New Home Building Arbitration Rules Provide for Quicker Resolutions

The American Arbitration Association recently issued revisions to its Home Construction Arbitration Rules and Mediation Procedures, which became effective on August 1. The revisions are intended to expedite the alternative dispute resolution process.

AAA said that it was being responsive to demands from business and consumer clients asking for a more streamlined, cost-effective, and tightly-managed arbitration process.

To help speed things along, AAA increased the upper dollar amount limits for its service levels, resulting in more disputes being heard at lower service levels. For example, disputes where the claim or counterclaim is less than $25,000 are considered Level 1 disputes, up from the previous cap of $10,000.

Level 1 and 2 disputes are eligible for expedited hearings, saving time and money for participants.

The revisions also allow the home construction rules to be used in more cases presented to AAA and generally allow for a quicker resolution process.

The push for a speedier dispute resolution process comes as alternative dispute resolution – most often arbitration or mediation – becomes increasingly popular as consumers and businesses attempt to avoid the overcrowded and costly U.S. court system. Learn more about arbitration in construction.

Peter Merrill, owner of Construction Dispute Resolution Services and an NAHB member, has been advocating for an even more streamlined approach through a process called binding mediation. Merrill writes, “Especially on smaller disputes, when there is virtually no discovery necessary, binding mediation should prove to be the best ADR method to settle a dispute.”

In binding mediation, the parties agree to first try to settle their dispute through mediation. If they are unable to reach an agreement, they give the mediator the power to make a decision for them. This can lead to incredibly quick resolutions, which can be critical when disputes arise during a home build.

There will always be disputes between builder and their clients. The first job for homebuilders is to minimize disputes. But when they arise, think of the words of Abraham Lincoln which underpin the very idea of mediation and arbitration: “Discourage litigation. Persuade your neighbors to compromise whenever you can.”

For more information, contact David Jaffe at 202-266-8317.