Can a Home Builder Disclaim Implied Warranties of Workmanship and Habitability?

In a recent Arizona Court of Appeals case, Zambrano v. M & RC II LLC, 2021 WL 3204491 (7/29/2021), the Court of Appeals addressed the question whether a home builder’s attempt to disclaim implied warranties of workmanship and habitability was effective.  In that case, the buyer initialed the builder’s prominent disclaimer of all implied warranties, including implied warranties of habitability and workmanship.  After the purchase, the buyer sued the builder, claiming construction defects.  The builder moved for summary judgment, seeking enforcement of the disclaimer of warranties.  The trial court granted the builder’s motion for summary judgment, thereby enforcing the disclaimers.  The buyer appealed.

The Court of Appeals addressed the question whether – as a matter of public policy – the implied warranties of workmanship and habitability were waivable.  The Court of Appeals started the analysis by noting that the Arizona Supreme Court had, in a 1979 case, judicially eliminated the caveat emptor rule for newly built homes.  The court further noted the long history of cases detailing the public policy favoring the implied warranties.  But the court also noted the competing public policy of allowing parties to freely contract; explaining that the usual and most important function of the courts is to maintain and enforce contracts rather than allowing parties to escape their contractual obligations on the pretext of public policy.

In weighing the competing public policies, the court reversed the trial court, holding: “As we study the scales, we conclude the public policy supporting the implied warranty clearly outweighs the freedom-of-contract interest in the waiver’s enforcement.  A new home buyer cannot waive – and a builder cannot disclaim – the implied warranty of workmanship and habitability.”  The Court of Appeals also noted that further guidance might come from the Arizona Supreme Court. Thus, the Court of Appeals’ answer to the question might not be the final answer.