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Why Homeowners Sue Builders (Businesses)

While this article uses construction projects for a basis of discussion, the small business owner can apply the principles to any business. The construction of a residence or commercial building is one of the most complex and expensive processes people ever undertake. When things ‘go south’, they often end in litigation. Most commonly, they end up there for the following reasons:

· The customer believes something is wrong with their home (i.e. product or service) and the builder won’t take care of the problem.

· The customers expectations, reasonable or not, have not been met.

· They feel someone lied to them or didn’t tell them the whole truth.

· They believe they got the run around from the sales or service department.

· They did not get the respect they felt they deserved.

· They felt they had no other choice.

Right now the market for housing in Central Oregon is very hot. So homeowners may feel they are paying a premium for a home. The search process is more stressful than they are accustomed to. Most importantly, they use other businesses as their basis for making service quality comparisons.

What makes you an attractive target for a lawyer? If you can remove the financial incentive for the attorney, you can reduce your risk of litigation exposure. Defect claims that call into question the fundamental integrity of the home, such as foundation or other structural concerns or leaks that could not be fixed, are prime candidates for lengthy and expensive litigation.

Do your contracts have clauses that create incentives for attorney’s fees? Ask yourself, how “litigation friendly” are your products or services or contracts?

Oftentimes claims come from misrepresentation made by sales people. (Not necessarily on purpose.) Symptoms of this problem surface when more than one customer complains about the same misrepresentation. Other examples include missing documentation (“I know they signed it!”), getting different stories depending on who you talked to at your company, or the sales person answered a question without knowing the answer.

How do you create proactive customer service that helps prevent litigation? First hire the right person. Someone with attention to detail that won’t let a customer fall through the cracks. Someone with a “can-do” attitude. Who knows when to say “yes” and when to say “no.” Everyone involved in customer service needs to understand how the company wants to approach customer service. That staff needs to understand what can happen when complaints are mishandled.

People often remember more about how they were treated than the solution. Don’t make excuses blaming subs or manufacturers.The customer bought the product from you! Treat them with respect, no matter how demanding they are. One of our best practices was to have a homeowner sign off on each item on the punch list.

If they wouldn’t sign off, they had to say what was still wrong. Some customers just don’t want you to be done or to fix the problem.

They often use ‘the problem’ to keep from paying a bill. Having them sign off and agreeing all problems were addressed on the list is a key method to moving beyond that “lifetime complaint”. When all else fails, consider bringing in an expert or a mediator to assist in reaching resolution.

Jim Kress works with small businesses developing customer service and marketing programs. He can be reached at COCC at 383-7712.

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