Homeowners say arbitrators biased toward builders

Greg and Kimberly Cole and their three children have slept in cars, in a tent, in a motel, at friends’ houses — all to avoid staying at their $429,000 house in Marietta.

The Coles say construction problems at their 3,400-square-foot house led to cracks, leaks and mold that’s sickened them.

They went to binding arbitration with John Wieland Homes and Neighborhoods because that’s what their home warranty required. Builders require buyers to agree to arbitration to avoid costly litigation when conflicts arise. But the Coles say arbitration failed them. Many of the repairs they sought were rejected by the arbitrator, and the ones that were ordered almost two years ago have not been made.

Homeowners recently visited the office of Senate Majority Leader Chip Rogers (R-Woodstock) to advocate changing state arbitration law to strengthen the homeowners’ hand. Rogers said last week he’s heard only the homeowners’ side of the story and is still looking into the issue.

“It sounds as if maybe the arbitration system needs to be changed so you don’t have what appears to be a very predictable outcome in every instance,” he said.

The Coles and other homeowners believe arbitrators are closely tied to home builders, to the detriment of homeowners.

“We already knew which way it was going to go. They just showed up,” said Jeanette Martin, who lost an arbitration in Fayette County involving Morningside Homes LLC. “I think all of them know each other.”

Bill Clements was involved in a dispute with Sharp Residential over problems with joists and wood floors at his new home in Kennesaw.

“It’s a kangaroo court for the homeowner,” Clements said. “We won but it was a grossly short amount of money considering what had to be done. My hardwood floors are a disaster.”

And because the arbitration decision is binding, “there’s no appeal whatsoever,” Clements said.

State law leaves the selection of the arbitrator up to builder agreements or the courts; both sides can employ attorneys. Wieland Homes required Cole and Hollin to use arbitrators selected by Construction Arbitration Associates because CAA is cost effective, John Wieland said.

Wieland said the Coles rebuffed offers to buy back the house at a premium and later prevented the builder from making repairs the arbitrator ordered. Greg Cole said Wieland offered only what he paid and he denied blocking repair efforts.

James Hollin, an attorney who lives in a Wieland community in Fayette County, lost an arbitration decision regarding room sizes and other issues.

“We think there’s a bit of bias” in how arbitrators are chosen, Hollin said. Arbitrators should be state vetted and chosen randomly or homeowners should help select them, he said.

Hollin withdrew three claims in his arbitration and lost on seven others, including seeking restitution for 30 shrubs eaten by deer after closing. Wieland Homes was ordered to repair sod and remove boulders.

Arbitration works, Wieland said, because otherwise “unhappy people can go into court and cost builders a lot of money, and it can end up there’s nothing wrong. The jury is not a construction expert.”

Homeowners voice skepticism about arbitrators’ neutrality in part because they teach courses on behalf of home builders.

Robert Merz, the owner of CAA, led courses last summer on quality construction sponsored by Bowen Family Homes. The home builder used Merz’s presentation to help market Stonehaven Pointe in Forsyth County.

“The construction at Stonehaven is superior,” Merz is quoted as saying on the Bowen Homes Web site. “I looked for areas that needed improvement to use for instructional purposes, but, honestly, the homes were built so well that flaws were not evident.”

Merz, a former instructor at Georgia Tech, said in an interview he teaches courses approved by the Georgia Real Estate Commission, and some are for the benefit of buyers.

“Promotion for the courses at Bowen was outside the arbitration guise,” he said.

CAA selected Tom Gotschall, president of Construction Diagnostic Services, to arbitrate the Cole case. Gotschall also teaches courses but said “I’m not myself a home builder. I’m not part of that community.”

“I must take an oath of neutrality. I take that seriously,” he said.

Arbitration often is held at the house in dispute and can take a few hours or all day as both sides make their arguments. Gotschall ruled for and against the Coles on a long list of issues in 2007 but little has come of it.

Their house is in foreclosure because the Coles stopped making payments two years ago.

“The roof leaks, the windows leak, the door leaks,” Greg Cole said. “The house is basically worthless.”

http://www.ajc.com/metro/content/business/stories/2009/02/17/wieland_home_arbitrator.html