Below is the text of a letter sent today by Alan Becker, Esq., a founding shareholder of the Becker & Poliakoff, asking Governor Scott to veto HB 1013 which wiped out common law implied warranties for common area property. We are requesting that you join us and ask Governor Scott to veto this legislation.
Dear Governor Scott:
I am writing to you with regard to the recently passed HB 1013 (companion SB 1196, “the legislation”) which eliminates common law implied warranties as it pertains to common areas of all communities in the state and asking that you veto this legislation. I was a member of the legislature when what is now section 718.203, providing statutory implied warranties for condominiums, was enacted and am a founding member of Becker & Poliakoff, P.A. which represents close to 4,000 community associations in the state of Florida. With that background, I can state that this legislation is absolutely harmful to consumers, will result in greater costs for Florida’s homeowners and lead to more foreclosures.
I want to assure you that this is not a question of reducing regulation on business. There is no agency regulation dealing with this and no statutory regulation. This is an effort to overturn decades of common law to benefit a few at the expense of many others.
The legislation is purportedly in reaction to the Fifth District Court of Appeal’s decision in Lakeview Reserve Homeowners v. Maronda Homes, which proponents of the legislation characterize as a departure from 40 years of law on common law implied warranties. It was not. Such action ignored the fact that the Fifth District case was appealed and that the Supreme Court heard oral argument on December 6, 2011. The issue of common law implied warranties is rightfully within the purview of the courts. Without waiting for the Supreme Court, the legislature abrogated 40 years of implied warranty case law. Florida’s homeowners will be far worse off.
Despite the concern for the “fragile real estate market” as stated in the preamble, the reality is that most new residential construction in this state occurs in planned communities. These planned communities may be a single subdivision with roads, sidewalks, drainage and sewers to larger master communities with multiple subdivisions, containing hundreds or thousands of lots and homes with appurtenant amenities, roadways, underground piping, rete ntion ponds, drainage areas and utilities. These complex arrangements are used extensively for the purpose of marketing and selling residential dwellings. These common area improvements are necessary in order to utilize the residential dwellings for their intended purpose, and part and parcel of the sale of the individual residential dwellings.
Proponents of the legislation argue that the existence of common law implied warranties damage the real estate market. This ignores the history of such warranties and is total nonsense. The real estate markets for the past 40 years have gone up and down with the economy and the existence of warranties has never been a factor in that rise or fall. The first common law implied warranty for new homes was found in 1972 in the landmark decision of Gable v. Silver. In that case the Supreme Court, which was in the early 70s a fairly conservative Supreme Court, stated:
Undoubtedly, the laws regarding the liability of a builder-vendor of new houses is changing. The…cases indicate a growing trend away from caveat emptor and toward the theory of implied warranty. The movement brings the law much closer to the realities of the market for new homes than does the anachronistic maxim of caveat emptor. “The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times. Ancient distinctions which make no sense in today’s society and tend to discredit the law should be readily rejected.”
The legislature later adopted the language of Gable in creating, what is now section 718.203, providing statutory implied warranties for condominiums. Condominiums in Florida have had both common law warranties and a statutory warranty for 35 years and there has been a significant increase in development of condominiums, certainly not a decrease, since these warranties came into effect. It is the existence of such warranties, along with other consumer protections, which has protected homeowners in the purchase of their condominium units and homes which has helped this increase in development. Do we really want to return to the anachronistic days of caveat emptor and throw the law (and the reputation of this state) back to a time that brought discredit to the law?
With no common law implied warranties, defects in the common areas can expose individual homeowners to significant liability. In most planned communities owners are obligated to be members of the homeowners’ association. Such membership is mandatory. If there are defects to the common areas then the association has an affirmative obligation to fix the defects and will necessarily incur repair costs. The association’s only revenue is the assessments paid by its members who in actuality bear the repair costs. If the assessments are not paid the homes will be foreclosed. In short, someone could lose their home for not paying to repair a common area that, under the new legislation, has no warranty protection if built or designed improperly.
Finally, proponents of the legislation argue that the implied warranty will expose developers to endless liability on HOA property if the Lakeview decision stands. This is simply inaccurate. Under Section 95.11(3)(c), there is a four year statute of limitations, and a ten year statute of repose, for construction defects.
As can be seen from the above, this legislation is anti-consumer, anti-homeowner and will result in homeowners being burdened with shoddy common areas for which they have no recourse. No other class of citizen is left entirely without recourse for such problems with any product or service. Homeowners will be assessed for repairs to these common areas and a number of them, who are now barely making it, will be forced into foreclosure as the legislation shifts the costs of repairs from those who have historically had that obligation to those least able to bear the costs.
I respectfully ask that you veto HB 1013 for the benefit of Florida’s homeowners.
Very truly yours,
Alan S. Becker
For the Firm
Governor Scott signed HB 1013 into law late last week. The legislation will take effect on July 1, 2012, and attempts to wipe out all common law implied warranties, including for pending litigation. I think there are significant constitutional issues as applied to pending claims. We may find out quickly as the Lakeview v. Maronda case is still pending before the Supreme Court. The Court may be able to address the scope of the warranty and also the constitutionality issue at one time. It will be an interesting decision but may be one of limited value going forward..jpg)
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