With Home Warranties, Getting to Home Base Not Necessarily a Home Run

Tallahassee, FLJust as there are various issues that can arise from the construction and habitation of a home, so too is the variation in warranties assigned to a home in order to guarantee that the home is habitable and free from workmanship defects. Various home warranty companies either underwrite new home warranties or offer to the homeowner an extended warranty that pushes coverage beyond a contractor’s standard new home warranty.

Various homeowners have been forced into Home Warranty Lawsuits when the insurance carrier balks at providing compensation for a covered defect in an act of bad faith. Homeowners protected by either a contractor’s new home warranty, or an extended warranty, should be conversant with the terms of the policy and be prepared to involve a bad faith insurance attorney if the carrier reneges. For most Americans, the family home is the biggest investment they will ever make, and the preservation of that investment or lack thereof can help keep a family solvent, or leave the homeowner in financial ruin.

But there are other warranty issues that extend even beyond that.

Take the recent case of a lawsuit filed by the Lakeview Reserve Homeowners Association against Maronda Homes of Florida Inc. (Maronda). Beyond any extended warranty, is the implied warranty by a contractor that a home would be habitable - in this case, an entire subdivision.

As chronicled by The Associated Press (AP, 7/11/13), Maronda built the homes and designed the subdivision, including roads and drainage. All seemed fine with the Orange County subdivision and Lakeview took over control of the development. However, it wasn’t until later that retention ponds began overflowing, storm drainage runoffs began collapsing, roads started breaking apart, lawns became routinely flooded and ground underneath driveways started sinking.

Lakeview sued Maronda for breach of implied warranty of habitation. Maronda countered that once Lakeview took control of the development, any deficiencies in drainage, roads and common areas was the responsibility of Lakeview. After a lower court ruled in favor of Maronda and an appeals court found for Lakeview, the case went to the Florida Supreme Court.

Complicating the case was the fact that the state, while the Lakeview v. Maronda case was still before the state Supreme Court, passed legislation effectively barring an implied warranty of habitation from extending to streets and drainage. According to the report, the bill referenced the actual lawsuit and contained retroactive language that would have served, according to the report, to protect Maronda.

In the end, the state Supreme Court in July ruled in favor of Lakeview, while chastising the Legislature for overstepping its authority in an attempt to hinder an active legal dispute.

“This is a clear violation of separation of powers because the Legislature does not sit as a supervising appellate court over our district courts of appeal,” the court wrote in its opinion.

Meanwhile, two other events illustrate the current state of home warranty. According to The Arizona Republic (Phoenix 7/6/13), an implied warranty of habitation from the time a home is built is enforceable for up to eight years following construction and initial habitation - even if the original owner sells the home to a subsequent party. The only caveat for the subsequent owner(s) who may have purchased the home within the eight-year window is that claims are limited to latent or hidden defects undiscovered by a home inspection prior to the transfer of the property.

In other words, if a qualified home inspection identifies a defect and the prospective purchaser opts to buy the home anyway, then the builder is indemnified.

Yet another case illustrates further potential limitations that could result in Home Warranty lawsuits. Case in point is a lawsuit filed against the builder of a custom home, and the manufacturer of an exterior coating purported to have a 20-year warranty. In 2011, according to Triangle Business Journal (7/16/13), George and Deborah Christie launched a lawsuit against Hartley Construction of Carrboro, and Grailcoat Worldwide after the homeowners discovered cracks seven years after the home was built.

According to the report, The Orange County Superior Court sided with the defense and an appellate panel voted unanimously to support the Superior Court ruling.

That’s because in North Carolina a statute of repose bars lawsuits over improvements to real estate after six years.

The lesson here is that different states may have different statutes and limitations. It is incumbent upon the new homeowner, therefore, to look beyond the shiny new taps and smell of fresh paint and dig into the various issues involved with implied warranty of habitation and potential limitations of home warranty insurance. While Home Warranty Lawsuits have netted many a litigant compensation for a habitability issue, it’s important to remain conversant with potential limitations that could come back to haunt you. Home warranty companies will try to avoid paying at all costs. Another reason why a good bad faith insurance attorney can be your best friend in such circumstances….