REAL ESTATE: RESIDENTIAL REAL ESTATE: IMPLIED WARRANTIES OF FITNESS AND MERCHANTABILITY (HABITABILITY): ESSENTIAL SERVICES: DRAINAGE SYSTEMS; STANDING: HOMEOWNERS ASSOCIATION; SECTION 553.835, FLORIDA STATUTES, IS SUBSTANTIVE, RATHER THAN REMEDIAL, DOES NOT APPLY RETROACTIVELY, AND VIOLATES ACCESS TO THE COURTS: LEGISLATURE DOES NOT SIT AS A SUPERVISING APPELLATE COURT OVER DISTRICT COURTS OF APPEAL

Maronda Homes, Inc. of Florida v. Lakeview Reserve Homeowners Association, Inc., ___ So. 3d ___, 38 Fla. L. Weekly S573 (Fla. July 11, 2013)

The homeowners association sued the developer for breach of implied warranties of fitness and merchantability (also referred to as habitability) based upon the defective design and construction of “the subdivision’s infrastructure, roadways, retention ponds, underground pipes, and drainage systems.”  The developer filed a third party complaint for indemnity against a construction company.  The trial court entered summary judgment in favor of the developer and the construction company based upon the premise that “the common law implied warranties of fitness and merchantability do not extend to the construction and design of the infrastructure, private roadways, drainage systems, retention ponds, underground pipes, or any other common areas in a residential subdivision because those structures do not immediately support the residences.”  The Fifth District Court of Appeal reversed and held that the implied warranties of fitness and merchantability apply “to improvements to real property that not only support residences in a structural sense, but also apply to the improvements which provide ‘essential services’ for the habitability of the homes.”  Under the Fifth District formulation, a service is essential if the home would be uninhabitable without it.  The Fifth District certified conflict with the decision of the Fourth District Court of Appeal in Port Sewall Harbor & Tennis Club Owners Association, Inc. v. First Federal Savings & Loan Association of Martin County, 463 So. 2d 530 (Fla. 4th DCA 1985), which refused to apply the implied warranties of fitness and merchantability to defects in “undescribed” roads and drainage areas because the work did not involve “the construction of homes or other improvements immediately supporting the residences” and the warranties could not be invoked against a mortgage lender after foreclosure. The Florida Supreme Court adopted the Fifth District’s essential services analysis and disapproved the decision in Port Sewall to the extent that it was inconsistent with the supreme court’s decision.  The court held that “the defects in the real estate at issue here are part of a fundamental and essential support system for a complex infrastructure designed, constructed, and installed by the developers as a precondition to build the residential units and to obtain a certificate of occupancy for residential use.”  Moreover, the homeowners association possessed “standing to present a claim for breach of the implied warranties of fitness and merchantability, as a homeowners association has the legal right to institute an action on behalf of its members for matters that concern the members’ common interest.”  In direct response to the Fifth District decision, the Florida legislature adopted Section 553.835, Florida Statutes (2012), to limit implied warranties to damages to a home or a structure or improvement under the home’s lot.  Although the legislation purports to be retroactive, the supreme court held that it was not because the statute was “substantive and not remedial in nature” and impaired the common law rights that vested in the association when it sustained the damages in question before the effective date of the statute.  Furthermore, the court held that the statute “violates the right of access to the courts because it “abolishes a cause of action for breach of the implied warranties for ‘off-site improvements,’ which are defined to include any improvement or structure that is not located on or under a new home’s lot, and any improvement or structure that does not immediately and directly support the home’s habitability. . . .  This limitation would apply even if those defects directly produce damage on a homeowner’s land and breach the implied warranties on the homeowner’s land.  The statute even provides that the purpose of the law is to place limitations on the applicability of the doctrine or theory of implied warranty of fitness and merchantability, and to reject the decision by the Fifth District Court of Appeal in [this] case.  This is a clear violation of separation of powers because the Legislature does not sit as a supervising appellate court over our district courts of appeal.”  Justice Polston concurred in part and dissented in part, and Justice Canady dissented.