What to do when faced with issues
The buyer of a new house says it has squeaky floors, leaky door frames and cracked basement walls. The builder says the flaws aren't that bad and aren't his obligation to fix. What's a buyer to do? Builder workmanship issues aren't regulated by state and federal agencies like the work of banks, stockbrokers and insurance agents. State attorneys general take construction complaints but generally let parties file claims in civil courts. The Better Business Bureau records complaints and often manages to induce builders to fix problems but can't force them.
The buyer of a new house says it has squeaky floors, leaky door frames and cracked basement walls. The builder says the flaws aren't that bad and aren't his obligation to fix.
What's a buyer to do?
Builder workmanship issues aren't regulated by state and federal agencies like the work of banks, stockbrokers and insurance agents. State attorneys general take construction complaints but generally let parties file claims in civil courts. The Better Business Bureau records complaints and often manages to induce builders to fix problems but can't force them.
"There isn't a safety net in any state, even in the states with the best laws on their books," said Nancy Seats, co-founder of Homeowners Against Deficient Dwellings, a consumer group in Kirkwood, Mo. "The people we hear from are people with serious, serious problems with their home, and sometimes they can't even get an attorney to hear their case."
After paying an average of $165,000 for a new house in Greater Cincinnati and Northern Kentucky, buyers are quick to complain about any imperfections they find. When new driveways are crumbling and water is seeping into basements, consumers understandably want immediate attention from their builders.
While construction began on about 10,000 houses and condos in the region in 2005, only 156 complaints were filed against homebuilders at the Cincinnati Better Business Bureau last year.
An unknown number of complaints, though, go to private arbitration hearings. Many more are resolved with the builder.
When disagreements arise and consumers and builders deadlock over alleged construction problems, consumers need to take these first two steps:
Find out if the builder is a member of the local homebuilders association. If so, the buyer can submit a formal complaint to the association. The builder will be contacted and urged to resolve the dispute within two weeks. If the dispute persists, an association committee will investigate the claims and notify the builder of repairs that need to be made. If fixes are warranted, the builder must comply - or be expelled or suspended from the association.
Send the builders a list of defects before pursuing legal remedies. Both Ohio and Kentucky have enacted laws that require consumers to do this. If the builder doesn't consent to fixes, pay a monetary settlement or dispute the claim in 21 days, consumers can then take their complaints to a more confrontational arena - either to arbitration or to court.
Dan Dressman, executive vice president of the Northern Kentucky Home Builders Association, said builders resolve about 90 percent of the complaints brought to his office. Of the rest, he said, almost all are settled during the complaint review by members of the association's Registered Builder/Remodeler Committee, which consists of 17 people in the construction or real estate industry.
"The majority of people who have a complaint just want to have them resolved," Dressman said. "It's not a perfect system, but we put a lot of effort into it. The people on the committee take it very seriously. It's their livelihood, and they don't want people giving them a bad name."
When agreements can't be reached civilly, lawyers tend to make their appearance. It is also when most homebuyers learn that the dispute - under the terms of the contract they signed when they bought the house - will be decided by an arbitration panel, not a judge or jury.
Courtney Caparella, a West Chester lawyer who has filed about 200 lawsuits against homebuilders in Ohio, said people who sign home-purchase contracts with mandatory arbitration clauses are waiving their legal rights.
"You should be leery of anyone who wants to take away your right to go to court if anything goes wrong," Caparella said. "If you've really been wronged in a major consumer purchase, arbitration is not the place where you want to be."
CHALLENGER ENDS UP POORER
That sizes up the sentiments of Kelli Keiper. In 2002, she bought an $185,198 house from Finke Homes in the Pebble Creek subdivision outside Burlington. When efforts to resolve a number of disputed items - including 8-foot-wide garage doors that were supposed to be 9 feet wide - she hired a lawyer and filed suit against Finke Homes in Boone County Circuit Court. The judge, however, ruled that the matter belonged in arbitration.
Keiper bristled at the ruling, but the arbiter, Louisville lawyer Margie Loeser, ruled in her favor. In March 2005, Keiper said Finke paid her $8,346 in March 2005. The amount didn't cover legal fees, though. Because arbitration cost her $4,100 and her lawyer charged her about $5,800, Keiper emerged from arbitration $1,500 poorer. She didn't widen the garage doors.
"As a consumer that won in arbitration, I had to pay more to proceed with arbitration than what I was awarded," she said. "Some fair and equitable system we have for consumers, isn't it? I would have preferred to go into a courtroom and present the facts to a jury of my peers."
A Finke official would not talk about the Keiper case.
WHEN TO ARBITRATE, LITIGATE
For years, consumer advocacy groups have criticized arbitration as a private legal system with high initial costs, a bias toward business, limitations on legal discovery, low damage awards and, because proceedings are confidential, no legal precedents to guide future cases.
Supporters say arbitration offers clear advantages to consumers. Cases are decided much faster than in civil courts. Arbitration fees are initially higher, while litigation tends to cost more as cases drag on. And courts typically uphold decisions, said Michael Hawkins, a Dinsmore & Shohl lawyer who has served as an arbitration panelist since 1994 and also defends companies in arbitration.
"Many of these civil claims are not big-dollar issues," Hawkins said. "To have a case litigate all the way through the courts, you're going to spend a lot of money on legal fees. The cost can be enormous." Tony Covatta, managing partner at the law firm Drew & Ward and an arbiter for 15 years, said arbitration is a fair process that can be faster and cheaper than going to court.
But as a lawyer, he has an instinctive preference for the court-style introduction of evidence and case precedence. The quality of arbitration, he added, can vary according to the arbiter.
"At least with litigation, you get judges who do this all day, every day for a living," Covatta said. "In arbitration, you have an architect who's doing it as a civil service or a retired attorney who's doing it for extra income. You need to get an arbiter who is decisive - who's not going to be pushed around - and who is knowledgeable."
Some cases belong in court, Covatta said, some in arbitration. "I would say the more complicated the case, the more you need a professional judge and the full dispute-resolution process that is our litigation system," he said.