Builder and Developer's Tips to Compelling Arbitration in Construction Defect Claims

Builder and Developer: "Tips to Compelling Arbitration in Construction Defect Claims By adding the appropriate language to contracts, homebuilders have the ability to compel arbitration in many construction defect claims, providing a valuable alternative to litigation. by John E. Bowerbank Often homebuilders are surprised to learn that under California law, a home purchaser can willingly and voluntarily enter into an agreement with the homebuilder for binding arbitration of construction defect claims, but later decide to avoid the arbitration provision and sue the homebuilder in California courts. Section 1298.7 of the Code of Civil Procedure specifically allows a home purchaser to opt out of arbitration and file suit in the courts. If California law applies to the arbitration provision, a builder cannot successfully compel binding arbitration after a homeowner files a lawsuit in the California courts. The million dollar question is whether there is a way to circumvent California’s law against compelling arbitration in construction defect lawsuits. The answer is “yes,” provided a builder can demonstrate that the real property purchase involved “interstate commerce.”"

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