Construction defects and Mandatory Arbitration

Shared by Deborah Goonan, Independent American Communities



New reports of home and condo owners dealing with shoddy construction continue to surface every week. A recent story from Florida involves the townhouses at Berkshire Park near Windmere. The 140-unit Association-Governed Community is less than a decade old. But the stucco is cracking, and water has created mold and decay of the wood framing underneath. Water is also damaging the interior surfaces of individual townhouses.

Homeowners are faced with repairs to the common areas as well as portions they own individually. But they cannot take the matter to court. That’s because the builder, Pulte Homes, requires binding arbitration to settle all construction defect claims out of court.

This Orlando Sentinel article (written by Mary Shanklin) explains why corporations, including home builders, are adding provisions to sales contracts and Association governing documents that require binding arbitration, and what that means for consumers.

Condo owners angry town-home problems aren’t being fixed

While mandatory arbitration helps builders save money, it generally results in lower monetary settlements for homeowners.

More importantly, it shields the nature of those settlements from public view. That means that housing consumers must rely on sellers or landlords to disclose any known defects and the nature of any repairs that have been made.

Some defects are readily visible (cracked stucco), or easily discovered with a home inspection. But other defects may lurk behind walls and finishes, especially if either owners or developers elect to do “band-aid” repairs and fail to disclose problems. In those cases, a homeowner may only discover problems after taking title to the home and moving in.

And when you add the fourth layer of government – the Owners’ Association – the process of working with developers and construction companies becomes more complex and bureaucratic. It can take months just to investigate the extent of defects, which might even involve cutting holes in walls or digging up landscaped areas.

Consumers need to know that the HOA board will make final decisions regarding settlement of construction defect claims involving common areas or elements, usually on the advice of an attorney. As an individual homeowner, you may be kept in the dark about the status of negotiations until they are complete.




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