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Arizona Home Lemon Law A Victory for Homebuilders
Friday, 07 November 2008

UPDATE: Builders 'Ecstatic' Over Arizona 'Lemon Law' Defeat
The initiative looked to force builders to offer 10-year warranties and use licensed contractors for repairs. Buyers would have had 100 days to cancel a contract, and they'd receive 95% of their deposit back. Companies grumbled the deposit would become meaningless and they'd be saddled with even more expensive, unsold inventory. Related article: Home Lemon Law

UPDATE: Builders 'Ecstatic' Over Arizona 'Lemon Law' Defeat
November 05, 2008
NEW YORK -(Dow Jones)- Arizona voters delivered some good news to builders Tuesday in rejecting Proposition 201, a so called buyers "lemon law" that could have left builders fighting - and funding - frivolous lawsuits and raising prices.

"It's good news for Arizona , not just home builders," said Spencer Kamps , vice president of legislative affairs for the Home Builders Association of Central Arizona, who said only 22% of voters supported the controversial measure. "At the end of the day, voters recognized 201 for the charlatan that it was."

Most of the big publicly traded builders, including Lennar Corp. (LEN), DR Horton Inc. (DHI), KB Home (KBH), Centex Corp. (CTX) and Toll Brothers Inc. ( TOL), operate in Arizona . Several industry watchers said this initiative would have driven some of the majors from the state and delayed recovery in one of the regions hit hardest by the housing bust.

" Arizona is a tough market for the home builders. It's going to take some time to recover," said Josh Levin , Citi's building analyst. "If this had passed, it would have been one more thing that they would have had to worry about."

The initiative looked to force builders to offer 10-year warranties and use licensed contractors for repairs. Buyers would have had 100 days to cancel a contract, and they'd receive 95% of their deposit back. Companies grumbled the deposit would become meaningless and they'd be saddled with even more expensive, unsold inventory.

It would have also meant that builders who are sued could not receive attorney fees and costs even if the builder wins. Opponents predicted an increase of frivolous lawsuits even from potential buyers, and a monetary windfall for attorneys. Levin said trial lawyers eager for a new revenue stream were big supporters.

Proposition 201, introduced and supported by unions and some community advocacy groups, was "created as a blackmail tactic from unions because we wouldn't help them unionize some of our subcontractors," Steven J. Hilton , Meritage Homes Corp.'s (MTH) chairman and chief executive, said during a recent earnings conference call.

The Arizona AFL-CIO previously denied that, saying it gets involved in community issues. It was not immediately available for comment Wednesday.

"Everybody's clearly ecstatic," said Kamps, whose organization failed to keep the measure off the ballot. "I think the business community in Arizona and the voters are happy with the results."

-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

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=MsA7vVfxWtWTrXv22V0WJw%3D%3D. You can use this link on the day this article is published and the following day.

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