All of HOME’s warranty programs feature mandatory binding arbitration of Unresolved Warranty Issues.* HOME and its builder members have been very successful at educating the courts to recognize and enforce the warranty’s mandatory binding arbitration provision. Courts across the country have removed cases from the courtroom and directed them to arbitration under HOME’s Limited Warranty Program.
An excellent example is discussed in this case study. During the first year of a home enrolled with the Warranty Company the homeowners filed a lawsuit against the Builder. The Builder was well equipped to defend himself with the warranty book, the application for warranty and his own contract which included language that made the warranty, including the warranty’s binding arbitration language, applicable to any alleged warranty defects in the home. Even though the homeowners argued that our warranty should not be enforced in that state, the court endorsed the warranty, and the motion brought by the Builder to compel arbitration and dismiss the homeowners’ lawsuit was granted.
Consequently, the homeowners submitted a request to the Warranty Company for warranty performance. Prior to arbitration, the warranty provides an informal mediation process. The builder and homeowners agreed to use our mediation to try to settle the warranty disputes. We actively worked to mediate between the two sides and successfully improved communication between the homeowners and the Builder. Several items were amicably resolved and all sides were hopeful that most, if not all warranty items, will soon be resolved in the same way. By the end of any mediation, if any items remain unresolved, the homeowners and builder may proceed to binding arbitration under the terms of the warranty.
*Note that per HUD regulations, mandatory arbitration does not apply to warranties placed on homes financed under FHA or VA financing.
This is a real case and a great example of how HOME’s mandatory binding arbitration provision is an effective tool in preventing litigation. It also points out the value of using HOME’s mediation process to resolve disputes about possible warranty defects in the homes you build.