Pennsylvania Moves to Regulate Home Building Arbitration Contracts

By Justin Kelly, ADRWorld.com

(9.14.2007) The Pennsylvania House of Representatives is considering legislation that would set conditions for the enforcement of pre-dispute arbitration agreements in contracts between home builders and customers, and make a failure to comply grounds for a court to void the clause.

H.B. 1821, "the New Home Construction Consumer Protection Act," introduced Sept. 4, establishes procedures that homebuilders must follow in building and dealing with customers.

Section 8(d) provides that an arbitration clause in a home construction contract must meet the following requirements: It must be written in capital letters in 12-point boldface type; it must be on a page separate from the overall contract. It must include a separate line for each of the parties to the contract to sign, indicating intent to be bound by its provisions.

It must state clearly whether the award is binding on the parties or may be appealed. And it must make it clear to the customer whether the dispute, related documents and the award would be kept confidential.

Section 8(d) further provides that an arbitration clause that does not satisfy these requirements or is not signed by both parties may be deemed void by a court if a party brings a motion "prior to the commencement of arbitration."

This provision also makes clear that nothing in the bill is intended to affect a court's ability to set aside an arbitration clause on any ground allowed by Pennsylvania law.

In addition, Section 8(e) of the bill would make a home construction contract voidable by the consumer if it has any of the following types of clauses:

• a clause purporting to waive a customer's right to a jury trial,

• an agreement not to assert any customer claims or defenses arising out of the contract,

• a provision authorizing a homebuilder to recovery attorney's fees and costs from the customer, or

• a clause waiving any customer rights under the provisions of the bill.