Arbitration of §553.84 Claims Under Home Warranties

One of the most common statutory claims in construction defect litigation arises under section 553.84, Florida Statutes, for failure to comply with the Florida Building Code. Many homeowner warranties require arbitration, but how do such provisions affect 553.84 claims, subsequent purchasers, and homeowners associations?

Because section 553.84 does not expressly prohibit arbitration, homeowners are required to arbitrate such claims if their home warranty so requires. See Reeves v. Ace Cash Express, Inc., 937 So. 2d 1136, 1137 (Fla. 2d DCA 2006) (courts examine the relevant statue and arbitration provision for an intent to preclude arbitration in determining arbitrability). Section 553.84's language creating a cause of action "in any court of competent jurisdiction" is likely insufficient to preclude arbitration. See Aztec Med. Servs., Inc. v. Burger, 792 So. 2d 617, 621 (Fla. 4th DCA 2001) (legislative intent to preclude arbitration must be unambiguously stated in the statute); see also Sharpe v. Lytal & Reiter, Clark, Shapre, Roca, Fountain, Williams, 702 So. 2d 622, 624 (Fla. 4th DCA 1997) (the phrase "the court shall adjudge a dissolution" in §620.715(1) of Florida Partnership Act did not preclude arbitration).

Subsequent purchasers, who are third-party beneficiaries of a home's limited warranty, can be bound by its arbitration provision. In Pulte Home Corp. v. Bay at Cypress Creek Homeowners' Association, Inc., 118 So. 3d 957, 958 (Fla. 2d DCA 2013), a warranty's arbitration provision compelled a homeowners association to arbitrate claims against the homebuilder for building code violations under section 553.84 despite the association's decision not to sue for breach of warranty. The court held that the arbitration agreement applied to statutory claims and breach of warranty claims and that subsequent purchasers were bound to the arbitration agreement, because "the subsequent purchasers are permitted to assume [the warranty] in favor of the initial purchasers," and are therefore third-party beneficiaries to the warranty who can be compelled to arbitrate. Id. Thus, the court reversed the trial court's denial of the builder's motion to compel arbitration.

Similar logic applied when the homeowners association brings a claim on behalf of individual homeowners. In Pulte Home Corp. v. Vermillion Homeowners Association, Inc., 109 So. 3d 233, 235 (Fla. 2d DCA 2013) the court held that any claims for damages to roofs and home exteriors that the plaintiff-homeowners association brought on behalf of individual homeowners were subject to the arbitration provision contained in the homebuilder's limited warranty, even though the association had not signed a purchase agreement or limited warranty. The limited warranty required the homeowners to arbitrate these claims. Thus, the association, proceeding on behalf of those homeowners, should also be required to arbitrate its defect claims, because the association's rights are not superior to those of the individual homeowners. Id. However, the court held that the association could allege claims involving its own property. Those claims would not be subject to arbitration.

In sum, Florida law suggests that homeowners, subsequent purchasers, and even homeowners associations can be compelled to arbitrate building code violations pursuant to the initial purchaser's home warranty.

This article was originally published by The Hillsborough County Bar Association.