Legal

Arizona Appeals Court affirms implied warranties for homebuyers in new ruling

Posted 7/31/21

PHOENIX — Home builders can't escape their legal responsibility to create "habitable'' houses by instead giving buyers a different kind of warranty, the state Court of Appeals has ruled.

In …

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Legal

Arizona Appeals Court affirms implied warranties for homebuyers in new ruling

Posted

PHOENIX — Home builders can't escape their legal responsibility to create "habitable'' houses by instead giving buyers a different kind of warranty, the state Court of Appeals has ruled.

In a new ruling, the judges acknowledged Tina Zambrano signed an agreement with Scott Homes Development Co. that provided for a "limited warranty'' on the property.

More to the point, that document said that warranty "is the only warranty applicable to the purchase of the property.'' And it said that she, as the buyer, "waived any right to any other express or implied warranties dealing with things like habitability and workmanship.''

But Judge David Gass, writing for the three-judge panel, said her signature on that document is irrelevant.

"A new home buyer cannot waive — and a builder cannot disclaim — the implied warranty of workmanship and habitability,'' he wrote. "This prohibition precludes a waiver even when, as here, the building gives an express warranty in consideration for the waiver.''

And Gass said public policy supporting the idea of an implied warranty outweighs any argument about the freedom to contract.

Spencer Kamps, lobbyist for the Home Builders Association of Central Arizona, said this is the first court ruling of its kind saying sellers and buyers cannot waive the warranty rights they have under Arizona law by providing something else.

But Kamps, whose organization was not a party to the litigation, pointed out the implied warranty law is essentially a remedy for homebuyers created not by the legislature but instead by the Arizona Supreme Court. And he noted the appellate judges said that means they are bound by those precedents unless and until the top state court revisits the issue.

James Holland Jr. said his client Homes was not seeking to avoid being responsible for any issues, saying it recognizes it has an obligation to build quality homes.

"It just wants to define everyone's rights ahead of time to avoid disputes and misunderstandings,'' he said, something that can be done with a specific warranty, spelled out in print, versus a more generic implied warranty.

Holland said he has not yet discussed the prospect of an appeal with his client.

According to court records, Zambrano sued under the implied warranty law when she claimed construction defects including popped nails and defects affecting the home's foundation, such as soil preparation, grading and drainage.

The trial court tossed her lawsuit because she had waived her right to all implied warranties. But Gass said it's not that simple.

On one hand, he said, Arizona has a policy of allowing parties to enter into contracts without interference.

"Accordingly, Arizona courts decline to enforce a contract terms on public policy grounds only when the term is contrary to an otherwise identifiable public policy that clearly outweighs any interests in the term's enforcement,'' the judge wrote.

And that, Gass said is what is at issue here, saying this isn't a contract between two equally knowledgeable parties.

"Builders hold themselves out as skilled in the profession,'' he wrote.

"Modern construction is complex and regulated by many governmental codes,'' Gass continued. "Home buyers are generally not skilled or knowledgeable in construction, plumbing, or electrical requirements and practices.''

He acknowledged some states do allow homebuyers to waive their rights under implied warranties.

But he and his colleagues sided with other states that have rejected this trend after concluding the whole purpose of the implied warranty is to protect a homeowner from defects that may be hidden or not appear obvious at the time of the sale.

"As we study the scales, we conclude the public policy supporting the implied warranty clearly outweighs the freedom-of-contract interest in the waiver's enforcement,'' Gasss wrote. And that makes it illegal for a buyer to waive that implied warranty even if she or he gets something else.

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