Welcome back!

After spending an hour or two going through the minute details of Proposition 201, one of the ballot propositions that Arizonans will be voting on next Tuesday, I am pretty angry.  During a time when people are in financial difficulties, the last thing we need is a bill that will raise the cost of housing without producing more value for the homeowner.

Bill of Rights?

I supposed that naming this amendment the Homeowners’ Bill of Rights was a pretty slick advertising move.  In fact, they are proposing to change the previously named “Purchaser Dwelling Actions” to now read “Homeowners’ Bill of Rights”.  This is not new legislation but a proposition to change our existing legislation which is already in place to protect homeowners.  Want details?  Read on.

What is a Purchaser?

The first thing that this amendment changes is the definition of “Purchaser”.  Now it means not only someone who purchases a home, but someone who is a Prospective Buyer.  Using that definition, it could mean anyone who walks into a builder’s office and wants more information on the homes they are building.

Changes to the Opportunity to Repair

Currently, a purchaser must give a 90 day notice to a builder if they intend to file a dwelling action.  That amount of time is cut to 60 days.  And now instead of a purchaser having to describe in “reasonable detail” the items that are defective, he is required to give a description in ordinary, non-technical language.  AND the notice is deemed to include not only items listed in the homeowner’s description, but any defect that “should have been found by a seller during an inspection”.  How’s that for adding vague language and an opportunity to add just about anything to a lawsuit after the fact?

The seller or builder is now required to conduct a diligent inspection of the dwelling once a notice is received (a good idea, actually) and has 30 days to respond instead of 60.

Changes to Contractors Used

If the seller offers to make repairs to cure the defects, this amendment requires that the builder use a contractor licensed by the state with no record of an order against it (by the Registrar of Contractors) within the last 10 years.  Furthermore, the seller is required to provide at least 3 contractors and the purchaser gets to choose who gets the job.  Being able to choose a contractor is one of the things I actually like about this amendment.

The limitations on contractors used is the real meat of this amendment for those attempting to pass this amendment, the Sheet Metal Union and the AFL-CIO.  Their hope is that these restrictions will prevent the use of non-union members and basically unionize the construction industry.  What do you think the chances are that they will charge higher prices than non-union workers?  Do you think that will affect housing prices here in Arizona?

Changes to Attorney’s Fees

Ok.  Let’s assume that a homeowner has a defective home and goes through the process of notifying the builder, receiving an answer, etc.  Let’s say that for some reason they can’t reach an agreement, but the homeowner feels that he/she has a good case against the builder and takes it to court.  Typically, if you go to court and you win, you are also awarded attorney’s fees, right? 

Well in this case the homeowner would get attorney’s fees if he wins, but if the builder wins, no attorney’s fees are awarded.  Here is the exact verbiage that has been added, “No contract for the purchase of a dwelling may require the purchaser to pay the attorney or expert fees of the seller under ANY circumstances.” (Emphasis Mine)  This, to me, is the worst part of this entire amendment.  While some see this as an enticement to get builders to settle out of court, it seems to me to be an enticement to get individuals or groups of people to take advantage of the builders’ “deep pockets” either in or out of court.  I’m not on the builder’s side or anything, but let’s be reasonable.  If there is no penalty for losing a frivolous lawsuit, then why wouldn’t anyone and everyone give it a try?  And keep in mind that a “Purchaser” is really any prospective buyer.  So Jake the Snake (Joe the Plumber’s brother-in-law) goes from builder to builder and creates lawsuits with his favorite attorney friend against the builders.  He’ll win some and lose some, but he has no penalty for losing, and his gains pay both him and his attorney.  In fact, he doesn’t even have to purchase the home in order to file a lawsuit.

Let’s say for a minute that I’m being too hard on Jake and he would never think of doing such a thing.  Ok.  Even with completely legitimate lawsuits, some will be won by the builder and some lost or settled out of court.  Pop Quiz:  Who is going to pay the attorney’s fees for ALL of these lawsuits?  (A) The builder, of course, (B) the builder’s rich uncle, Sam, or (C) everyone who buys a house from this builder.  If you guessed C, give yourself a gold star.  I’ll even give you a silver star for answering B.    My clients will be paying for this because they will want to have that new home and will be excited by the extended “protection” they’re getting.  However, they’ll pay for it in the hefty price up front.  On the bright side, perhaps this will help encourage people to buy the already existing homes that I have listed for sale…

Some Miscellaneous Changes

There are some miscellaneous changes that would be required by this amendment as well.  For example, all the upgrades in a model home must be included in the base price of the homes or separately itemized.  So base prices would be going up.  The builders would probably just adjust a price downward for buyers who chose less pricey upgrades or they may choose to itemize the price of the upgrades up front.  This is actually not a bad idea, as it provides more disclosure to the public.

Also, the seller could not require a deposit for a contract unless the purchaser can cancel the contract within 100 days and receive a refund of at least 95% of the deposit.  This will result in the builders shouldering a lot of risk with no compensation from buyers who back out after the builder is half-way through the building process.  As this costs them money, it will, of course, be passed along to the consumer in the form of higher home prices.

Currently there is an eight-year period in which a homeowner can file an action against a builder (or anyone who makes improvement to real estate).  This amendment extends it to 10 years.

Something’s Missing

Typically when you sign a real estate contract, there’s about a half-page of legal “mumbo jumbo” that describes the alternative resolution process, typically having the parties agree to try mediation or arbitration before dragging each other into court.  In the current statute, there is a paragraph stating that if there are alternative dispute resolution procedures, they are to appear consipicuously in the contract in bold lettering so that you know what the procedure is ahead of time.  This amendment completely crosses out that paragraph.  So we the public when purchasing from a builder are not even able to use our own fair judgement about how we will resolve our own disputes.  Do we really want the law to tell us that we HAVE to go to court?

Who Wins?

So if Proposition 201 passes, who benefits?  The unions will, quite possibly, but the people who will get the biggest payoff is Attorneys.  Hey!  We’ll be required to go to court to resolve our differences with a builder.  We’re going to need some attorneys. 

*Disclaimer:  I know attorneys get a bad rap and I also know some of them are excellent and operate with integrity.  However, we shouldn’t be forced into using them any more than you should be forced into using a Realtor in order to sell your home.

Who Loses?

Contrary to what the supporters of this proposition would have you believe, this is not going to protect our home values.  We the consumers will lose if this passes.  We’ll lose once by paying higher home prices, twice by spending more time entrenched in legal issues, and we’ll lose a third time when we pay more taxes to pay the judges and court staff who have to handle a higher influx of court cases.  We need to hold home-builders accountable if they produce poor quality homes, but this amendment is not the right tool for that job.

Vote NO on Proposition 201.

Technorati Tags: 2008 election year, amendment changes, Arizona, Arizona Election, Arizona Prop 201, Attorney, ballot propositions, bill of rights, contractor, court, disclosure, Election, frivolous lawsuit, Homeowners, new legislation, prospective buyer, Realtor, technical language