Does a buyer’s release and waiver in exchange for cash settlement protect a builder from claims for latent defects?

Facts: A homebuyer enters into an agreement to purchase a home from a builder. After escrow closes, the buyer presents the builder with a list of construction defects and files a complaint against the builder with the Contractors State License Board. The dispute enters arbitration and the builder offers the buyer a cash settlement in exchange for their release of the builder’s responsibility for any current and future defects and waiver of the buyer’s claim to any remedy for any such defects. In the arbitration and settlement agreement, the buyer also waives protections under the California Civil Code which state that a buyer’s general release and waiver of builder liability does not extend to defects not known or suspected to exist at the time of settlement. Several years after the settlement, the buyer discovers a significant construction defect in the home’s roof.

Claim: The buyer seeks money losses from the builder to pay for the roof repairs, claiming their release and waiver of the builder’s liability in the settlement agreement was void as against public policy since the Civil Code section referenced in the settlement agreement specifically prohibits a homebuyer’s ability to waive their right to claims based on defects unknown and discovered later, and the release and waiver was unenforceable as it was in exchange for repairs.

Counterclaim: The builder seeks to avoid paying money losses to the buyer for the roof repairs, arguing that the buyer not only released the builder of liability and waived their right to make claims but also waived their Civil Code protections barring waivers of claims for unknown defects, and that the release and waiver was valid since it was in exchange for a cash settlement used to make repairs and not for repairs themselves.

Holding: A California Court of Appeals holds that the buyer is not entitled to money losses from the builder for the construction defects discovered in the roof since the buyer willingly released the builder of responsibility, waived their right to claims for any defects discovered after the settlement agreement and waived their statutory protection from unintentional release and waiver of unknown defects, and the release and waiver was valid as it was in exchange for a cash settlement and not for repairs. [David Belasco v. Gary Loren Wells et al. (2015) 234 CA4th 409]