Arizona residential construction and single-family home production is growing at a rapid pace. Just as fast as the homes are sold, homeowners are seeking warranty repairs from their homebuilders.
Despite having strong purchase documents with express warranty language, the Arizona Supreme Court, in Zambrano v. M & RC, II LLC, 254 Ariz. 53 (2022), adopted a bright-line rule that, regardless of the contract, the implied warranty of workmanship and habitability (implied warranty) cannot be disclaimed or waived under any circumstance. The Arizona Supreme Court opinion provides clear guidance of the law in this area on the scope of the implied warranty in contracts between homebuyers and builders/vendors, specifically on the issue of whether an express warranty can negate and effectively waive the common law implied warranty, which is a definitive violation of public policy.
The Zambrano decision involved a licensed real estate broker who bought a new single-family home for herself in a newly constructed, master-planned community in Surprise, Arizona. Zambrano, the buyer, entered into a valid sales contract with Scott Homes, the homebuilder.
The contract contained a standalone, 45-page pre-printed form express warranty. The express warranty was to be the “only warranty applicable to the home.” The contract further clarified that the buyer was expressly disclaiming (and, thus, waiving) the implied warranty.
The sales documents and express warranty were signed and authorized by Zambrano. A short time later, the home developer alleged “design and construction defects” that were “either time barred or outside the coverage” of the express warranty. Zambrano filed suit for the alleged defects based on the implied warranty. Scott Homes filed summary judgment based on Zambrano’s waiver and disclaimer of the implied warranty in the purchase agreement. The trial court granted summary judgment, and the matter was appealed up to the Arizona Supreme Court.
State Supreme Court Weighs In
The Arizona Supreme Court decided the issue of whether an express warranty can essentially trump the common law implied warranty. The court adopted a bright-line rule holding that any disclaimer or waiver of the implied warranty is unenforceable as a matter of law and as a matter of public policy.
The court further held that the implied warranty could not be disclaimed or waived unless and until the Arizona legislature expressly declared it to be a right that buyers could waive or disclaim. The court concluded that “[e]nforcing the disclaimer and waiver here would grievously injure homebuyers and the public welfare as doing so would likely spell the end of the implied warranty….”
The court acknowledged that it had “considered leaving open the possibility that a sophisticated homebuyer in some settings could negotiate to waive the implied warranty,” but rejected that idea. The court observed that “it would be next to impossible for courts to decide whether a homebuyer was sophisticated enough,” and the court nevertheless concluded that “[e]ven sophisticated homebuyers need the protection offered by the implied warranty.”
Interestingly, the dissent relied upon long-established public policy behind the freedom to contract, and considered a “sophisticated” homebuyer who “seeks to purchase a customized home that presents specific risks for which the homebuyer prefers to negotiate unique coverage in an express warranty.” The dissent went further to consider “a homebuyer who prefers a contractual term that is less protective than the implied warranty as to one section or component of the home, in exchange for greater and broader protection in another area of the home,” and a homebuyer who “negotiate[s] a reduced purchase price in exchange for a warranty more limited than the implied warranty.”
However, the majority of the court emphatically deferred any change in the law on circumventing the common law and public policy implications of implied warranty to the legislature.
The major takeaway is that, without legislative intervention, the implied warranty cannot be waived, disclaimed, or modified under any circumstances in Arizona, irrespective of a valid contract and express warranty.