LAW OF THE LAND: Homeowner’s ‘essential services’ now covered by implied warranty of fitness
Last month, the Florida Supreme Court issued an important ruling that clarified the law regarding the protection of Florida families who are faced with defective development and construction of Florida homes. The case was appealed from an action filed by Lakeview Homeowners Association against Maronda Homes, Inc., alleging a breach of the implied warranties of fitness and merchantability in the residential construction context.
Lakeview alleged a series of defects in the development and construction of a residential subdivision that Maronda Homes developed in Orange County, Florida. After the homeowners association assumed control of the subdivision, residents reported water and drainage problems caused by the infrastructure of the subdivision. Residents reported that the storm water failed to drain properly which flooded driveways and completely impeded normal use. They also reported a host of other problems stemming from the drainage system.
A soil expert retained by Lakeview found that water saturation damaged the subdivision’s roadways, along with a host of other issues. The homeowners association filed suit, alleging that the defects were latent, as they were not readily discoverable by home purchasers who lacked special knowledge and could not discover the defects when they purchased their homes.
Maronda moved for summary judgment, arguing that the common law implied warranties of fitness and merchantability do not extend to the construction and design of the infrastructure, private roadways, drainage systems, retention ponds, underground pipes, or any other common areas in a residential subdivision because those structures do not immediately support the residences. The trial court agreed but the 5th Circuit reversed on appeal and the Florida Supreme Court took up the issue.
As it typically does when it prepares to extend the law in a given area, the Supreme Court recapped the history of Florida real estate law. For years, the law in Florida held that the rule of Caveat Emptor (“buyer beware”) governed disputes arising from the sale of real property. In the absence of an express agreement to the contrary, the seller of real property was not liable for a defective condition that existed at the time of the sale of the property. Over time, courts began to recede from the rule of Caveat Emptor, in part because the home is the “fondest dream and largest investment, both emotional and financial, for Florida families.” In 1972, the Florida Supreme Court concluded that the application of Caveat Emptor to the purchase of a new home was anachronistic and not in congruence with modern home buying practices. Accordingly, the court held that the implied warranties of fitness and
However, in subsequent decisions, the court held that implied warranties did not extend to protect investors with regard to a seawall constructed on vacant land, “unless the seawall was part of or in connection with the construction of a home or in support of the residence.” The issue in Lakeview v. Maronda was whether the court was going to extend the implied warranty to cover infrastructure that provided service “essential to the habitability of the residence, including roads for ingress and egress, drainage systems to divert flooding, retention ponds to correct water flow damage, and underground pipes which are necessary for living accommodations.”
Because the developer, builder, and seller of new residential real estate is in the best position to have knowledge of, discover, and prevent defects in connection with the design, development, and construction of residential real estate, the Supreme Court approved of the 5th Circuit’s holding and adopted the “essential services” standard to determine whether a defect in an improvement beyond the actual home impacts the habitability and residential use of the home. As a consequence, the implied warranties of fitness and merchantability now apply to the improvements that provide essential services to a home.
Bill Martin is a former B-52 and B-1 pilot and senior attorney for the Federal Deposit Insurance Corporation. He is currently a partner in the law firm of Keefe, Anchors & Gordon in Fort Walton Beach. Bill is admitted to practice in the U.S. Tax Court and Court of Federal Claims.