Carolina Construction Law

Can a builder include subcontractors in arbitration with homeowner?

No.  If a homeowner and builder are in a construction dispute that has a binding arbitration provision, then any attempt to bring a subcontractor into the arbitration will void the arbitration agreement since the subcontractors were not a party to the original construction agreement.  This raises a number of other issues.  It apparently means that the contractor is going to be involved in both an arbitration with the owner and a civil trial with the subcontractors.  This produces twice the legal costs.  What if the contractor and the owner have one arbitration agreement, and the builder and the subcontractors have a separate arbitration contract - can you force them both to arbitrate at the same time?  I'm not sure we know the answer to that question.  Of course, the parties can always agree to arbitrate, regardless of what the contract says.  (See the recent decisions of University Heights v. Pineville Forest).

Can a contractor force a condo association to arbitrate construction claims?

Apparently not.  In a case decided just last month, the Court of Appeals in Pineville Forest v. Portrait Homes rejected both of the builder's arguments that any claim for defects alleged by a homeowners association for condominiums must be arbitrated.  At the time of the sale of the units, each owner was given a warranty on the building issued by a third party.  The third party warranty had a mandatory arbitration provision.  The Court held that since the warranty was a contract between the owners and the builder and not a contract between the association and the builder, that the arbitration provision did not apply.  Additionally the builder, (who we represented BTW), had placed a binding arbitration provision in the recorded Covenants, Conditions and Restrictions.  However, here the Court said that no contract existed - merely recorded restrictions on the property.  In other words, an arbitration provision was only enforceable if it was in a contract between the two parties to the contract.

Is an arbitration clause signed after the initial contract, enforceable?

In an unpublished opinion of the Court of Appeals in July 2007, the Court held in Hailey v. Terminix that since the initial contract between the owner and the pest control company did not contain an arbitration provision, the fact that the report given to the owner did have such a clause, did not make it enforceable.  Therefore, the matter had to proceed to trial - not arbitration.

How do I enforce an arbitration award?

Once you have the decision of the arbitrator, North Carolina has adopted the Uniform Arbitration Act. This Act permits you to petition any Superior Court judge to affirm the award.  This will convert the award to a judgment on the public records just as an original jury verdict would.  From there, you can execute on the judgment through the Sherriff's department.

What is remedy if contract exceeds limitation on license?

Sometimes you will have a situation where the builder undertakes a contract with a license that is limited in some way, but then the cost of the undertaking exceeds his limit.  In that case, North Carolina will permit him to recover up to the amount of his license - but no more.  We are handling a case just like this now.  The fact that the owner knew the license was limited does not help the contractor recover his money.

Arbitration

Arbitration is a legal proceeding, outside the courtroom, that is binding on the parties.  It is typically conducted by 1 or 3 arbitrators.  There are only two ways to have arbitration in North Carolina. First, there must be in arbitration clause in the written contract between the parties; or second, the parties must consent to arbitration.  Some contracts require the arbitration to be conducted through the American Arbitration Association (AAA).  However, many people find their administrative fees expensive.  There are alternative arbitration groups such as The Arbitration Group (TAG) that some may find to be a less expensive solution.  There are advantages and disadvantages to arbitration.  A disadvantage is that the decision is not appealable. An advantage is that it is usually quicker, cheaper and less formal that a jury trial.