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Hogan Lovells US LLP Columbia Square 555 Thirteenth Street, NW. Washington, OC 20004 T +1'202 637 5600 F +1 202.637 5910 ‘www hoganlovels.com November 15, 2019 By Electronic Mail ‘The Honorable Sherrod Brown The Honorable Richard Blumenthal ‘The Honorable Benjamin L. Cardin The Honorable Chris Van Hollen, United State Senate Washington, DC 20510 Dear Senators: We are in receipt of your letter dated November 6, 2019 accusing NVR, Inc. (NVR) of using “anti- ‘consumer tactics” in connection with its new home construction warranties and dispute resolution procedures and claiming NVR uses “mandatory’ arbitration provisions and non-disclosure agreements. Unfortunately, the facts as presented, both in the articles referenced therein and reiterated in your correspondence, are not an accurate portrayal of what has transpired. We would like to take this opportunity to correct those inaccuracies so as to respond to the concerns you raise. ‘The Facts Reaarding the Amos Matter The Cincinnati Enquirer and Salisbury Daily Times articles referenced in your letter, although portrayed as “investigative journalism,” mischaracterize the facts relating to the disputes described therein. Allow us to set the record straight. With respect to the Amos family’s home in Milford, Ohio, NVR made extraordinary efforts to work with the Amoses and their attorney to correct, at NVR’s expense, the conditions they identified in connection with their warranty claims. Although NVR strives to build every home to a standard of excellence, in some cases like the Amoses’, punch list items and warranty repairs may be necessary following construction. In those cases, it is NVR's practice to promptly and diligently complete any punch list items and perform covered warranty repairs so that its customers get the home they contracted for. The Amos case was no different. NVR made numerous attempts to repair the items the Amoses identified and extended several good-faith offers to resolve the Amoses' claims. At various times, NVR offered to either: (a) repair all of the warranty and punch-list items the Amoses raised (including several items that NVR in good faith does not believe are covered under the Amoses’ warranty), and also provide a reasonable cash payment to cover the Amoses' claimed attorneys’ fees and various incidental expenses incurred in connection with the repair work; or (b) provide a more substantial cash payment to allow the Amoses to hire a third-party contractor to perform the requested repair work. Hoge Lovet Us Ll td ys nd nt Dart Curia. ‘Hogan Loa aan rams apd ac al es Hogan Lo Hater Parry turns Cn ch Co Hare Kony outer rey trie Ler hes tebany ost Moses CO Wan MaMa Say ‘uest Alan ew ek Mstan Vigna Pate Fary Piscopna one San Frances Seo Pau, shang Sheey Ve, Sap. Syy Tee Wireeostegoe SC" Aeccced Ges Wolves skein taghe FZ Urata Zag Gunnese Svcs Cons: Jrwneury Louse (USarSunte Cones ben ‘Frmers cen stv ogee -2- November 15, 2019 ‘The Amoses repeatedly declined NVR’s offers, instead demanding a much larger cash payment totaling several times the cost of the repairs and any reasonably related incidentals for the acknowledged purpose of, among other things, adding a deck onto their house and paying a contractor to plant additional trees in their backyard—items that were never part of the parties’ contract and have nothing to do with the Amoses' warranty claims or complaints over NVR's construction. Notwithstanding the parties’ inability to reach a global settlement, NVR has already repaired, at no cost to the Amoses, many of the items that comprised the Amoses' original warranty claim and punch list. The only reason NVR has not repaired others of those items is because the ‘Amoses have refused to grant NVR access to the premises to address those items. ‘Additionally, that the Amoses’ home is ‘not approved for occupancy’ tells only half the story. The home passed all county inspections and was issued a temporary certificate of occupancy that was valid until May 2019. The certificate of occupancy was “temporary” due to the landscaping not being installed at time of home settlement, which is a common Ohio practice for winter settlements. Although its true that the final certificate of occupancy has not yet been issued, that is not due to any failing by NVR. Had the Amoses accepted NVR’s reasonable seitlement proposals or even allowed NVR to enter the property to complete the requisite repairs pending further negotiation of a final settlement, those repairs would have been completed long before the 2019 expiration of the temporary permit. NVR even wrote to the County to propose a joint inspection of the home so that any issues holding up the final certificate of occupancy could be identified and resolved by NVR. Rather than cooperate with that request, the Amoses chose to file a lawsuit. Importantly, NVR did not, as you state, at any time "demand{ | that the Amoses enter into binding arbitration and sign a non-disclosure agreement that would prevent them from publicly discussing their experience” in connection with its settlement offers. NVR never insisted on any agreement to arbitration as a condition of settlement. Although the Amoses’ warranty does contain an arbitration provision, NVR never indicated any intent to enforce that provision and despite that it could have done so, did not seek to enforce that provision even after the Amoses filed a lawsuit against NVR. NVR did propose that the repairs being made by NVR be inspected and signed off on by a neutral, third-party contractor mutually agreeable to NVR and to the Amoses, for the purpose of achieving final resolution of the parties’ dispute and avoiding future disputes. The Amoses' attorney did not take issue with this request as the negotiations proceeded. Similarly, while NVR proposed a limited non-disclosure provision to be incorporated into a final settlement agreement, the proposed provision was to apply only to the amount of the cash payment NVR was providing to compensate the Amoses’ for their attorneys’ fees and incidental expenses—it ‘would not have prevented the Amoses from “discussing their experiences” or disclosing any information they may have wished to disclose regarding the purported defects in construction or the repairs NVR agreed to perform for them. Moreover, the Amoses were represented by an attorney throughout their settlement discussions with NVR—they were free at any time to break off negotiations and file a lawsuit, as they ultimately did. If necessary, we could provide a point-by-point rebuttal to numerous other issues raised in the Cincinnati Enquirer and Salisbury Times articles. As noted above, those articles do not accurately portray NVR's dealings with the Amoses or its overall handling of warranty claims, ‘The Facts Regarding NVR's Warranty Practices NVR provides a warranty for every home that it builds—and it honors those warranties as it has sought to do for the Amoses. NVR is one of the largest homebuilding companies in the country—it was started in 1948 and has built over 120,000 homes in the last 10 years (2009-2018). NVR performs a detailed third-party November 15, 2019 Quality Assurance Inspection prior to settlement and provides a comprehensive warranty on every home built. NVR would not be the successful company itis today if it ignored its customers’ warranty concems. Indeed, NVR provides each of its customers submitting a warranty claim the opportunity to evaluate NVR's warranty work through a survey. The average survey score over the last three years is 9.5 on a 10-point scale. On the occasions when NVR receives complaints from its customers, NVR acts promptly and in ood faith to attempt to resolve those complaints. Over the past 10 years, NVR has built 123,757 homes, but has been sued fewer than 200 times related to warranty claims and has entered into arbitration over a warranty claim fewer than ten times (and zero times since 2016). In other words, less than two tenths of a percent of the homes NVR has built have resulted in legal proceedings, and arbitration has very rarely been used. Moreover, for the majority of the handful of claims that ‘went to arbitration, itwas the homeowner that requested arbitration and not NVR. As you can see, forcing customers into arbitration simply is not a business practice or legal strategy employed by NVR. To the contrary, NVR's practice is to do everything reasonably possible to fix any issues its customers may experience Italso is not NVR’s practice or policy to request that homeowners enter into non-disclosure or confidentiality agreements as a condition to obtaining legitimate warranty repairs. Indeed, NVR routinely performs such warranty work without requiring non-disclosure agreements, Itis, however, a common business practice for NVR and any other company dealing with claims that could result in litigation to include a non-disclosure clause in settlement agreements, whether the agreement relates to a disputed warranty claim or any other legal matter. Requesting that a homeowner sign a non-disclosure agreement in connection with the settlement of a legitimate dispute is not, as you phrase it, “corporate blackmail.” Itis a standard term included in virtually every private settlement of potential litigation. Where there is a dispute over the proper scope of warranty repairs or where, as in the Amos matter, NVR is asked to consider a resolution that involves a cash payment on top of making legitimate warranty repairs, NVR is well within its rights to seek a limited, reasonably tailored non-disclosure agreement to protect its legitimate confidentiality interests in connection with any settlement offer it may extend. We strongly believe there is nothing illegal or improper about doing so, Nor is there any coercion involved. No consumer is “forced to execute a settlement agreement. They are the result of arms-length negotiations. Consumers are free to negotiate the removal of the provision from any settlement or dectine an offer and proceed with litigation or arbitration, just as the ‘Amoses did with respect to NVR's limited non-disclosure proposal which, again, only covered the amount of the cash payment. Arbitration Provisions in New Home Warranties Are Both Legal and Appropriate NVR strongly disagrees with the contention that the inclusion of arbitration provisions in new home construction warranties is “anti-consumer’ or “unconscionable,” and there simply is no basis for the implication that it “may be illegal.” As you are no doubt aware, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and its implementing regulations only apply to residential mortgage loans and consumer credit transactions. They do not apply to new home warranties, Perhaps more importantly, we vigorously disagree with the notion that arbitration somehow is more harmful to consumers than litigation. In many instances, arbitration allows for a speedier and lower- cost resolution of legitimate claims. We also respectfully disagree with the conclusions in the CFPB study referenced in your letter. November 15, 2019 ‘We hope this correspondence provides you with helpful clarity in regard to what NVR believes to have been an appropriate response to the Amos matter, as well as a more complete overview of NVR's history in dealing with homeowner warranty claims and the appropriate and limited use of arbitration and non-disclosure provisions in connection with these matters. Sincerely, David J. Hensler Senior Counsel david.hensler@hoganlovells.com D 202-637-5630 ce Jan Singelmann, Counsel, U.S. Senate Committee on Banking, Housing, and Urban Affairs