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Despite Void Buy-Back Provision Court Orders Parties to Arbitration

In a decision of particular interest to purchasers of new homes, including those in planned communities, Florida’s Fifth District Court of Appeal recently ordered home buyers and the builder of their homes to arbitration to resolve construction defect claims.

After experiencing water intrusion and identifying other alleged construction defects, four buyers brought suit against the builder of their homes. The lower court found that a “buy back” provision was unenforceable and could not be severed from the respective new home construction contracts, and denied the builder’s motion to compel arbitration accordingly. The arbitration clause required mandatory arbitration before a licensed “general BUILDER” but gave the builder the option, in lieu of arbitration, to purchase the property back at a calculated “total price paid” based upon the original contract price plus designated additional amounts such as closing costs and upgrades/change orders.

The Fifth District disagreed with the lower court and ruled that the “buy back” provision could be severed, resulting in an enforceable contract with a valid arbitration provision. The appellate court looked to the broad language of the arbitration provision to glean an intent to arbitrate all claims with a “significant relationship” to the contract, such as those raised by the purchasers regarding the builder’s obligations under the contracts. The purchasers must now arbitrate before a “general BUILDER.”

This decision illustrates the lengths that Florida courts will sometimes go to enforce arbitration agreements. It is therefore critical that before entering into a contract with a mandatory arbitration provision (especially those involving new construction or the purchase of real estate) a purchaser consult with experienced counsel so that they understand the provisions of the contract they have been asked to sign and the prospects of what might happen in case of a later dispute.

Vanacore Constr., Inc. v. Osborn, 5D18-598, 2018 WL 6579205, (Fla. 5th DCA Dec. 14, 2018)

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