Home Warranties and the Value of Arbitration: Part 2

– wisdom header e1524682220716 – Home Warranties and the Value of Arbitration: Part 2

We recently examined the importance of the arbitration provision in the warranty by focusing on its underlying principle of fairness. And while we concluded the process is fair for all the parties involved, for the purposes of our discussion, it was demonstrated how arbitration can be framed in a positive manner for the homeowner, either by the builder when explaining the warranty to the homeowner, or for 2-10 HBW when explaining the provision to the builder and/or the homeowner. But what about the builder who still has doubts about arbitration? What value does the arbitration provision add to the warranty for a builder?

Like last week, this examination will consider arbitration as being between a builder and homeowner, and whether one defines value in financial terms or in terms of something’s usefulness or importance, the arbitration provision in the warranty offers a number of benefits for a builder. As discussed in the most recent installment, the primary advantage of arbitration is it provides a binding method of resolution outside the court system. This is an immediate, obvious financial value for a builder, but a closer look reveals there are a number of additional benefits beyond the financial one for keeping a dispute out of court.

One such advantage is that an arbitration hearing also does not require a builder to limit their case in any way, and indeed may actually aid by putting that case in direct, physical context due to the hearing being held at the home. Rather than trying to present a case in court without direct access to the disputed items, the builder may structure their case around the items which are directly in front of them, and which can be seen, measured and even felt.

Removing the case from court also lessens the unpredictability of a decision being rendered by an uninformed court. We talked last week about how arbitration services can make things fair for homeowners because the arbitrators employed by the services have a construction background. And though the rules of the arbitration proceedings are generally more relaxed and lenient, the experience of the arbitrator, and the fact they are basing their decision on an expressed set of guidelines, i.e., the warranty, seriously limits the possibility of open interpretations, and makes it easier to tailor an argument to achieve maximum effect. It is extremely difficult to get an arbitration award vacated, but one of the premises on which it can be considered is if the award exceeds the scope of the hearing or the provisions of the source material from which the arbitration was generated. Arbitrators are keenly aware of this, so while they may allow more disparate or extraneous testimony at the hearing, their award will be limited to what is allowed by the warranty.