This blog is the second in a series of blogs discussing the New Jersey Home Warranty and Builders’ Registration Act. This blog will provide an overview remedy preclusion under the New Jersey Home Warranty and Builder’s Registration Act. You can access previous installments of this series online here.

Nevertheless, as innocuous as the claims process sounds, the Act contains what can only be described as a death knell for homeowners who choose to proceed through the warranty program. Section 46:3B-9, known as the “election of remedies” provision provides as follows:

Availability of any legal remedy to owner; election of remedy. Nothing herein shall affect the other rights and remedies available to the owner. The owner shall have the opportunity to pursue any remedy legally available to the owner. However, initiation of procedures to enforce a remedy shall constitute an election which shall bar the owner from all other remedies. Nothing herein shall be deemed to limit the owner’s right of appeal as applicable to the remedy elected.

The significance of this provision cannot be under-emphasized. Should a homeowner decide to pursue a claim for defects under the warranty, he or she is thereafter statutorily barred and precluded from bringing a lawsuit against the builder. This means that the homeowner must pick at the outset whether to proceed under the Act i.e. mediation and arbitration, or pursue a legal remedy through the court system. It is either or and never both. See Marchak v. Claridge Commons, Inc., 134 N.J. 275, 280 (1993) (a new home buyer may seek recovery through one of two mutually exclusive mechanisms, “either (1) conciliation or arbitration, or (2) filing a lawsuit . . . . but not both”).

As the Appellate Division explained, once a homeowner opts for binding arbitration pursuant to the Act, all of the homeowner’s potential claims for damages against the builder, including common law fraud and alleged violations of the Consumer Fraud Act, are subsumed by the homeowner’s election of remedies under the Act. Konieczny v. Micciche, 305 N.J. Super. 375, 381 (App. Div. 1997). The Appellate Division emphasized that even initiation of the claims process is enough to trigger the election of remedies provision and bar the homeowner from all other remedies.