In Osborne v. Drees Homes of Fla., Inc., a home builder deeded a built home to original buyers by a warranty deed in December 2012. No. 5D2023-2978, 2024 WL 4575415 (Fla. 5th DCA Oct. 25, 2024). In addition to the deed, the Parties entered into a purchase and sale agreement that contained a limited warranty which contained a provision to arbitrate disputes “regarding a defect, problem or difficulty of any kind relating to the home.” Id.

The limited warranty was broken down into one-year and two-year coverage provisions and a ten-year structural coverage provision which only applied to “major structural defects.” Id. For an issue to qualify as a major structural defect, all the following conditions had to be met:

1. Actual physical damage to one or more of the load-bearing segments of the home;
   
2. Causing the failure of the major structural components;
   
3. Which affects its load-bearing function to the degree that it materially affects the physical safety of the occupants of the home.

Id.

In 2016, subsequent buyers purchased the property and were assigned all rights under the purchase and sale agreement. In April 2021, the subsequent buyers filed suit and alleged the home was suffering from negligent and faulty stucco, paint, and window installation and filed suit. Notably, stucco, paint, and windows were all mentioned as being covered under the one-year coverage provision and were not deemed to be major structural defects.

In response, the home builder filed a motion to compel arbitration based upon the arbitration provision of the contract. The trial court granted the home builder’s motion; however, the ruling was overturned on appeal by the Fifth District Court of Appeals of Florida.

In its ruling, the Fifth District Court of Appeals held the subsequent buyers were only assigned the ten-year limited warranty for structural coverage because two years had passed at the point of the assignment. In other words, the structural coverage was the sole remaining warranty the original buyers had to assign because no other warranty periods were active at the time of the assignment. As the subsequent homeowners only alleged issues was with the stucco, paint, and windows, the Court determined no “major structural components or load bearing functions had been affected;” thus, these alleged defects were excluded from the limited warranty’s ten-year structural coverage. Id. As a result, the Fifth District Court of Appeals reversed the order compelling arbitration and remanded to the trial court.

When attempting to compel arbitration, contractors should pay close attention to the scope of such contractual provisions.  Be sure to draft arbitration provisions which are broad enough to encompass all claims, as most State Courts will bend over backwards to deny a Motion to Compel Arbitration.