Home Builders Fearful Of Arizona ' Lemon Law ' For Buyers
Proposition 201, a so-called "lemon law" for home buyers... Supporters say the initiative protects buyers from sloppy construction and gives them recourse to remedy defects. The proposal, introduced and supported by unions and some community advocacy groups, provides "much-needed protection for people who buy new homes," said Linda Brown , executive director of the Arizona Advocacy Network Foundation, a supporter. "There ' s been very little oversight or checks for the home building industry because it ' s been the economic engine for the state...It ' s been the Wild West for them." Prop 201

Home Builders Fearful Of Arizona ' Lemon Law ' For Buyers

October 28, 2008: 05:24 PM EST

NEW YORK -(Dow Jones)- For Arizona ' s home builders, the big vote next Tuesday won ' t be McCain vs. Obama. They ' ll focus on Proposition 201, a so-called "lemon law" for home buyers.

Supporters say the initiative protects buyers from sloppy construction and gives them recourse to remedy defects. Opponents counter it would delay housing ' s recovery, cause prices to jump and push companies from the state, one of the hardest hit by the downturn. The vote affects several industry giants operating in desert region, including Lennar (LEN), DR Horton (DHI), KB Home ( KBH), Centex (CTX), Meritage Homes (MTH) and Toll Brothers (TOL).

Under the initiative, builders must offer 10-year warranties and use licensed contractors for repairs. Buyers would also have 100 days to cancel a contract and receive 95% of their deposit back. The deposit, builders say, becomes meaningless.

Also under Proposition 201, builders who are sued could not receive attorney fees and costs even if the builder prevails, opponents say. Supporters counter the measure levels the playing field by removing forced mediation that can drag on for years.

The proposal, introduced and supported by unions and some community advocacy groups, provides "much-needed protection for people who buy new homes," said Linda Brown , executive director of the Arizona Advocacy Network Foundation, a supporter. "There ' s been very little oversight or checks for the home building industry because it ' s been the economic engine for the state...It ' s been the Wild West for them."

Tradesmen were worried about taking shortcuts in their work and their concerns not being addressed as they rushed to build more than 500,000 new homes in the last six years, said Rebekah Friend , executive director of the Arizona AFL-CIO, which helped gather signatures to propel the proposition onto the ballot.

Home builders strongly disagree.

During Meritage ' s third-quarter earnings conference call Tuesday, Chairman and Chief Executive Steven J. Hilton said the proposition was "created as a blackmail tactic from unions because we wouldn ' t help them unionize some of our subcontractors."

Friend said the proposition does not mention or benefit unions, and the AFL- CIO often becomes involved in community issues unrelated to union development.

Builders maintain they ' d face frivolous lawsuits - even from prospective buyers. Lawyers, they add, would see a windfall. Also, because builders typically start construction when a contract is inked, they face a potential loss should buyers exercise that 100-day cancellation clause.

"Either deposits will be really huge, which is problematic, or all closings will take 100 additional days," said Spencer Kamps , vice president of legislative affairs for the Home Builders Association of Central Arizona, which tried - and failed - to keep the measure off the ballot. "In these economic times, it will severely and dramatically impact the construction industry in the state of Arizona ."

John Fioramonti, senior managing director of Meyers Builder Advisors, a real estate consulting firm, agreed. "It ' s so lopsided against the home builder, I wouldn ' t be surprised if many home builders that are in our market right now, including national home builders, pull out of our market altogether," he said. "There ' s no reason to build here under this type of arrangement when they could go build in the other 49 states and not (have) this kind of burden."

-By Dawn Wotapka , Dow Jones Newswires; 201-938-5248; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Proposition 201

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