How KB Home Uses This Clause
KB Home purchase agreements have been documented to include mandatory binding arbitration provisions. KB Home purchase agreements have historically included mandatory binding arbitration clauses. In 2005, the FTC imposed a $2 million civil penalty on KB Home for violating a 1979 consent order by furnishing warranties that required binding arbitration on homeowners, despite a 1995 advisory opinion warning the company this would violate the order. Current contracts may offer buyers a choice between non-binding arbitration with a 10-year warranty or binding arbitration with a 12-year warranty. This clause has been the subject of litigation, including FTC Consent Order Violation.
This provision typically appears within the purchase agreement alongside other terms that may limit buyer remedies. Because KB Home operates across multiple states, the enforceability and practical impact of this clause varies depending on where the home is located.
KB Home's scale means contract templates are largely standardized across its operations. A clause identified in one market's contract is likely present in other markets' contracts, though local addenda may modify the terms.
Builder-Specific Details
Combined with Class Action Waiver
The class action waiver and arbitration clause work together to ensure all disputes are handled individually in private proceedings.
Regional Contract Patterns
KB Home operates in a more focused geographic footprint. Contract terms may vary somewhat between markets, but documented patterns tend to be consistent across the builder's operating states.
Standard Form Contract
This clause appears in KB Home's standard purchase agreement, which is generally presented on a take-it-or-leave-it basis. Buyers typically have limited ability to negotiate individual terms, though making the request in writing is still advisable.
Legal History
The following cases involve KB Home's use of this clause type.
FTC Consent Order Violation
KB Home paid a $2 million civil penalty to settle charges that it violated a 1979 FTC consent order by furnishing home buyers with warranties requiring mandatory binding arbitration. The 1979 order required that arbitration be binding on KB Home but not on homeowners. Despite receiving a 1995 staff advisory opinion warning that its practices violated the order, KB Home continued to impose binding arbitration on buyers.
State-by-State Enforceability
Enforceability of this clause varies by state. The following reflects KB Home's operating states.
| State | Status | Note |
|---|---|---|
| Texas | Likely Enforceable | Mandatory arbitration clauses in Texas new construction contracts are likely enforceable. Texas has... |
| California | Uncertain | The enforceability of mandatory arbitration clauses in California new construction contracts is... |
| Arizona | Likely Enforceable | Mandatory arbitration clauses in Arizona new construction contracts are likely enforceable. Arizona... |
| Nevada | Likely Enforceable | Mandatory arbitration clauses in Nevada new construction contracts are likely enforceable. Nevada... |
| Colorado | Likely Enforceable | Mandatory arbitration clauses in Colorado new construction contracts are likely enforceable.... |
| North Carolina | Likely Enforceable | Mandatory arbitration clauses in North Carolina new construction contracts are likely enforceable.... |
| Florida | Likely Enforceable | Mandatory arbitration clauses in Florida new construction contracts are likely enforceable. Florida... |
| Washington | Likely Enforceable | Mandatory arbitration clauses in Washington new construction contracts are likely enforceable.... |
| Idaho | Likely Enforceable | Mandatory arbitration clauses in Idaho new construction contracts are likely enforceable. Idaho has... |
Related Clauses in KB Home Contracts
This clause often works in combination with other provisions in KB Home's purchase agreements.
The class action waiver and arbitration clause work together to ensure all disputes are handled individually in private proceedings.
Disputes over deposit forfeiture must be resolved through arbitration, where the cost of pursuing a claim may exceed the deposit amount.
Challenges to the habitability waiver must be pursued in arbitration rather than court.
Even if an arbitrator finds in the buyer's favor, the liability cap may limit the award.
What Buyers Can Do
- Understand the arbitration process before signing. Review which arbitration provider is specified, who selects the arbitrator, and whether you have any right to appeal. These details significantly affect the fairness of the process.
- Research the arbitration provider's track record. The specified arbitration provider may have a history with builder disputes. Understanding the provider's procedures and typical outcomes can help you prepare.
- Review the FTC Consent Order Violation case. The FTC Consent Order Violation ruling may be relevant to your situation. If you are buying a KB Home home in a state with similar legal protections, this precedent could affect the enforceability of this clause.
- Have the full contract scanned before signing. This clause is often one of several interconnected provisions in KB Home contracts that collectively limit buyer remedies. A contract scan can identify all of them.