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Home Warranty Dispute Alternative

Law Offers Alternative In Home Warranty Disputes

Scott Wente - Woodbury Bulletin

Woodbury legislators say a new law could curb future home construction defect lawsuits, but it will not help homeowners fighting to recover costs from residential mold or water damage.

The new law creates home warranty dispute resolution, an alternative to traditional legal action over contested residential construction defects and warranty coverage.

State-appointed “neutrals,” or mediators, could be used to help reach agreement among homeowners and builders at odds over repair and financial coverage for damage such as water intrusion and mold. The process is voluntary and a mediator’s recommendation would be nonbinding.

Republican Gov. Tim Pawlenty signed the bill into law in the closing days of the legislative session.
The issue is of particular interest to Woodbury because the city saw a rash of construction defect cases and home-warranty disputes related to problems with residential construction, often of stucco exterior, dating from the late 1980s.

Sen. Kathy Saltzman and Rep. Marsha Swails, both Woodbury Democrats, authored the legislation. Saltzman said it will be helpful because contractors argue that often the first they learn of a homeowner’s problem is when they are contacted by an attorney in a lawsuit. For homeowners, she said, it provides an alternative to trying to get a home repaired without accruing legal bills that cannot be recovered.

“Moving forward, people who have problems or will have problems in the future, this will be extremely beneficial to them,” Saltzman said.

A compromise

The bill did not include a controversial measure allowing homeowners to recover attorney fees if they win a home warranty lawsuit.

In Steve Palmer’s view, that means the new law does very little.

Palmer and his family moved into their Powers Lake home in 2004. A year and a half later, Palmer said, he noticed his basement was musty after several days of hard rain.

Further detection revealed water damage beneath the stucco exterior, attributed to improperly installed sheathing.

Palmer said the problem was discovered within the home’s 10-year warranty, but a dispute emerged with the builder over the repair. More than two years of legal action followed. Palmer said he finally accepted a settlement, but estimated that he had put roughly $160,000 into the ordeal, including legal fees and the repair cost.
“This has wrecked my life – mentally, emotionally, financially,” he said.

Palmer participated in a group of homeowners, lobbyists, state leaders and building officials that looked at the home warranty issue prior to this legislative session. He said he stopped participating when it was clear the work would not go as far as he believed it should.

“I thought that the reason for this group of people was to put teeth behind current law to support the homeowner warranty so that the homeowner wouldn’t have to go through all of this cost and all of this upheaval and ultimately financial devastation,” he said.

That did not happen.

“I just see these meetings as kind of a joke because it’s an after-the-fact half Band-Aid that’s going to do nothing to change,” he said. “I found it extremely difficult to stay with such nonsense.”

Swails and Saltzman said the new law is a compromise and was as far-reaching as possible while still being acceptable to Pawlenty. The governor vetoed a bill in 2009 that included a controversial attorney fee provision, but said he wanted stakeholders to pursue the home warranty dispute resolution.

The legislators said it is possible the attorney fee issue will be considered again next year.

Swails said it is not clear how many people will use the new alternative dispute resolution. She said homes built in the 1990s that were damaged have either been repaired or no longer have active warranties.

Still, she said, the new program will mean homeowners have another option before pursuing a lawsuit over home damages and contested warranties.

“I think it’s a good process, it’s not a perfect one,” she said.

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