Implied Warranties in Florida: Essential Services

On July 11, 2013, the Florida Supreme Court adopted the “essential services” test in determining whether the implied warranty of fitness and merchantability applies to improvements such as infrastructure, drainage systems, retention ponds, and underground pipes.  Maronda Homes, Inc. of Florida v. Lakeview Reserve Homeowners Association, Inc., 38 Fla. L. Weekly S 573.  In deciding the case, the Florida Supreme Court resolved a split of authority between two Florida appellate courts, and addressed a recently-adopted Florida statute dealing with such improvements.  Compare Port Sewall Harbor & Tennis Club Owners Association, Inc. v. First Federal Savings & Loan Association of Martin County, 463 So. 2d 530 (Fla. 4^th DCA 1985) with Lakeview Reserve Homeowners v. Maronda Homes, Inc., 48 So. 3d 902 (Fla. 5^th DCA 2010); § 553.835, Fla. Stat.  While the Court’s ruling is subject to rehearing motion (and, therefore, not yet final), it is an important holding that could significantly affect Florida’s construction and design industry.

As a general matter, the test for determining a breach of the implied warranty of fitness and merchantability is whether the premises meets ordinary, normal standards that are reasonably expected of living quarters of comparable kind and quality.  Maronda Homes, Inc. of Florida v. Lakeview Reserve Homeowners Association, Inc., 38 Fla. L. Weekly S 573.  In other words, the warranty is breached if the home is rendered not reasonably fit for the ordinary or general purpose intended.

In Maronda, a homeowners association brought implied warranty claims against the builder/developer that performed infrastructure and site work at the subdivision.  After the association assumed control of the subdivision, it experienced significant drainage problems, flooding, and other damages caused by the infrastructure problems.  These problems included failures of storm drains and problems with retention ponds.  The association alleged the builder/developer was liable for breaching the implied warranty of fitness and merchantability for defectively designing and constructing the subdivision’s infrastructure, resulting in the above-referenced problems.

The builder/ developer in Maronda, on the other hand, argued the implied warranty of fitness and merchantability did not extend to construction and design of infrastructure, roadways, drainage systems, retention ponds, underground pipes, or any other common areas in a subdivision because those structures do not immediately support the residences.  While the trial court agreed with the builder/developer’s argument at the summary judgment stage, the appellate court and, ultimately, the Florida Supreme Court sided with the association. The Florida Supreme Court found that the implied warranty of fitness and merchantability applied to the defects at issue in Maronda.

The Court in Maronda determined that components (like a drainage system, storm water pipes, and roadway systems) need not be physically attached to a residence to affect its habitability.  Instead, defects in components that provide “essential services” to the residences can result in breach of the implied warranty of fitness and merchantability.  These essential services, however, do not include items that provide convenience or aesthetic beauty, such as landscaping, sprinkler systems, or recreational facilities.

The Florida Supreme Court in Maronda also addressed the applicability and validity of §553.835, Fla. Stat. to the association’s claims.  Section 553.835 addresses liability for improvements, such as streets and drainage systems and provides “there is no cause of action in law or equity available to a purchaser of a home or to a homeowners’ association based upon the doctrine or theory of implied warranty of fitness and merchantability or habitability for damages” to such “offsite improvements.”  This statute took effect on July 1, 2012, during the pendency of the Maronda litigation. Consequently, the builder/ developer in Maronda argued that because this statute “applies to all cases accruing before, pending on, or filed after that date (July 1, 2012)” the association’s warranty claim against it was barred.  The Florida Supreme Court, however, disagreed with the builder/developer and held that the statute could not be applied retroactively to bar the claim.  According to the Court, such statutory application would offend due process by abolishing the association’s vested right to bring such a claim.