Homebuilders stack deck with arbitration
Posted
Jul 08 2009, 12:16 PM
by
Karen Datko
Rating:
This post comes from Martin H. Bosworth at partner site ConsumerAffairs.com.
Many an enthusiastic new homeowner has been horrified to find that the warranty offered to them by the builder not only does not cover a host of problems, but forces the owners into private, often complex and costly arbitration schemes -- which nearly always favor the builder in the end.
That's the premise of "Home Court Advantage," a new report (.pdf file) released by Public Citizen that explores the homebuilding industry's use of private arbitration to avoid responsibility for structural defects and flaws in their products -- often violating state consumer protection laws.
"The arbitration companies know that their futures depend on keeping the people who hire them happy, and that means the builders and warranty companies," said David Arkush, director of Public Citizen's Congress Watch division. "As a result, the system is stacked against the consumer."
The 69-page report combines testimony from aggrieved homeowners and Public Citizen's own investigative research to paint a picture of a business where arbitrators are literally adjuncts of the homebuilding industry, and how homeowner warranties often fail to disclose the restrictions arbitration places upon the buyer until it's too late.
Among the report's findings:
- Construction arbitration firms were either created by or with the help of major homebuilder associations, causing an immediate conflict of interest.
- Homebuilders force arbitration contracts on buyers in violation of Federal Trade Commission orders banning the practice.
- Arbitrators often fail to disclose their close connections with the homebuilding industry.
"We are losing our Seventh Amendment rights by contract, and the word needs to get out all over this nation," said Nancy Seats, president of Homeowners Against Deficient Dwellings, which has lobbied against arbitration in building contracts and for better homeowner protections. "Forced arbitration clauses are found in nearly every purchase we make or service we use today, and the consumer almost always loses."
A 2007 report from Public Citizen stated that in California, arbitrators ruled against consumers 95% of the time in cases involving credit card disputes.
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