Hashing Out Disputes

When homeowner and builder reach a stalemate over disputed warranted items within the first two years, either may request the plan administrator to arrange for an impartial third party to mediate, at no cost to the buyer. Referees for such disputes are not affiliated with the plan administrator or the builder.

If a mutually acceptable solution cannot be reached, the neutral party decides on the issue, based on the warranty documents. The builder is bound by the decision once it is accepted by a homeowner. He can appeal the decision but faces expulsion from membership if he ultimately refuses to comply. An unmollified owner is


New Jersey's New Home Warranty and Builders' Registration Act protects new-home buyers. Under the law, all home builders in the state must register with the state's New Home Warranty Program. New homes are covered by a ten-year warranty issued through the state's warranty plan or a state-approved private plan.

For more information, contact the Department of Community Affairs, New Home Warranty Program, CN 805, Trenton, NJ 08625; or call, 609-984-7534 or 609-984-7563.

free to reject the arbitrated settlement and go to court. (The mandated New Jersey New Home Warranty Program provides that the decision of the neutral third party is final and binding on both parties.)

Most homeowners accept the mediated decision. That may not mean they're satisfied, however. According to Peter Desch, chief of New Jersey's Bureau of Homeowner Protection, the biggest problems with extended warranties are that homeowners don't consult their warranty until a problem surfaces, they fail to give the builder an opportunity to correct the defect, or they wait too long before filing a claim. The National Academy of Conciliators, which provides mediators for many warranty disputes, agrees with Desch and adds that owners may feel dissatisfied with mediated decisions because they did not understand warranty limitations—either because they spent too little time reading their policies or didn't understand what they read.

Another problem is that plan issuers have no authority to get tough on delinquent builders, except by suing them or expelling them from the program. An expelled builder can go on constructing homes unless local or state regulatory bodies decide to take action. (In New Jersey, if a builder fails to abide by the decision of a plan's dispute settler, its right to build homes in New Jersey can be revoked or suspended.)

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