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Appellate Court Declares Arbitration Provision in Home Builder’s Warranty Deed is Binding on Subsequent Homeowner

Home Warranty Update Person Holding Paper
The Second District Court of Appeals has recently declared that the arbitration provision contained within the warranty deed of a single-family home was binding on subsequent homeowners.

In Hayslip v. U.S. Home Corporation, Case No. 2D17-4372 (July 10, 2019), the plaintiff homeowners (the Hayslip’s) sued U.S. Home for allegedly inadequately and improperly installing a stucco system in their home in violation of the Florida Building Codes Act. U.S. Home built the home and conveyed its original owners through a special warranty deed that required binding arbitration under the Federal Arbitration Act for, among other things, all claims or disputes “related to… the Property”. The special warranty deed also provided that this covenant ran with the land, and that the original homeowners agreed to be bound by the deed’s terms and conditions “for itself, and its heirs, personal representatives, successors and assigns.”

The original homeowners subsequently conveyed the home to the Hayslip’s through a special warranty deed that provided the conveyance of the home was “[s]ubject to easements, restrictions, reservations and limitations, if any.”

Thereafter, the Hayslip’s filed suit against U.S. Home, and U.S. Home moved to compel arbitration per the special warranty deed it delivered to the original homeowners. The circuit court granted the motion to compel arbitration and the Second District Court of Appeals affirmed.

The Second District held that the original homeowner’s failure to sign the special warranty deed did not render the arbitration provision unenforceable because the original homeowners had notice of all the original special warranty deed’s covenants and restrictions, and that by taking title to and possession of the home, they accepted the arbitration provision.

The Second District also held that the arbitration provision was not so personal that it would not be binding on future homeowners, like the Hayslip’s. Rather, the Second District reasoned that the covenant affected the occupation and enjoyment of the home, therefore, would “run with the land” and be binding on subsequent homeowners.  The Second District also noted that “courts are required to indulge every reasonable presumption in favor of arbitration, recognizing it as a favored means of dispute resolution.”

In closing, the Second District Court was clear that no Florida court had previously considered this issue, and that it was an issue of “great public importance.” As a result, the Second District certified this case as one that may be considered for further review by the Florida Supreme Court.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.