No matter how carefully homeowners select home improvement contractors, sometimes projects go badly. When problems occur, the home owners first recourse is to talk to the contractor and try to work out a mutually agreeable solution under the terms of their home improvement contracts. Failing this, home owners may opt for arbitration through their state’s Office of Consumer Affairs.

Arbitration Rules

Arbitration is only an option if a contractor is licensed with the state. Under arbitration rules, both contractor and homeowner present their complaints to a neutral third party. After evaluating contractor license complaints, the arbitrator delivers a legally binding decision.

State arbitrators have significant experience in contractor complaints, and are required to be neutral. Arbitrators may be active or retired members of the legal profession or experts in the home improvement industry.

Not every contractor license complaint qualifies under arbitration rules. To be eligible for arbitration, the complaint must fulfill certain requirements, and the damages sought must meet a state-determined maximum (usually $10,000 or less). Additionally, the home improvement contractor involved in the cases must:

• Be licensed when the disputed work was performed
• Have no prior record of violations
• Not have current contractor complaints pending against him.

Arbitration is binding. If the homeowner does not agree with the arbitration decision, he or she cannot pursue the matter in court. On the other hand, home improvement contractors who refuse to comply with the arbitrator’s decision risk court action and suspended licenses.

Arbitration Rules and Guaranty Funds

Licensed home improvement contractors are charged a onetime fee by their state’s Office of Consumer Affairs. This fee is deposited in the Guaranty Fund, a fund provided for consumer protection.

If contractors refuse to submit to either arbitration or court rulings, consumers can apply to the Guaranty Fund for reimbursement. Each state has its own regulations concerning Guaranty Fund use, but in general there is a maximum amount that can be claimed from the Fund. In the event that home improvement contractors pay damages after the consumer receives a Guaranty Fund payment, the payment must be returned to the Fund. Failure to do so brings the risk of legal action.

Advantages to Arbitration Rules

Both consumer and contractor benefit from successful arbitration. Arbitration does not require costly legal fees. Either side can opt to be represented by a lawyer, but if so they must pay all fees. The point of arbitration is, after all, to resolve contractor complaints without recourse to the courts.

Arbitration is binding and can be enforced in court. Successful arbitration provides the consumer with satisfaction and, when necessary, damages, and neither damages the contractor’s reputation or results in license suspension. The arbitration process is also faster than litigation.

Alternatives to Home Improvement Contractor Arbitration

There are alternatives to home improvement contractor arbitration. Many states offer mediation services, helping contactors and home owners find mutually acceptable solutions to their dispute.

The courts are also an option for pursuing contractor complaints, but more expensive and time-consuming than arbitration. If homowner’s hire unlicensed home improvement contractors and need to seek damages, the courts are, however, the only option.