Arbitration Is Exclusive Remedy for Displeased New-Home Warranty Claimants, per N.J. Appellate Division

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In Frumer v. National Home Insurance Company,1 the New Jersey Superior Court, Appellate Division, held that arbitration was the exclusive remedy available to plaintiffs, pursuant to the terms of the plaintiffs' new-home buyer's warranty. The warranty at issue—which was a private warranty plan approved pursuant to the New Home Warranty and Builders' Registration Act2 (the "Act")—permitted the homeowners to elect at the outset whether to pursue a remedy for "workmanship/systems defect" claims under the warranty, or whether to pursue such claims through litigation. If a warranty claim is elected, the warranty plan states that disputes arising from a warranty claim are to be submitted to binding arbitration. The warranty further provides that arbitration is the exclusive remedy for a dispute over a "major structural defect" claim.

Although statutory new-home warranties issued pursuant to the Act permit homeowners to elect between either the warranty claim process or other legal remedies potentially available through litigation, approved private warranty plans—such as the one at issue in Frumer—need not provide an election of remedies and may limit the available remedy to arbitration.

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Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates, Construction Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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