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Baby Steps in Florida

Proposed amendments to Florida’s Right to Repair Act are a good start, but not enough

June 03, 2021 Photo

Florida’s Right to Repair Act (Florida Statutes Chapter 558 et seq.) contains a glaring omission that has frustrated both homebuilders and insurers since the statute was first signed into law in 2003: The act does not require homeowners who settle with, or obtain a judgment against, their homebuilder in connection with an alleged construction defect to actually spend the proceeds from that resolution on repairing the defect.

Indeed, homeowners have been known to spend these proceeds on luxury items, vacations, new cars, and practically anything else other than repairing the alleged defect that prompted the claim. When homeowners elect not to repair alleged construction defects in their home, it potentially exposes homebuilders, subcontractors, and insurers to additional liability to future owners of their home.

By way of example, a homeowner asserts a construction-defect claim against a homebuilder four years after the home was built. The parties resolve the claim pre-suit, but the homeowner does not use the settlement proceeds to repair the claimed defects. The home is then sold, twice. Eight years after the home was built, a subsequent owner brings the same defect claim against the homebuilder. Scrupulous builders may require disclosure of claims to subsequent purchasers, but the enforceability of such disclosure requirements, when a home has been resold several times, is tenuous.

Because Florida has a 10-year statute of repose to bring a construction-defect claim, the subsequent owner’s claim is otherwise timely. Although the homebuilder already resolved the claim with the first owner, the alleged defect persists because it was never repaired, through no fault of the homebuilder. At the same time, the new homeowner is arguably within her rights to bring her own defect claim.

A bill in the Florida House of Representatives appears to take aim at this problem through amendments to Florida’s Right to Repair Act, but at the end of Florida’s 2021 legislative session, the bill remained in the Judicial Committee. And while these amendments are a step in the right direction, they are merely a baby step. Without additional amendments requiring homeowners to spend the proceeds they receive from a construction defect claim on repairing the defect, homebuilders and insurance companies will continue to be stuck between a rock and a hard place.

The Proposed Amendments

Florida HB 21 (2021) sought to amend the Right to Repair Act in three important ways.

First, it amends §553.84 regarding civil actions under the act. New Subsection 1 would define a “material violation,” as that term is used in the act, to mean “a violation that exists within a completed building, structure, or facility which may reasonably result, or has resulted, in physical harm to a person or significant damage to the performance of a building or a system.” New Subsection 3 would permit a person or a party to bring a legal action under the act “only after the person or party has submitted a claim for the alleged material violation under an applicable warranty and the warranty provider denies the claim or offers a remedy that is unsatisfactory to the person or party within the time limits provided in the warranty.”

Second, HB 21 amends §558.004 regarding the requisite notice and opportunity to repair required under the act. Subsection 1(a) would require that, before a notice of a construction-defect claim is served on a homebuilder or contractor, that claim must be submitted as a warranty claim to the warranty provider. If the warranty provider denies the claim or offers an unsatisfactory remedy, then the homeowner can assert a claim against the homebuilder or contractor. Subsection 1(b) would require that notices of claim contain, among other things, at least one photo of the alleged defect or “evidence” of it, and a declaration by the signer, under penalty of perjury, that the facts alleged are true to the best of their knowledge and belief. Subsection 1(c) states that if a person willfully includes a false statement in the notice of the claim, they will have committed perjury.

Finally, HB 21 adds a new section, §558.006, which requires a settling claimant to notify mortgagees or assignees with a security interest in a property that a construction-defect claim brought under the act has resulted in a monetary settlement or judgment in favor of the claimant. This notice must be given within 90 days of the settlement or judgment.

Too Little, But Not Too Late

The amendments to §553.84 and §558.004 attempt to flush out dubious defect claims. However, though §558.006 attempts to curtail homeowners’ misuse of construction-defect settlement proceeds, it does not go far enough to end the practice. As previously noted, this misuse comes at the expense of builders and insurance companies that, as a result, could be subject to duplicative claims from subsequent owners for the same defect.

Yes, requiring homeowners to notify their mortgagees or assignees that a defect claim was brought and resolved forces them to tell someone about the claim. Perhaps someday there will be a requirement that such resolved claims are reported so that they appear in the chain of title during a title search. But, for now, all §558.006 does is require that a homeowner report the claim—it does not require that they repair the defect. Nor does it penalize a homeowner for noncompliance with the reporting requirement.

There are two easy additional legislative remedies here: Either require homeowners to repair a defect with the money they recover from the resolution of their defect claim, or require that they report such resolutions to their homeowners’ insurance company. If insurance companies begin dropping homeowners from their policies for not repairing these defects, or they refuse to renew coverage for these homeowners, homeowners will likely realize that their failure to use the proceeds of their defect claims to repair the defects has serious consequences.

Even with HB 21’s proposed amendments, more must be done by Florida’s legislature to force homeowners to actually repair their homes after their defect claims under the state’s Right to Repair Act are resolved.

About The Authors
Katherine Klapsa

Katherine L. Klapsa is a partner in Koeller Nebeker Carlson Haluck, LLP’s Miami and Orlando offices. 

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