Title 7's Pre-litigation Procedures provide a detailed dispute resolution procedure which must be completed before litigation can be started. The concept is to keep the parties talking in a non-adversarial process. The Builder must record a notice of the existence of these procedures and provide a copy of Title 7 to the Buyer at the time of the sales contract. The Builder must also provide significant documentation to the Buyer involved in a claim (essentially pre-litigation free discovery). Much of this documentation is also required to be provided during the sales process (see Required Sales Documentation). The Builder has a right to inspect and to repair but there are many strings attached. The Builder must restore any inspection area to its pre-inspection ("pretesting") condition within 48 hours. The Builder may not obtain a release from a Buyer as a part of making the repair. Thus, a Builder may perform a repair, but the homeowner (or the Association) may sue the Builder in relation to the failure of the repair to satisfy the Performance Standard. However, a cash payment in lieu of the repair can be the basis for a release agreement. The repair work can be observed, photographed or videotaped by the Buyer (or the Association) or by the Buyer's legal representative during the repair work (more free discovery). There is no discernible penalty to the Buyer who refuses to permit the Builder to effectuate a repair. In any event, as soon as the Builder completes the repair, the Buyer is free to sue, unless a mediation request is made. The mediation only lasts for 4 hours and is paid for entirely by the Builder who is entitled to select the mediator. Any applicable statute of limitation is extended to 100 days after the repair is complete.
A Builder may "opt out" of the statutory procedure by offering its own non-adversarial procedures -- we call it a "Claim Process." There are advantages and disadvantages to creating a Claim Process. A primary disadvantage is the risk that any Claim Process, no matter how carefully and properly drafted, will be challenged, adding to the costs of defense and creating uncertainty. The best solution is simply not clear.
Of course Pre-litigation procedures, whether those set forth in Title 7 or a different Claim Process created by a Builder do not resolve all disputes. Consideration should be given to creating a subsequent binding alternative dispute resolution ("ADR") mechanism should a claim not be resolved through the Pre-litigation procedures.