Home Warranties: Contractor and Owner Beware

Many new home purchases in Florida include some sort of home warranty agreement.  Home warranties in Florida are governed by Chapter 634 of the Florida Statutes.  As is usually the case, the “devil is in the details” in terms of what that home warranty does and does not cover.  Indeed, some home warranty agreements attempt to require a homeowner to waive and release certain types of claims.  Therefore, it is critical for owners and contractors to understand what a home warranty covers.

Florida law requires that a home warranty contract disclose any exclusions, restrictions, or limitations on the benefits offered or coverage provided by the warranty in boldfaced type.  Section 634.312(4), Fla. Stat.  That disclaimer language must also contain a statement, in boldfaced type, on the front page of the contract language that: “Certain items and events are not covered by this contract. Please refer to the exclusions listed on page [__] of this document.”   Moreover, with respect to waivers of implied warranties, any such disclaimers must be clear and specific as to those items the homeowner agrees are excluded.  McGuire v. The Ryland Group, Inc.

Home warranty agreements may attempt to disclaim certain statutory causes of action, like building code violations and/or deceptive trade practices claims.  As the court in Anderson v. Taylor Morrison of Florida, Inc. recently held, these types of exclusions are unenforceable as they are void against public policy.

In Taylor Morrison, the contractor provided a home warranty limiting the homeowners’ statutory remedies for defective construction.  The home warranty contained a disclaimer, stating the warranty was the exclusive remedy for any issues in design and construction, and contained a waiver of any claims whether in contract, tort, or otherwise.  When the homeowners sued the contractor for, among other things, violations of the Florida Building Code, the contractor moved to compel arbitration based on the dispute resolution provisions in the warranty.  The homeowners argued the arbitration provision was void against public policy because it barred recovery of all statutory and contractual claims.  The trial court granted the motion to compel and found the arbitration agreement was enforceable.

The appellate court in Taylor Morrison disagreed with the trial court’s findings and reversed.  The appellate court noted the arbitration provision and warranty disclaimer totally eliminated the homeowners’ claims for building code violations, which violated public policy.  As such, the warranty limitation and arbitration provision in it were unenforceable.

Homeowners must carefully read and understand the scope of any home warranty they obtain when they purchase a new home.  If there are disclaimers/exclusions to the warranty, they must be called out specifically in the warranty agreement.  Contractors must also understand how and to what extent certain warranties can be waived in home warranty agreements.  Indeed, attempting to exclude certain claims in a warranty agreement can have disastrous effects, like rendering some or all of the warranty agreement unenforceable.