As home buyers and builders square off in court over alleged construction defects, one thing is certain: The trend has meant a drop in affordable housing
May 12, 2002 - Shelly and Jeff Comings could have handled ants, even spiders I their brand-new Riverside home. But when winged beetles drilled through the walls of the four-bedroom house about a month after they moved in, the couple thought they'd better investigate how much damage the insects could cause.
After learning that the beetles' offspring can bore through wood and metal years after eggs are laid and that extermination cannot be guaranteed, the couple asked the builders of the 120-home development to buy back the house. The developers, according to the Comings' offered instead to fill in the wall holes created by the beetles and extend the home's warranty.
The Comings and several neighbors whose homes also were built with infested wood sued the builder, who declined to comment about the lawsuit. That was two years ago; the case is still pending.
Each year, builders and homeowners - and a legion of attorneys - square off over construction defects, from leaky roofs to collapsing decks.
Builders claim that many cases, especially those involving condominium developments, are frivolous. They assert that typically, a few units in a complex have roof leaks or squeaky stairs, but once lawyers become involved, the liability claims include everything but the kitchen sink.
The proliferation of such lawsuits, builders say, has forced much of the insurance industry to stop covering attached-housing construction, resulting in a huge decline in affordable housing in California.
Homeowner advocates counter that if builders had taken more time, care, and money in producing their product during the construction boom of the late 1980's; costly lawsuits wouldn't be necessary.
Furthermore, if builders responded promptly to requests for repairs, the defects wouldn't mushroom into the larger problems that force frustrated homeowners into lawsuits, said Kelly Hayes-Raitt, director for HomeSafe Campaign, a consumer-advocacy group.
As the defects multiply and lawsuits are filed, builders sue their subcontractors, leading to layers of liability issues that take years to sort out.
Recently, for example, residents of the Glen at Hilisborough in La Mirada were awarded $5 million to fix decks, reset stairs and repair roof leaks at the condominium complex. The lawsuit took 2-½ years to settle; repair work on the development only recently began.
"It took years to get the attorney, file the lawsuit, go through mediation...then interview the architects, contractors and construction workers," said Kimberly Truitt, one of the plaintiffs in the suit. "But it was worth it; we couldn't have been able to address the magnitude of the problems on our own."
Defects generally fall into two categories: faulty design, workmanship and materials, such as water seepage, damaged to infested lumber and defective plumbing; and landslide and earth-settlement problems, such as expansive soils, underground streams, horizontal movement, and inadequate grading, according to attorney Thomas E. Miller, a Newport Beach construction-defect expert.
Statistics are not kept on the number of lawsuits field, but most experts agree that they increased dramatically following the 1980's condo boom. Homeowners were helped by the implementation of "strict liability" laws, which say that homes are defective if the builders fail to construct them as well as they should be built, and by the statue of limitations that lasts 10 years after the building is completed. The vast majority of cases are settled out of court.
Two decades ago, construction-defect lawsuits were nearly unheard of, as homeowners operated under the legal principle of caveat emptor, or buyer beware, according to lawyers. But the condominium boom of the mid-80's ushered in an area of lawsuits, as homeowners challenged builders' warranties that virtually guaranteed defect-free construction.
According to builders and homeowners, most cases begin when several condominium owners, for example, complain of water intrusion or faulty plumbing, perhaps three or four years after the complex is completed.
The owners approach their association board, which may hire a plumber or roofer to make repairs, if they're inexpensive, or go back to the builder right away demanding fixes. What happens next, however is at the crux of the faulty-construction fray.
Homeowners complain that often the builders perform only perfunctory repairs, and when the problems recur, refuse to address them adequately. Builders say that they don't have an adequate chance to address the problem before they're slapped with a lawsuit.
Tom Thacker, 50, bought his Dana Point condo in August 19". The land surveyor noticed water coming through his window
not long after buying the unit. After discovering other problems, his homeowner's association board authorized $30,000 to
make temporary repairs.
Eventually, Thacker asked the board members, two of whom were representatives of the builders, to rectify the construction defects, but only minor repairs were made, he said.
By 1998, the builders' representatives were off the board, and Thacker presented the new board with a 50-signature petition requesting legal remedy for the defects, which by then had worsened. The legal team conducted "destructive testing" on several units, a process in which plantiffs' experts open up several walls in a complex, looking for defective construction or noncompliance of codes. Among other defects, the testing revealed violations of the electrical wiring in some units.
A lawsuit representing 325 units was field in September 1998, and was settled three years later for $8.7 million. A confidentiality agreement prevents the homeowners from revealing the name of the builder.
"These lawsuits are worth it because homeowners are stuck with a choice: either pay for the damages, out of their pockets, or make the builder responsible," said Rachel Miller, the homeowners' attorney. "The average consumer doesn't have the expertise to investigate the cause of defects or make proper repairs."
The cost of lawsuits to builders has been significant, said Ray Perl, a Building Industry Assn. Spokesman. Condominium construction, once a staple of the housing industry in California - comprising about 30% of all residential construction in the last 1980s - has slowed significantly, Perl said.
In 1994, 18,691 condos were built, according to the building association, while only 2,945 went up in 1999.
First-time buyers, who for years counted on purchasing less-expensive condominiums, have had to shift to costlier single-family detached homes, the demand for which far outstrips the supply.
Insurance costs also have skyrocketed, especially for smaller builders and subcontractors, said Pete Moraga, a spokesman for the Insurance Information Network of California.
For every dollar collected in premiums, insurance companies are paying $4 to $4.50 in lawsuits, said Dan Dunmoyer, Personal Insurance Federation, an insurance trade group.
It's difficult to assess the risk involved in insuring a project today, attorney Bremmer said, when, for example, a $2,000 plumbing problem can end up costing $300,000 after workers have to break up and then replace Italian marble to get to the broken pipes.
The building industry, which until two years ago had few legislative successes in limiting lawsuits, applauded a December 2000 California Supreme Court decision that prevents plaintiffs from recovering damages for developers' negligence that have not yet caused personal injury or property damage.
However, a state Senate bill would nullify the ruling, known as the Aas decision. Homeowners' groups are pushing hard to get the legislation passed, saying homeowners should not have to wait until hazards occur to recover damages to repair known building code violations.
Other legislative efforts have had mixed results. The so-called Calderon Process, enacted in 1996, is a pre-litigation procedure requiring that homeowners' associations notify builders of a potential lawsuit and try to work out settlements before filing lawsuits.
That process has been revamped under a 2001 law, which will go into effect on July 1. The revised procedure includes the participation of subcontractor, testing by the builder and subcontractors and the exchange of insurance information, all during the pre-litigation stage.
While builders, homeowners and legislators continue to try to find a middle ground for handling construction defects, homeowners such as Julie and Dick Haynes feel they have no recourse but to sue.
The Palos Verdes couple, who purchased their newly built five-bedroom home in an existing neighborhood in 1998, encountered backed-up showers and a flooding water heater their first night in the house. The builder made some quick repairs, but they were temporary, Dick Haynes said.
Next came water pouring into windows and doors, warped floors, a slumping fence and rotting patio posts. The couple has spent $20,000 so far on repairs on the million-dollar house, home and has hired a lawyer. The lawsuit, which involves multiple subcontractors is headed for trial.
"Nobody wins in this situation," Julie Haynes said. Many developers now videotape and photograph the construction process to ensure proper construction, and make sure their supervisors are well trained.
"Builders are concerned with construction defects; they want to still be around in 10 years," said John Burns, and Irvine consultant to newhome builders. "They have a lot of processes in place now to make sure the job is done right."
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