"We Build In Middle Class Neighborhoods Because You Can't Afford To Fight Us"

Meet Michelle. We met Michelle at Arbitration Fairness Day and she told us about being forced into arbitration when she tried to get her poorly constructed home repaired. Now she’d like to share her story with you.

My husband and I are struggling with a housing crisis – and it’s very different from the mortgage crisis you’ve been hearing so much about. Ours was caused by sneaky language in the contract we signed with the home builders. Thanks to a clause requiring “binding arbitration agreement,” we are stuck with a poorly constructed house that we might not be able to get rid of.

John is an Apache helicopter pilot serving in Iraq and, between his year-long tours of duty, his unit transferred to Georgia. When we bought our new home in Savannah in 2006, we thought of it as a place representing security, stability and safety for our family – everything a home should be. The associate assured us the defects we noticed when touring the house were “normal” and would be repaired by the builder in a timely manner.

Among the blizzard of documents we had to sign during our closing was a warranty that contained the arbitration clause. We had no idea it meant we agreed to a contract that shielded the builders from legal action no matter how negligent or shoddy their workmanship was. And believe me, it was.

Apparently, all kinds of businesses routinely stick these arbitration clauses into contracts for credit cards, cell phones, nursing homes and employment, to name a few. Like millions of other Americans, we effectively waived our legal right to take the company to court. Instead, our arguments would be handled by an arbitrator – a private company hired by the home builder.

Of the 182 defects we found and reported to the arbitrator, only 39 were approved for repair. Contractor estimates said it will take about $20,000 just to repair those defects, not including the other defects and code violations, doors that don’t fit their doorways and mold problems caused by improperly installed showers and doors. Instead of fixing the defects, the home builder has offered us a measly $2,600.

Given the huge difference between the estimated repair cost and the home builder’s offer, we appealed the arbitrator’s decision. Just submitting the appeal set us back another $1,000.

If we disagree with the arbitrator’s final decision, we won’t be able to appeal or take the builder or the arbitrator to court – even if the decision seems illegal. Once you’ve agreed to binding arbitration, the only way to address problems is through that process regardless of facts and evidence. And since arbitrators are hired by the company responsible for the circumstances in dispute, they have a financial incentive to make rulings that satisfy the company that retains them.

Meanwhile, the paperwork and fees keep adding up. Instead of taking care of our home repairs, we have to keep feeding the arbitration beast while we hope and pray that the next decision will be a fair one. We doubt it will. And as the clock ticks, defects like the faulty installed showers and back door are causing more and more damage from water and mold.

John comes home from Iraq in October, and his unit will transfer to Fort Drum, New York, in January 2010. We will have to sell the house, defects and all. We would need to disclose the lingering $20,000 repair estimates, code violations and mold issues. With a mess like this, who in their right mind would knowingly buy this house?

Like so many of our country’s economic problems, ours shows the amazing gap between what is legal and what is right. It’s just not right for us to be saddled with the expense of fixing this defective home. Nor is it right that we had to sign away our right to sue and become trapped in this frustrating process of binding arbitration.

Unfortunately, the only way out of binding arbitration now is for Congress to change the law to let buyers choose whether they want to settle disputes with an arbitrator or in a court of law.

Michelle also told us that while she was complaining to the construction company, one of their employees told her, “We build in middle class neighborhoods because middle class people can’t afford to fight us.” People are fighting, though: victims of mandatory binding arbitration and consumer advocates are hitting the Hill today to tell Congress to support the Arbitration Fairness Act. You can ask your members of Congress to support the Arbitration Fairness Act here, you can also check out the Fair Arbitration Now website and sign a petition to ban forced arbitration.