Horizon, Host: Ted Simons

September 29, 2008


Host: Ted Simons

Terry Goddard


  • Arizona Attorney General Terry Goddard joins us to discuss a variety of issues, including lending in Arizona and the new student loan code of conduct.
Guests:
  • Rebecca Friend - AFL-CIO
  • Kevin O’Malley - Gallagher and Kennedy law firm


View Transcript
Ted Simons:
>>> Tonight, we talk about proposition 201, the homeowners’ bill of rights initiative. Before we get started, here are highlights of the initiative. It'll create a 10-year warranty on new homes. It would give homeowners the right to demand correction of construction defects. It would allow the homeowner the right to participate in getting the contractor to do repairs. If an agreement is not reached it allows the homeowners to sue the builder. Homeowners could recover legal costs. Builder cannot. Homeowners could sometimes recover compensatory damages. Relationship between the lender and the builder must be disclosed. There'd be a right to cancel a contract within 100 days and get most of the deposit back. A seller's agent would be prohibited in participating in false mortgage applications. Here to speak in favor of proposition 201 is Rebecca Friend of the afl-cio and speaking against the measure is Kevin O’Malley of the law firm Gallagher and Kennedy. Thank you, both, for joining us on "horizon."

Rebecca Friend:
>> Thank you.

Kevin O’Malley:
>> Thank you.

Ted Simons:
>> Rebecca, why do we need this law?

Rebecca Friend:
>> We started hearing concerns from two groups, workers that were building these homes and homeowners, and the concerns weren’t being addressed by the builders. So we believe that this is legislation that is needed. The legislature took out a lot of homeowner protections in 2002. We believe that we took this to the voters to see if they'll put some of those protections back in.

Ted Simons:
>> protecting the homeowner. Sounds like a pretty good idea.


Kevin O’Malley:
>> Of course it is. Actually, the choice here is about more lawsuits prompted by out-of-state unions that are providing most of the funding for this proposition and a proposition that is written by ape an out-of-state lawyer who didn't participate in the process that Rebecca is talking about. Five or six years ago, there were meetings about all the interested stakeholders in this process that included homeowners groups, contractors and insurance companies, anyone that had to do with the process. We also sat down and worked through this and came up with a process that works it gets homes fixed and fixed quickly and without lawsuits. Now, we have someone coming from out of state telling us we’re more in favor of lawsuits and not in favor of getting the homes fixed when they need it.

Ted Simons:
>> Talk about lawsuits necessary and otherwise. Does this just mean a whole bunch more?

Rebecca Friend:
>> Certainly this law doesn't bypass the arbitration section, the adr. You can't do that federal law protects that preventing any state from doing that. This, we're talking about a family's largest investment. The median income in Arizona in 2007 was a little bit around $45,000 or $47,000. New home costs in 2007, median cost was $283,000. So you're talking about a family's largest investment. If you go buy a new car for $30,000, you can get an 8-10 year warranty. We're saying you should be able to do this on a new home. We're not inventing the wheel on this. There are several states that have stronger laws than Arizona two states, New Jersey and Louisiana have a 10-year warranty on new homes.

Ted Simons:
>> Talk about what happened five or six years ago and the resulting law? Do you want to take it to what happened prior to the law? Does that jump the law? What is happening here?

Rebecca Friend:
>> This makes to new law. Speak to Kevin’s concern that this is an out-of-state union that funded it. The union that funded it primarily is the sheet metal workers from in state. Out-of-state lawyer, all propositions need to have a lawyer to write the language. You have to make the law fit with existing law. Not violate state or federal law.

Ted Simons:
>> are you saying homeowners had enough protection? Is there room for more? Are you saying it's good enough as it is?



Kevin O’Malley:
>> The system that works right now works very, very well. The legislature held open and public meetings about this. There was bipartisan support. The governor signed these bills into law because it provides an even and balanced system Rebecca says we're not taking away the right for arbitration. If you read this bill, that's exactly what it does. Instead of allowing people to get together, mediate or arbitrate their disputes that strikes the language from the existing law and forces people into litigation it takes away people's rights. It takes away the rights of the homeowners and the builders to get together and solve their problems themselves.

Ted Simons:
>> Talk about that. Does this keep folks -- I mean, do you have to go to court now?

Rebecca Friend:
>> No, absolutely not. And in fact, um, you do have a choice of contractors. You have to have someone that have a clean record with the registrar of contractors. The home builder could certainly be one of those. What we're saying is homeowners need a way to address the situations when they're not fixed. We did a study on faulty homes. We studied 400 home owners. I have the survey. Out of those, 59% of the homeowners had defects that wasn’t addressed by the builder.

Ted Simons:
>> A 10-year warranty which is addressed here as well. Why isn't that such a great idea?

Kevin O’Malley:
>> First of all, under existing law, homeowner haves an eight-year warranty. If the problem developed in the eighth year, you have a nine-year warranty. That's not what this is about. This is not about warranties. Our builders stand behind their product already. It's about whether or not you want the problems to be addressed in two or three years on litigation with hundreds of thousands of dollars of fees for everyone or whether you want the current system which avoids litigation and has people sit down in a dialogue and provide for example a reasonable list of the problems. Under this proposition, the homeowner no longer has to tell where you the defects are in the home. How are we going to get things fixed if they don't tell you what the problems are in the home?

Rebecca Friend:
>> J.D. powers says within homes, there's 11.5% problems. Is that what we want in Arizona where we have a median income where it's working families. This is your largest investment. Shouldn't it be protected as much as your car?

Ted Simons:
>> Why shouldn't home buyers, why shouldn't consumer in order to stave off some of the frivolous lawsuits or unnecessary lawsuits, however you want to describe them, why should they be responsible for the legal costs?


Rebecca Friend:
>> What we're assuming is there'll be frivolous lawsuits. We held the minimum wage initiative. What we heard is it'll be involved in identity theft. That's a fallacy. There's nothing that proves we will have increased courts or increased legal fees or increased anything except the homeowners getting the defects fixed.

Kevin O’Malley:
>> Ted, here is the problem. Right now, here is the existing law. Under existing law, if you file -- if you go through the process and determine you don't like the offer that's made by the builder and go to a lawsuit, at the end of the lawsuit, if do you better than offer that was made to you before the lawsuit started, you win. You get your attorney's fees and the expert witness fees. If on the other hand out-of-state lawyers come in, file lawsuits that are frivolous, have no merit and you go to litigation, at the end of the day, the jury said, you know what? Mr. Builder did you a good job. Under this proposition, they're striking that out saying no matter how frivolous or unmeritorious the lawsuit is the builder never gets the fees. It'll incentivize the out-of-state lawyers to file the lawsuits hoping it get a big payday with no risk of having to address the problems they filed in the lawsuit.

Ted Simons:
>> Prior to 2002, was there a problem with unnecessary lawsuits against home builders?

Kevin O’Malley:
>> There was a problem with unnecessary lawsuits. We saw it starting in California. It's come over here. There's been lawyers and there's been expert witnesses that have opened shop here in Arizona to file lawsuits. And as I mentioned before, the purpose of the group getting together at the state legislature was to find a way we could avoid lawsuits. That's what the notice and opportunity repair bill was all about. Avoid lawsuits and get problems fixed. Now what we're talking about is let's dismantle that system and force this into litigation.

Ted Simons:
>> It -- please.

Rebecca Friend:
>> Well, certainly, Kevin, you know, i read bios. Kevin represented home builders. He's representing a group that's got interests. If you look at who is representing this bill, it's the chambers and the homeowners and the lawyers that represent them. They didn't go in to make this better in 2002. They went in to strip out the homeowner's rights.

Ted Simons:
>> If we look for who is behind the proposition, you see unions, why?

Rebecca Friend:
>> You see unions, because we hear from workers and homeowners all the time. We get a lot of calls at the afl-cio that have nothing to do with unions or nothing to do with union organizations. They have to do with workers and working families because they know we stand up for their rights.

Kevin O’Malley:
>> Ted, when we got together in 2002, sitting in the table were representatives of homeowners' associations, lawyers that sue builders were at the table as well as insurance companies and multihousing groups. Why is it we need an out-of-state lawyer to tell us in Arizona and tell that group of interested people that the unions think we should do something different.

Ted Simons:
>> Last question, we got like 30 seconds here, is that a major part of your opposition? The idea of unionizing?

Kevin O’Malley:
>> No. No. No. It's not about unions. It's about if you want to be part of the process, we're worthy in the last five years sitting down with everyone that’s interested including the homeowners. We had homeowners' groups in our meetings. Where is the homeowners' interests? It's not being represented by the union.

Ted Simons:
>> all right, we have to stop it right there thank you, both, for joining us. We appreciate it.

Kevin O’Malley:
>> Thank you Ted.

Rebecca Friend:
>> Thank you.

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