Recent court ruling affects homeowners' mandatory arbitration

Real Estate Agent with Long & Foster Real Estate Inc 610-225-7400 PA License - AB067198

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.

New home

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



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Nick Vandekar
Nick is a Tredyffrin Easttown Residential and Commercial REALTOR selling The Main Line, Chester, Delaware and Montgomery Counties.

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Raymond Henson, SRES, GRI
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA

That is an interesting situation.  I could see both sides of the argument, but if the homeowners did not sign the acknowledgment, it does seem like they should not be bound by it. 

May 07, 2020 03:58 PM #1
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Something I really never gave any thought to, Nick... very interesting and very important. Not ever aware there was a subsequent home buyer acknowledgment form around to sign... and not sure I'd recommend to a buyer of mine to give away their rights that way.

May 08, 2020 05:58 AM #2
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi Nick - there is seemingly no end to need for addenda, forms and miscellany.  If there is such an end to it, it's unlikely we will ever see it in our lifetime.  But it's kinda nice to think of the possibilities. . . 

May 08, 2020 06:26 AM #3
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Nick, we in Denver had this same issue years ago, and has created lots of issues.

May 10, 2020 07:07 AM #4
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Tredyffrin Easttown Realtor, Philly Main Line
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