General Anti‑Assignment Clauses Do Not Bar Assignment of Accrued Implied‑Warranty Claims to HOAs

Introduction

In Pointe 16 Community Association v. GTIS-HOV Pointe 16, LLC, the Arizona Supreme Court resolved a recurring problem in construction defect litigation: whether a developer’s anti‑assignment clause in individual home purchase agreements prevents homeowners from assigning their accrued claims for breach of the implied warranty of workmanship and habitability to their homeowners’ association (HOA). The Court held it does not, because a clause prohibiting assignment of “this Agreement and the rights of Buyer hereunder” bars only assignments of the contract and the buyer’s performance rights under it—not the later assignment of accrued causes of action for damages arising from a breach.

The case arises out of alleged construction defects at the Pointe 16 Townhomes, a 67‑residence community in Phoenix developed by GTIS‑HOV Pointe 16, LLC (the developer) and built by K. Hovnanian Arizona Operations, LLC (the general contractor). After the HOA sued for defects, a majority of individual owners executed written assignments transferring their accrued implied‑warranty claims to the HOA. The developer argued those assignments were barred by the purchase agreement’s non‑assignment clause. The trial court agreed and dismissed the HOA’s implied‑warranty claim; the court of appeals affirmed. The Supreme Court reversed, clarifying Arizona law on the scope of anti‑assignment clauses and the assignability of implied‑warranty claims.

Summary of the Opinion

• Holding: An anti‑assignment clause that prohibits assignment of “this Agreement and the rights of Buyer hereunder” does not preclude homeowners from assigning their accrued claims for damages for breach of the implied warranty of workmanship and habitability to an HOA without the seller’s consent.
• Rationale: Arizona law treats breach‑of‑contract claims as generally assignable. The implied warranty of workmanship and habitability is imputed by law into home purchase contracts and breach of that warranty “sounds in contract.” However, the assignment at issue transferred not the agreement or “rights hereunder,” but an accrued cause of action for damages arising from breach—something distinct from contractual “rights.” The clause’s text and purpose (credit qualifications and pre‑closing performance) confirmed it did not reach post‑breach claim assignments.
• Disposition: The Court vacated portions of the court of appeals’ memorandum decision, reversed the trial court’s grant of summary judgment on the implied‑warranty claim, and remanded for further proceedings. The separate, granted issue regarding assignments as to the non‑party builder was deemed moot in light of the Court’s resolution of the first issue.

Analysis

Precedents and Authorities Cited

• Assignability in Arizona:
  • Webb v. Gittlen (2008): Modern Arizona law favors assignability of claims except for personal injury; absent contrary legislation, public policy guides exceptions. The decision situates implied‑warranty claims within the generally assignable class.
  • Deatsch v. Fairfield (1925) and Martinez v. Bucyrus‑Erie Co. (1976): Contract claims (choses in action ex contractu) are assignable, and an assignee acquires the assignor’s rights.
  • Highland Village Partners v. Bradbury & Stamm Constr. Co. (App. 2008): Parties may preclude assignment by contract, setting the analytical frame for reading the non‑assignment clause’s scope.
  • Certified Collectors, Inc. v. Lesnick (1977): An assignment (and, by extension, a contractual anti‑assignment) must identify the subject matter with sufficient specificity; this informs the Court’s requirement that a clause expressly cover claims if that is the intention.
  • Aetna Casualty & Surety Co. v. Valley Nat’l Bank (App. 1971) and Farmers Ins. Exch. v. Udall (App. 2018): The insurance “post‑loss” analogy—clauses barring assignment of “the policy” do not prevent post‑loss assignment of a claim for benefits—supports the rights-versus-claims distinction adopted here.
  • UCC analogue, A.R.S. § 47‑2210(B): Although not controlling in real property transactions, the statute distinguishes assignment of contract rights (which may materially alter obligations and thus be restricted) from assignment of a right to damages for breach—reflecting a legislatively recognized rights/claims dichotomy.
• The Implied Warranty in Arizona:
  • Richards v. Powercraft Homes, Inc. (1984); Woodward v. Chirco (1984): Arizona recognizes an implied warranty of workmanship and habitability in new‑home construction, actionable in contract.
  • Lofts at Fillmore Condo. Ass’n v. Reliance Commercial Constr., Inc. (2008) and Sirrah Enterprises v. Wunderlich (2017): The implied warranty sounds in contract and is imputed into the builder‑vendor/homebuyer agreement.
  • Zambrano v. M & RC II LLC (2022): Parties cannot disclaim/waive the implied warranty; this opinion leverages Zambrano to show the warranty is not a “right under the Agreement” (because the contract here purported to disclaim it), underscoring that a claim for its breach is not a contract “right” covered by the clause.
• Persuasive Out‑of‑State Authority:
  • Korte Constr. Co. v. Deaconess Manor Ass’n (Mo. Ct. App. 1996); Folgers Architects, Ltd. v. Kerns (Neb. 2001); Cordis Corp. v. Sonics Int’l (Fla. Dist. Ct. App. 1983); Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1 (Wash. 1994): Collectively stand for the principle that prohibitions on assignment of the contract or “rights under the contract” do not, absent explicit language, bar assignment of accrued causes of action for breach.

Legal Reasoning

• Step 1 — Establishing general assignability: Arizona starts from a presumption that contract claims (including claims for breach of the implied warranty) are assignable. The implied warranty is “as much a part of the contract as are the express terms” and breach “sounds in contract,” placing it within the assignable universe.
• Step 2 — Freedom of contract tempered by specificity: Parties may restrict assignments, but to do so they must speak clearly to the subject they intend to preclude. Under Lesnick, specificity matters both to effective assignments and to effective anti‑assignment provisions.
• Step 3 — Interpreting the clause in context:
  • Text and purpose. The clause’s prefatory language—“In view of the credit qualifications, processing and other personal matters considered hereunder”—shows its purpose is to preserve the seller’s control over the identity and credit of the buyer and prevent pre‑closing “double‑escrows.” The operative bar is to assignment of “this Agreement and the rights of Buyer hereunder.”
  • Silence about claims. The clause never mentions claims, causes of action, or rights to damages. The Court treats that omission as dispositive: assignment of an accrued claim for damages is not the same as assignment of the contract or performance rights under it.
  • Contract structure consistent with the purpose. The clause addresses pre‑closing defaults and instructs the escrow not to participate in “double‑escrows,” confirming the focus on performance, credit risk, and closing—not on post‑breach claim prosecution.
  • Warranty disclaimer within the contract. The purchase agreement (invalidly, per Zambrano) purported to disclaim the implied warranty. That underscores that the implied warranty is not a “right under this Agreement,” further distancing a warranty‑breach claim from the clause’s scope.
• Step 4 — Rights versus claims distinction: Echoing the insurance “post‑loss” cases and the UCC’s structure, the Court draws a firm line between (a) assignment of the contract and performance rights—which can alter duties, risks, or counterparties and are often subject to valid contractual restraint—and (b) assignment of an accrued cause of action for damages, which does not alter the obligor’s performance burdens and therefore is not captured by general “no assignment of rights under the contract” language.
• Step 5 — The assignments here: Owners assigned only their accrued implied‑warranty claims (as framed in the HOA’s defect notices and expert reports). They did not assign the agreement, an interest in the property, or any performance right. Consequently, the assignments were valid and outside the clause’s reach.
• Note on unanimity: The Court was unanimous as to the holding and most reasoning; Justice Bolick did not join paragraph 29, which cites Restatement (Second) of Contracts § 322(2)(a). The non‑joinder does not alter the Court’s judgment.

Impact and Practical Consequences

• Statewide ability of HOAs to centralize defect claims: HOAs can now, with homeowner consent, aggregate and prosecute accrued implied‑warranty claims despite anti‑assignment clauses that merely bar assignment of “the Agreement and rights thereunder.” This facilitates comprehensive repair programs, consistent litigation strategies, cost efficiency, and avoids duplicative suits.
• Drafting implications for developers:
  • General non‑assignment clauses are insufficient to block assignment of accrued breach claims. Drafters who intend to restrict such assignments must use clear, specific language that expressly prohibits assignment of “claims, causes of action, and rights to damages (including for breach of the implied warranty of workmanship and habitability).”
  • However, any attempt to disclaim the implied warranty itself remains unenforceable under Zambrano. The Court here signaled that parties may “contract away the ability to assign rights or claims,” but did not address whether public policy places additional limits on barring assignments of implied‑warranty claims specifically. Developers should anticipate potential challenges based on public policy or unconscionability if restrictions are overbroad or impair effective vindication of homeowner rights.
• Litigation strategy for HOAs and owners:
  • Use written assignments that expressly transfer “accrued” claims and identify the claims with reasonable specificity (e.g., by reference to notices of claim, expert reports, and alleged defect categories).
  • Time the assignments to ensure accrual (e.g., after breach manifests or after the closing obligations are complete), aligning with the Court’s emphasis on post‑breach claims.
  • Maintain clarity that the assignment does not transfer the purchase agreement, title, or performance obligations.
• Judicial administration: Expect more consolidated HOA‑led actions rather than numerous individual homeowner suits. Courts should parse anti‑assignment clauses to determine whether they specifically reach claims; general clauses will not suffice.
• Scope of this ruling:
  • The Court addressed only the implied‑warranty claim’s assignability. It did not resolve whether A.R.S. § 12‑1361 et seq. creates an independent cause of action; the HOA’s “dwelling action” claim remains outside this decision’s scope.
  • The Court found the separate issue—whether the clause would bar assignment of claims against a non‑party builder—moot given its main holding. Practically, non‑parties to the purchase agreement cannot ordinarily invoke its anti‑assignment provisions.

Complex Concepts Simplified

• Implied warranty of workmanship and habitability: A legal guarantee automatically built into new‑home sales that the home was constructed in a workmanlike manner and is fit to live in. It exists even if the contract is silent and cannot be disclaimed.
• Assignment (general): A transfer of a legal right or claim from one party (assignor) to another (assignee). The assignee stands in the assignor’s shoes and may enforce the transferred right or claim.
• Anti‑assignment clause: A contractual term limiting the parties’ ability to assign the contract itself or “rights under the contract.” Such clauses protect against changes in who must perform or who is entitled to performance, to manage credit risk and performance burdens.
• Rights vs. claims: “Rights under the contract” are performance entitlements (e.g., the right to receive title at closing, the right to a particular specification). A “claim” is a cause of action for damages after a breach occurs. The Court holds that a ban on assigning the contract or rights under it does not, without more, extend to claims for damages after breach.
• Accrued claim: A claim that has already come into existence because a breach has occurred. Post‑breach claims are commonly assignable even when assignment of the contract itself is restricted.
• “Double‑escrow” and pre‑closing assignment: A buyer may try to resell before closing via a second escrow or assign the purchase agreement to someone else. Non‑assignment clauses often target these moves to protect the seller’s credit and counterparty expectations. That is different from assigning a post‑breach damages claim.

Key Passages and Their Significance

• Purpose clause matters: By foregrounding “credit qualifications” and “personal matters,” the Court reads the clause as aimed at pre‑closing performance risks, not post‑breach claims. This interpretive move emphasizes the importance of clause context and recitals in construing scope.
• Silence about “claims” is dispositive: The absence of words like “claims,” “causes of action,” or “damages” limited the clause’s reach. Drafters who intend to curb assignments of claims must say so expressly.
• Warranty disclaimer’s ironic role: Although disclaimers of the implied warranty are unenforceable, their presence in the contract helped the Court conclude that a warranty‑breach claim is not a “right under the Agreement,” reinforcing the rights/claims distinction.
• Restatement § 322(2)(a) alignment: The decision aligns with the Restatement rule that a prohibition on assignment of “rights under the contract” does not bar assignment of a right to damages for breach of the whole contract, unless the contract expresses a different intention with specificity.

What Remains for the Trial Court on Remand

• Merits of the HOA’s assigned implied‑warranty claims, including defect causation, scope, and measure of damages.
• Any remaining procedural or affirmative defenses (e.g., limitations/repose, compliance with statutory pre‑suit processes under A.R.S. § 12‑1361, if relevant to the implied‑warranty claim).
• Allocation and remedy issues (repair versus replacement), consistent with the HOA’s maintenance obligations and the assignments’ terms.

Conclusion

Pointe 16 clarifies a critical point in Arizona contract and construction law: a general non‑assignment clause that bars transfer of “this Agreement and the rights of Buyer hereunder” does not, without clear and specific language, prohibit homeowners from assigning accrued causes of action for breach—here, claims for breach of the implied warranty of workmanship and habitability—to their HOA. The decision harmonizes Arizona’s strong presumption favoring assignability of contract claims with freedom‑of‑contract principles, by insisting on precise drafting if parties wish to restrict assignment of claims.

For homeowners and HOAs, the ruling enables efficient, centralized pursuit of construction defect remedies. For developers and builders, it sends a drafting signal: if the goal is to limit assignment of claims, the contract must expressly say so, bearing in mind the separate and overriding rule that the implied warranty itself cannot be disclaimed. As Arizona construction and community association litigation continues to evolve, Pointe 16 provides a clear blueprint for interpreting non‑assignment clauses and advances the efficient administration of defect claims without undermining legitimate contractual expectations about pre‑closing performance and credit risk.