In an appelate ruling last month the PA Superior Court rules that subsequent purchasers are not bound to arbitrate with builders over warranty issues if they do not sign to be so bound.
This affirmed an earlier ruling from August 2019.
This will affect tens of thousands of PA homeowners and is good news for those who wish to bring claims against a builder into court. However, for builders it is bad news as they hoped to have these claims heard at arbitration.
This case came about because of claims against a national builder. The decision involved homes constructed and built between October 2002 and January 2005. Seperate from the agreement of sale the builder offered each "homeowner" a written 10 year warranty for repairs.
The warranty defined the homeowner as the original purchaser, the first person to whome the house is sold. It included future homeowners in its definition but only if they signed a form called a Subsequent Home Buyer Acknowledgement Form. The original warranty included a mandatory arbitration clause preventing any homeowner from bringing construction claims against the biuilder to court.
But between 2005 and 2016 all the 30 original "homeowners" sold their homes and the buyers did not sign the Subsequent Home Buyer Acknolwedgement Form. Those 30 subsequent owners sued the builder and a window manufacturer for purported construction defects.
The builder claimed they had to arbitrate. However, the subsequnet homeowners disagreed. They agreed they received a transferable warranty, but one of them had signed the acknowledgement form.
The Superior Court agreed and they were not bound to arbitrate as that obligation did not transfer to them when they received the transferable warranty.
This means that any subsequent owners who have not signed a form allowing themselves to be bound by arbitration can take any claims they have to court rather than having to go to arbitration.
The national homebuilder is asking the PA Supreme Court to give comment on these rulings and so it could change the outcome. So PA homebuilders and homeowners need to keep an eye on this case to see how it plays out.
For the full story by Max O'Keefe of Lamb McErlane PC go to Vista Today