitable or fit for their intended purposes.

The appellate court adopted a perspective that construction systems that provide essential services should be found to "immediately support the residence" and carry implied warranties. The savvy constructor will appreciate the potential impact of that perspective and price this common law warranty into its contracts.