Critics say new rule favors contractors; builders contend it will make complaint process more efficient 
A new law, signed by Gov. John Engler on July 31, makes it mandatory for consumers to go to arbitration if the builder seeks negotiations and provides a third party to conduct them. Previously, the Michigan Department of Consumer and Industry Services handled all consumer complaints by holding formal hearings.

Arbitration forced on consumers
Critics say new rule favors contractors; builders contend it will make complaint process more efficient

By George Hunter / The Detroit News

    LANSING — Michigan homeowners who file complaints against shoddy builders soon will have to agree to arbitration of their cases.

    A new law, signed by Gov. John Engler on July 31, makes it mandatory for consumers to go to arbitration if the builder seeks negotiations and provides a third party to conduct them. Previously, the Michigan Department of Consumer and Industry Services handled all consumer complaints by holding formal hearings.

    The law allows the agency to get involved later if resolution doesn’t work. Still, the measure’s critics are numerous and include the Attorney General’s Consumer Protection Division.

    “This is not a very consumer-friendly law,” said Stanley Pruss, chief of the division. “There’s nothing in the law that lays out the rules for the arbitration. So a builder can select his own arbitrator. That’s not very good news for consumers.”

    The Building Industry Association of Southeastern Michigan pushed for the law. Supporters complained that the old system lacked uniformity and allowed homeowners to make vague complaints about poor workmanship. The association contends that arbitration actually could speed up the process for consumers.

    “We wanted to make certain that consumers and builders could get together to solve their disputes in the most expeditious and amicable way possible,” said Irvin Yackness, chief executive officer and general counsel for the group. “I absolutely think this is a fair bill to both sides.”

    Pruss said arbitration isn’t necessarily a bad thing for consumers. “If the parties adhere to the guidelines laid out by the Michigan Supreme Court for arbitration, then it can be fair on both sides,” he said. “Unfortunately, there’s nothing in this law that sets any rules for the arbitration. That means the builders can set their own rules.”

    Yackness counters that the law requires that the rules of arbitration be laid out in the original contract between a builder and a consumer. “The consumer will be aware of the rules at the time he signs the contract,” Yackness said.

    But consumers seldom read the fine print when hiring a contractor, contends Fred Hoffecker, president of the Better Business Bureau of Eastern Michigan in Southfield.

    “We try to tell them again and again, but most people tend to just look at the price and the payment amounts, but they don’t read the pre-printed boilerplate stuff,” he said. “The terms of the contract giveth — and the fine print taketh away.”

    Hoffecker also notes that a builders trade association helped write the bill. “In my experience, very seldom do trade associations draft bills that help consumers.”

    The bill passed both houses of the Legislature overwhelmingly and was hardly considered “controversial or unfair,” said Steve Taglione, president of the builder’s group.

    He argued that the old system led to uneven enforcement among municipalities.

    Before Michigan adopted a uniform building code last year, things that were deemed violations in one city were perfectly acceptable in another, Taglione said.

    Arbitration will allow “people who are knowledgeable about the building trade” to mediate disputes, he said. “It’s not like builders are going to run amok,” he said. “Arbitration is a well-recognized, well-established vehicle for dispute resolution. If anything, this could speed up the process for consumers.”

    Pruss of the Attorney General’s Consumer Protection notes the original bill was worse.

    “We fought to make this more consumer-friendly,” he said. “The original bill said that if Consumer and Industry Services didn’t notify a builder about a complaint against him within 30 days, the complaint would be null and void. That would’ve punished the consumer if Consumer and Industry Services dragged its feet on a complaint.”

    That provision was eventually struck down. But other aspects of the bill Pruss pushed for weren’t included, he said.

    “The law says the arbitration must be carried out by an impartial third party,” Pruss said. “Well, what constitutes an impartial third party? In a perfect world, all that would’ve been laid out in the law. We tried to get that included. But, as it stands now, it’s up to the builder to determine who’s impartial.”

NOTES from Oakland Press article September 17, 2001 by Doug Henze, Law Encourages mediation between homeowners, builders.