Arbitration: The Good, The Bad and the Ugly
Posted: June 23rd, 2025
Written By: Mark Siemer
Arbitration clauses have become standard in many home construction contracts, offering a pathway to resolve disputes outside of the traditional courtroom. While arbitration can provide significant advantages, particularly in terms of speed and expertise, there are also important considerations and potential pitfalls homeowners and contractors should be aware of.
The Good - Faster Resolution
One of the primary benefits of arbitration is its efficiency compared to litigation. Construction disputes, by their nature, can drag on for years in the court system due to crowded dockets and lengthy discovery processes. Arbitration, on the other hand, typically moves much faster. For example, under the American Arbitration Association (AAA) rules, claims under $75,000 may qualify for the "fast track" process, where hearings can occur within 45 days of filing and decisions are rendered within two weeks of the hearing. This expedited timeline is particularly valuable in home construction, where delays can be costly and disruptive.
The Good - Expertise of the Arbitrator
A distinct advantage of arbitration in home construction disputes is the ability for parties to choose an arbitrator with specialized knowledge tailored to the nature of the dispute. This arbitrator can be an attorney who specializes in construction law or a professional from within the construction industry itself, such as an engineer, architect, contractor, or project manager. Both options offer unique benefits.
An attorney-arbitrator brings a deep understanding of legal principles, contract interpretation, and procedural fairness, which can be particularly advantageous when the dispute centers on complex legal issues or contract interpretation. Depending on your claim or defense, you might want to focus your arguments on the legal issues that an attorney will understand better.
On the other hand, selecting an arbitrator who is a construction industry professional offers hands-on expertise and practical experience with building processes, technical standards, and industry relationships. These arbitrators are often better equipped to evaluate technical evidence, understand construction methods, and assess workmanship or project management issues. They might be better suited if your claim relies more on “common-sense” or technical evidence.
Ultimately, the flexibility to select an arbitrator with either legal or industry-specific expertise allows parties to match the decision-maker’s background to the specific needs of their case, maximizing the likelihood of a fair and efficient resolution.
The Bad - Upfront Costs
While arbitration can be less expensive in the long run due to its speed, the upfront costs are often higher than filing a lawsuit. Parties must pay arbitrator fees, administrative costs, and sometimes even rent for hearing rooms, all of which can add up quickly, especially compared to the relatively low cost of filing a court case.
These upfront costs bring the reality of fighting a legal matter home sooner than filing a lawsuit and are often a major deterrent to homeowners who also need to find a way to make their home safe and livable while the matter is pending.
The Bad - Potential for Unfair Clauses
All contracts are written favor of the drafter. Meaning, not all arbitration clauses are created equal. Some contracts may include provisions that limit remedies, impose additional procedural hurdles, or otherwise tilt the process in favor of the contractor. For example, the arbitration clause might require pre-arbitration mediation. That could add several thousand dollars to the process before the matter goes to arbitration.
The Ugly - Limited Discovery and Appeal
Arbitration generally allows for less discovery than litigation, meaning there are fewer opportunities to obtain evidence from the other side. This can be a disadvantage if one party holds most of the relevant documents or information. Lawsuits are usually won on the evidence the party starts with. If you are fighting over defective windows, you have the windows in your possession from the beginning, but you might not be able to dig through the builder’s email or project management software to find the smoking gun that they new the windows were defective when they put the windows in your home. In a lawsuit, the attorneys have years to develop the case, craft the best possible discovery requests and depose the witness they deem important to make the best possible case. In Arbitration, especially fast track arbitration, the evidence you bring to the initial consultation with the attorney represents a substantial amount of the evidence that you will be able to use in the arbitration.
Conclusion
Arbitration clauses in home construction contracts offer clear benefits: faster resolution and specialized decision-makers. However, they also come with higher upfront costs and the risk of restrictive or unfair terms. Homeowners and contractors should carefully review arbitration provisions and consider whether the advantages outweigh the potential drawbacks for their specific situation.
Need assistance with arbitration clauses? Call Volk Law Offices and ask for Mark Siemer at 321-726-8338.
The matters discussed here are general in nature and are not to be relied upon as legal advice. Every specific legal matter requires specific legal attention.
The law is constantly changing and matters discussed today may not be the same tomorrow. Legal matters are also subject to different interpretations by attorneys, judges, jurors and scholars. No attorney-client relationship is intended or created as a result of matters discussed here. You should consult counsel of your choice if you have any dealings in these areas of the law. Volk Law Offices, P.A. and its attorneys make no representations or warranties with respect to the accuracy or completeness of the matters addressed.