Homebuilder arbitration under fire

Public Citizen says rules tilt playing field toward builders

A national consumer advocacy organization is urging attorneys general in 17 states, including Georgia, to enforce bans on mandatory arbitration clauses often used by the home building industry.

Georgia's attorney general's office, however, says it's not that simple.

According to Washington-based Public Citizen, the required use of arbitration to resolve disputes between builders and buyers tilts the playing field toward the builders.

"Forced arbitration creates a gross conflict of interest in every industry that uses it," the group wrote in a letter to Attorney General Thurbert Baker. "Arbitration firms depend on business parties to choose them as the venue for resolving disputes. As a result, forced arbitrations are biased in favor of businesses and against consumers."

Public Citizen named Georgia among states with laws banning forced arbitration in insurance contracts, It says such laws in Georgia and other states are not being properly enforced.

But Russ Willard, a spokesman for Baker, said home warranties that are third-party insurance contracts are exempt under the arbitration code. "Georgia law does not forbid the inclusion of these clauses in contracts, but Georgia law does make them unenforceable," he said.

Public Citizen has opposed required arbitration since the late 1990s, and the practice has proliferated since then, according to Taylor Lincoln, research director for the group. Its goal is to have Congress prohibit the use of forced arbitration.

One metro Atlantan who agrees with the group is Marietta resident Greg Cole. He says construction problems at his $429,000, 3,400-square-foot house led to cracks, leaks and mold that sickened the whole family.

They went to binding arbitration with John Wieland Homes and Neighborhoods, as the home warranty required, but Cole said the house has not been fixed and continues to deteriorate. His family lives elsewhere.

"This is a system that clearly does not work for the homeowner," he said. "I hope what this group is doing can help change things in the future."

John Wieland, chief executive of John Wieland Homes and Neighborhoods, said he believes in arbitration. "The arbitration process is a long standing process that has served thousands of people well."