Myths about Common Law Implied Warranties and the effect of the anti-Maronda Legislation
On Tuesday I had the pleasure of being in Tallahassee and testifying at the House Civil Justice Subcommittee meeting against HB 1013 (the House equivalent of SB 1196). The Senate Judiciary Committee meeting scheduled for that afternoon was canceled and has been rolled over to next week. Although my opinion on this legislation can be found here, here, here, here and here, I was interested in hearing the remarks of the Bill’s sponsor and others in support of the bill. After hearing those comments and having subsequent discussions with individuals supporting the bill it became clear to me that there existed several myths about common law implied warranties and the need for legislative action which needed to be addressed.
Myth 1: The legislature must act immediately.
This push by certain legislators to pass this bill by the end of this session ignores that the Supreme Court heard oral argument on the Lakeview case in the first week of December. The issue the Supreme Court is considering is common law implied warranties. By definition "common law" relates to case law not statutory interpretation, and the Supreme Court will determine if the opinion of the 5th District Court of Appeal was in fact errant or consistent with the common law.
Myth 2: This is an example of the court legislating from the bench.
As noted above this is simply not the case. The entire concept of common law implied warranties arose in Florida caselaw to overcome another judicially created doctrine in caveat emptor. The Fifth District considered only the application of those same common law implied warranties. The Supreme Court will determine whether the Fifth District’s opinion fits with the existing common law.
Myth 3 – Common law implied warranties for common areas would damage the real estate market.
The first common law implied warranty for new homes was found in 1972 in the landmark decision of Gable v. Silver. The legislature then adopted the language of Gable in creating, what is now, section 718.203 dealing with implied warranties. Condominiums in Florida have both common law warranties and a statutory warranty right now. I would defy anyone to show me how the existence of these warranties has deterred, or even slowed down, condominium development in the state. Presumably those who believe that legislating away these warranties will bring about a healthy real estate market also believe that car sales would boom but for those pesky 3 year/36,000 mile warranties.
Myth 4: Homeowners and associations have numerous other causes of action.
The reality is that most claims for defective common areas in HOAs involve: 1- Breach of common law implied warranty; 2- Negligence; 3- Breach of Building Code pursuant to section 553.84. The reality is that negligence causes of action are often limited (improperly in my opinion) due to the application of another judicial doctrine, "the economic loss rule (ELR)." While a full review of the ELR is not possible here, simply put this doctrine wipes out negligence claims where the court believes there is privity between the parties or the defect does not damage other property. As for breach of the building code, the building code deals primarily with vertical structures and is very limited on common area site work.
Myth 5: Homeowners have no property interest in the common areas.
This is not true. First, homeowners have easement rights on the common areas which by black letter law is a property right. Second, as noted here, HOA membership is mandatory, as is the requirement to repair defective commons areas, so the owners bear the full brunt fo repairing the defective common areas. As such, the owners have a strong interest in the common areas as these obligations were part of the property rights that were transferred with the title of their home.
Myth 6: Developers would have endless liability on HOA property if the Lakeview decision stands.
Under Section 95.11(3)(c), claims for defective consruction must be brought within 4 years of when the defect was discovered, or should have been discovered with the exercise of reasonable diligence, but no more than 10 years "after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest."