A Not So “EASY COME,” but a Very “EASY GO” – No Implied Warranties for Off Site Improvements for Homeowners Associations

For some time now condominium and cooperative associations alike benefited from the implied warranty of habitability for construction defect damages.  While these rights are codified in Florida Statutes Chapter 718 (the “Condominium Act”) and Chapter 719 (the “Cooperative Act”), there is no similar codification in Chapter 720 (the “Homeowners’ Association Act”).

In plain English, and loosely stated, the “implied warranty of habitability” means that the home, as built, is reasonably fit for its intended purpose (i.e., that the home is suitable to live in).  But, just how far does the “home” extend?  In other words, if an off-site improvement, such as the roadways or drainage system, falls victim to a construction defect, does that mean the home is unsuited for occupancy?  While a court said “Yes”, the Florida Legislature and the Governor said “No”.

In July 2012, in Lakeview Reserve v. Marondo, the 5th District Court of Appeals recognized, and thus judicially created, implied warranties for off-site homeowners’ association improvements. The sole issue in the case was whether the   homeowners’ association could maintain a claim for breach of the common law implied warranties of fitness and merchantability, also referred to as a warranty of habitability, against a builder/developer for defects in certain off-site improvements including roadways, drainage systems, retention ponds and underground pipes in a residential subdivision?

In Lakeview Reserve, the Association filed a complaint against the Developer for breach of the implied warranties of habitability based on latent defects (a fancy legal term that, in plain English, means “hidden defects”) in the subdivision’s common areas.  Specifically, it claimed that the roadways, retention ponds, underground pipes, and drainage systems throughout the subdivision were defectively constructed.  The Developer filed a “motion for summary judgment” (another fancy legal term that means there are no disputed facts and the party that filed the motion believes it is entitled to a verdict in its favor based on the application of existing law), arguing that the common law implied warranties do not extend to the construction and design of off-site improvements in a a subdivision, because these structures do not immediately support the home(s).  The trial court agreed with the Developer but, on appeal, the 5th DCA reversed the trial court’s decision and ruled in favor of the HOA.  Then, on April 27, 2012, House Bill 1013 was signed into law by Governor Scott, which killed the recently created judicial remedies.

However, and importantly, all is not yet lost.  House Bill 1013 made patently clear that both the HOA’s and the purchaser’s of homes within them have other existing rights to pursue causes of action arising from defects based on contract, tort or statute.  In the end, what does all of this mean to your HOA?  It simply means that if an off-site improvement is the subject of a construction defect, such as an improperly built drainage system, an HOA and/or a member can still bring a cause of action against the developer for such things as failure to build the system as designed, etc., but the HOA won’t have the ability to include an additional cause of action for damages to off-site improvements that stem from a breach of the implied warranty of habitability.

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