Page 28 - BB_Nov_2018

Arbitration Trumps Litigation:

Home Builder Construction Disputes

You may have heard that President Warranty companies generally offer pre-arbitration
conciliation for both home owners and home builders.
Trump uses an arbitration provision in Home builders may also include arbitration provisions

his confidentiality agreements to settle in subcontractor agreements so that all potential parties

disputes. No fake news there! involved in a dispute can settle on an agreement in a
single arbitration. A local attorney should review all legal
Arbitration is widely used in most industries. But it documents to ensure they are consistent throughout the
is particularly beneficial for home builders and home process and comply with the law.
owners to expeditiously settle construction disputes, Home owners always have a constitutional right
which are often technical in nature. to sue for any reason. However, it is generally in the
It is often said that no one wins in litigation except the home owner’s and home builder’s best interest to
attorneys. Arbitration, when compared to litigation in settle construction disputes outside the courtroom in
the court system, is fast, cost-effective, more predictable, a fair, equitable and expeditious manner. The home
fair and private. The final arbitration decision is legally builder and home owner should agree to and sign the
binding and non-appealable (unless, in very rare cases, construction contract and warranty document with
there are arbitrator procedural violations). arbitration provisions prior to closing.
NAHB policy supports initiatives that promote binding The average total cost for a home warranty
arbitration in residential construction contracts. Having arbitration is $750-$5,000 (commonly split evenly
an arbitrator with construction experience is much better between the parties), compared to $25,000-$50,000
than going before a judge and/or jury who will need to for litigation. The entire arbitration process takes an
be educated about the construction issues involved in average of 6-10 weeks (some as little as two weeks),
the dispute. compared to 2-6 years for litigation. The average
arbitration hearing takes 1-3 hours, compared to 5-10
Construction litigation is causing court backlogs in
many states. Thus, home builders and home owners days for a court trial.
are seeking an alternative expedited dispute resolution Arbitration is particularly effective in home building,
process. All parties can more efficiently settle disputes by due to the often technical nature of construction
agreeing to an arbitration provision in the warranty and disputes. It is fast, cost-effective, fair and equitable for
in the general construction contract. all parties. Construction dispute arbitration held in
a dining room is much preferred over litigation held
All leading third-party new home warranty
companies typically include an arbitration provision. in a courtroom.
NAHB SEPTEMBER 2018

28 NOVEMBER 2018 | GREATER SAN ANTONIO BUILDERS ASSOCIATION