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Home Building

Forced arbitration clauses targeting unwary home buyers appear in two possible places: (1) the builder’s or sales contract and (2) the home warranty policy provided by a third-party company such as HBW or RWC.

Although billed as protection plans, the details of warranties are often withheld until closing – when it’s too late for new homeowner to say “no thanks.” Close reading of these documents reveals that they typically do more to protect builders than buyers. In addition to forcing buyers into arbitration, new home warranties also exclude from their coverage many protections buyers would otherwise enjoy under broad “implied warranty” statutes that apply to any purchase of a new house.

Forced arbitration also serves another purpose for builders and for the other industries that use this sham legal system: it keeps complaints hidden from public view. Arbitration yields little or no public record. Additionally, arbitration clauses often include gag orders that prohibit home owners from even talking about their case.


Home Court Advantage: How the Building Industry Uses Forced Arbitration to Evade Accountability


Jordan Fogal, Houston, Texas

Jordan bought her dream retirement home in Houston, Texas. Within months of moving into her new home, she discovered over $150,000 worth of damages–damages so severe that her doctor insisted that she move out immediately, because of the harmful health effects. Jordan pleaded with her builder to fix the damage on the home but instead she was forced into arbitration because, as with many homebuyers’ contracts, her contract included a binding mandatory arbitration clause. Jordan went through arbitration, spending thousands on experts and witnesses. After successfully proving fraud against her builder she only received $26,000 for her $300,000 home, which is now uninhabitable. Jordan now cannot appeal and has no other recourse for action. She is left homeless and stripped of her basic American right to get justice through the courts.

Dale Beinusa, Dixon, Mississippi

Dale Beinusa is a US Army Combat Veteran of 22 years and recently returned home from a tour of active duty in Iraq in October 2006. While still on active duty, stationed at Fort Leonard Wood, Missouri, he purchased a newly constructed home in November 2002 in Waynesville, Missouri.

There were multiple problems with the home, including major structural damage and an unstable, un-level kitchen floor. Dale notified the builder about the problems but the builder only fixed a few of the many problems with the home. Dale was forced to settle the dispute through arbitration, as required by his warranty. Dale paid $500 in arbitration fees and $80 in additional travel expenses for a meeting that only lasted 38 minutes. The arbitration process was severely slanted in favor of the builder. The arbitrator had not read the information on the case and he did not inspect the structure of the house as requested. The final arbitration ruling provided no remedies that would allow him to fix his home. Dale did not understand the references in the ruling so he asked for clarification. He was told that the arbitration ruling would stand and that the case was closed with absolutely no explanation. While he tried to fight this unfair ruling, Dale received orders to return to Iraq.

Greg Cole, Marietta, GA

Greg and his wife bought their dream home for their two boys. Greg noticed a few structural problems with the home so he hired an engineer who discovered three pages worth of defects in the house. In particular, there was mold growing throughout the house. His family was diagnosed with dangerously high levels of mycotoxins in their bodies because of the mold. His two boys have mold in their bloodstream and his wife has a fungus eating away her ear canal that her doctor cannot cure. The family’s doctors say they are all slowly dying. Greg tried to go to court with the builder, but was forced into arbitration. When he bought the home, he was instructed to initial a box on arbitration, which was never explained to him. The arbitrator instructed the builder to make some minor repairs but he did not address the largest problems, most importantly the mold. Despite his supposed “victory,” Greg was told to split the arbitration fees with his builder. The house was uninhabitable, so he was forced to tear it down and rebuild. Greg is too sick to work. He has no home and he has mounting arbitration bills and medical bills from his family’s deteriorating health. The arbitration process denied him access to justice that would have held the builder accountable and provided a remedy for the wrongs Greg and his family suffered.

Guy Combs, Alpine, TX

Vietnam veteran Guy Combs bought a house in his hometown of Alpine, Texas. After living in the house for only four years, Guy discovered that his home had severe structural problems. He asked his builder to repair the damage, but the builder offered to pay only $3,000 for $300,000 worth of damages. When Guy bought the home he unknowingly signed an arbitration agreement, which was not explained to him at the time. Therefore, he was forced to settle his dispute in arbitration. Guy describes arbitration as “third world justice.” The arbitrator refused to recognize that there were damages to Guy’s home despite the testimony of twenty expert witnesses that Guy hired. The arbitration process cost him $77,000. The arbitrator billed him a flat fee of $150,000 but after negotiations he brought the fee down to $50,000 plus interest. Guy did not want to lose his ranch and, since there was no means for appeal, he paid the fees. Guy has a PhD from Brown and he thought he understood our legal system, until his rights were eviscerated by arbitration.

Mary Finn, Cincinnati, Ohio

Eighty-two-year-old Mary Finn had a home built for her by Ray Murphy Homes but due to numerous structural problems (the home did not meet building standards) she did not purchase the home. She tried to get her down payment back, but was told she was bound by an arbitration clause. Using the “fast track” system, she went through arbitration with the American Arbitration Association. The builder and attorneys kept cancelling, so it was not a fast process, as advertised. During arbitration Mary encountered misrepresentation and fraud. The builders hid the damage on the house by limiting inspections and Mary paid high costs and was misled about the costs of arbitration. The builder’s lawyer took money out of their retainer to pay for the builder’s filing fee without their knowledge or approval. She still can not get the builder into arbitration because he refuses to make himself available.