Warranty Law Exposes Rift

WARRANTY LAW EXPOSES RIFT BETWEEN

FLORIDA LEGISLATURE AND FLORIDA SUPREME COURT

By: Robert S. Tanner, Esq.

Your Construction Law FirmTM

In 2010, the Fifth District Court of Appeal ruled in Lakeview Reserve Homeowners, Etc. v. Maronda Homes, Inc., 48 So. 3d 902 (Fla. 5th DCA 2010) that a developer granted to new buyer's in a residential subdivision implied warranty rights with respect to supporting elements such as roadways, retention ponds, underground pipes, and drainage systems. The Fifth District discussed some of the reasons for such warranty rights:

The planning, permitting, site work and construction required to build these improvements requires expertise far beyond the expertise of the average homebuyer, so that the homebuyer, as well as homeowners association, must rely on the expertise of the builder/developer. During the construction of these structures, it is the builder/developer that has the opportunity for periodic inspection and approval of the ongoing work, not the homebuyer or homeowners association. The builder/developer is in a superior position to ferret out and discover defects in the construction of the improvements and to have the defects timely cured during construction. Upon completion of the construction, the defects are not readily discernable to the average homebuyer, even with diligent inspection.

Lakeview Reserve Homeowners v. Maronda Homes, Inc., 48 So. 3d 902, 908 (Fla. 5th DCA 2010). We discussed that opinion here.

The Fifth District noted that its decision conflicted with a ruling of the Fourth District Court of Appeal on a similar set of facts and, therefore, certified the case to the Florida Supreme Court for review and to resolve the conflict. On April 20, 2011, the Florida Supreme Court accepted review of the case.

Before the Florida Supreme Court issued its decision, the Florida Legislature entered the fray. Representative Frank Articles (R) introduced House Bill 1013, the purpose which was to prevent homebuyers from suing developers for violations of the common law implied warranties recognized by the Fifth District. The text of that bill can be found here.

The bill, after amendments, was passed by the House on February 23, 2012 and by the Senate on March 8, 2012. Governor Rick Scott signed the bill into law on April 27, 2012. Not only did the law expressly take aim at the Fifth District's decision, but it was intended to kill all such warranty claims that were already pending as well as all that might be filed thereafter.

Finally, on July 11, 2013, the Florida Supreme Court issued its decision on the Lakeview Reserve Homeowners v. Maronda Homes, Inc. case. In the decision, the Court also addressed the actions of the Legislature.

The Florida Supreme Court provided a somewhat detailed explanation of the homeowner's complaints, among which was that storm water did not drain properly, flooding driveways and completely impeding normal use. The homeowners also alleged that storm drain runoffs collapsed in the direction of residential driveways, resulting in the obstruction of the normal use of the driveways. They further claimed that water would remain standing and stagnant in their lawns for days following rains. They claimed soil erosion, depressions occurring between residential properties, buckling and splitting of pavement and asphalt, and flooding of retention ponds that were had been intended to be dry beds.

The Court explained the history of the law of implied warranties. Before implied warranties, the doctrine of caveat emptor ("buyer beware") prevailed for centuries, leaving the purchaser to buy property at his own risk. With the progress of civilization and the mass production of complicated goods, the law developed implied warranties that were imposed on sellers. "Courts reasoned that fairness required recognition of implied warranties because sellers were now in a superior position over buyers with regard to knowledge of, or the ability to discover and prevent defects." That rational, the superiority of knowledge of the seller over the buyer, was then recognized in connection with the modern techniques of construction and developing real property. Moreover, the law recognized the major significance that purchasing real estate was in the lives of ordinary individuals. In 1972, the Florida Supreme Court held that implied warranties were applicable in the sale of new homes and condominiums.

Maronda Homes argued to the Florida Supreme Court that the Legislature's 2012 enactment of Florida Statutes, section 553.883 applied retroactively to divest Lakeview Reserve of its cause of action for breach of the implied warranties. In rejecting Maronda Homes' arguments, the Florida Supreme Court referred to the section of the Florida Constitution which says that, "The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay." The Court explained that the phrase "redress of any injury" means that, "where a cause of action exists under the statutory or common law of Florida, the Florida Legislature may not abolish that action unless it provides a reasonable alternative for redress of injuries, or demonstrates an overpowering public necessity for its abrogation and no other means by which to meet that necessity."

The Court expressly held that the Legislature by enacting the statute "violate[d] the right of access to courts because it attempt[ed] to abolish the common law cause of action for breach of implied warranties for certain injuries to property." Further, the Court said that the Legislature had clearly violated the separation of powers by enacting the statute because the Legislature was attempting to exercise, but constitutionally does not have, supervisory power over the district courts of appeal.

The Florida Supreme Court upheld the Fifth District's decision and adopted the test it had articulated: "implied warranties of fitness for a particular purpose, habitability, and merchantability apply to structures in common areas of a subdivision that immediately support the residence in the form of essential services." While that test is used to determine whether an allegedly defective condition, structure, or system is covered by an implied warranty, the Court also explained what the warranty is: "The general test for whether a party has breached the implied warranties of fitness and merchantability is whether the premises meet the ordinary, normal standards reasonably to be expected of living quarters of comparable kind and quality."

In summary, the Legislature determined that Florida homeowners should not have implied warranties of fitness, merchantability, or habitability for the roads, drainage systems, retention ponds, and underground pipes that service individual new homes. The developer, Maronda Homes, tried to hide behind the Legislature's act.

The highest court in the state disagreed and determined that the Legislature overstepped its constitutional authority and had acted in derogation of due process to deprive the homeowners of Lakeview Reserve of vested rights. As a result, the case was remanded to the trial court where the homeowners will be able to pursue their claim that Maronda Homes breached the implied warranties of fitness and merchantability concerning the supporting residential elements by failing to meet the ordinary, normal standards reasonably to be expected.

What do you think? Should a developer not be held to constructing homes, condominiums, and subdivision supporting or common elements to "ordinary, normal standards reasonably to be expected of living quarters of comparable kind and quality"?