The brand-new snag
The boxes are unpacked. The paintings are hung. The housewarming gifts are on display.
Then, just as indigestion sometimes follows a rich meal, the first rains arrive, and owners of newly built residences may face the bitter aftertaste of ceiling water stains, slumping decks and peeling stucco.
Every year, especially as winter unfolds, a legion of builders and contractors, homeowners and lawyers, and mediators and judges gird themselves for battle over construction defects.
The tidal wave of lawsuits that engulfed the state’s building industry in the 1990s, prompting the exodus of many insurers that underwrite condo projects and the near halt of that type of construction for a decade, has slowed somewhat. The 10-year statute of limitations on many of those flawed complexes has run out, although second-generation owner suits stemming from those projects still clog legal calendars.
Despite improved quality control on newer developments, the housing boom since the early 2000s that saw some builders erect single-family tract homes in 60 days “from pour to door,” as industry insiders call it, resulted in cut corners, lawyers and inspectors say, and has paved the way for a new generation of lawsuits. In 2007, the Superior Court of California, County of Orange, for example, reported the highest number of construction defect lawsuits since 2000.
The recent proliferation of high-density, mixed-use urban construction also has contributed to more litigation, lawyers say. Those suits focus on high-decibel household noise bouncing from unit to unit and street-level restaurant odors wafting up through ducts into living quarters.
“When I started mediating in the 1990s, I thought these lawsuits would last just a few years, but I’ve not seen it diminish,” said Ross Hart, a national mediator appointed by courts to serve as a “settlement referee” in construction-defect cases. “I have a nine-month waiting list.”
State legislation signed into law in September 2002 has prevented an even greater backlog. Senate Bill 800, which pertains to new homes sold after Jan. 1, 2003, guarantees that builders have the opportunity to repair reported defects before a lawsuit is filed against them. Owners, however, still can sue if the problem isn’t resolved to their satisfaction.
“We can’t . . . say ‘mission accomplished’ yet,” said George Dale, head of a West Los Angeles risk-management firm for the home-building and insurance industries, about SB 800’s success in limiting lawsuits. “It’s too early.”
Frivolous lawsuits?
Builders complain that liability claims often are frivolous and include an everything-but-the-kitchen-sink list of tacked-on items beyond the actual roof leaks or squeaky stairs. Homeowner advocates counter that if builders put more time, care and money into their products, costly lawsuits wouldn’t be necessary.
Necessary or not, they happen, and they often unfold like this: William Lyons, a 69-year-old retired engineer, had just been elected to his homeowners association board in 2000 when a resident of his 170-unit condo complex in Anaheim fell through the stairway landing situated between her first-floor unit and the garage below. She suffered minor injuries, Lyons said, but red flags went up about the building’s safety.
The culprits, it appeared, were faulty waterproofing and subterranean drainage problems connected to a concrete-block-and-earth wall separating the resident’s condo from the one next door.
“When I saw the damage, I was concerned about the rest of the units in the building,” Lyons said. “I thought it was a construction glitch, and with 80 drains in the complex, I was worried.”
The homeowners association hired attorney Thomas E. Miller, a Newport Beach construction-defect specialist, who brought in a forensic architect to test the development’s waterproofing, stability of concrete, grading and any cracks.
The association sued the builder based on the findings. The case, which included 72 subcontractors and six insurance companies, settled two years later for about $5 million, part of which went to legal and forensics costs; the remainder was used by the association for repairs. The injured owner was compensated separately, according to Miller’s firm.
“These cases usually come down to three basic elements,” Miller said. “Poor design, lack of adequate construction supervision and difficulty in finding responsible workers.”
In response to the proliferation of lawsuits stemming from faulty construction two decades ago, many builders have instituted safeguards that ensure higher-quality workmanship.
Paramount among them is the use of private, third-party inspectors, who consult with builders during the design phase about waterproofing and acoustical engineering, provide written and photographic documentation of the entire construction process and write homeowners association guidelines for maintaining the properties, said Dan Reeve, a national quality-assurance inspector with La Jolla Pacific in Irvine who provides such services.
Builders also provide better customer service, addressing homeowner complaints more expeditiously, and with the goal of “keeping customers from changing their title from ‘home buyer’ to ‘plaintiff,’ ” consultant Dale said.
Disputes simmering
The latest building boom, which began in the late ‘90s and continued through 2006, spawned a gold rush of single-family-home developments in the Inland Empire and the Antelope Valley. It’s too early to know if that boom will produce the same explosion of lawsuits as condos did in the ‘90s, attorneys say, but Ron Hartmann, a Woodland Hills lawyer who specializes in construction-defect cases, says he currently is working on only three condo lawsuits and “several hundred single-family-home” cases.
“They’re all over . . . in Temecula, Carlsbad, Santa Monica, Studio City and Granada Hills,” said Hartmann, who is also handling cases in Kern County, Tulare and San Jose.
Some lawsuits involve second- or third-generation disputes. An association board might have received $1.5 million in damages from the original builder and subcontractors in 1993 and completed the work in 1997, for example, but in 2003 the decks and windows still leaked, prompting legal action against the repair contractor, mediator Hart said.
“The original statute is up, but a new statute starts from the day the repair is done.”
Lawsuits involving single-family dwellings typically focus on water intrusion, insect- or mold-infested lumber and defective plumbing, but also landslide and earth-settlement problems, such as soil expansion, horizontal movement and inadequate grading, attorneys say.
Luxury properties aren’t exempt from construction defects. Hart has handled several cases in which mansions with multimillion-dollar art collections had rainwater pouring in.
Attorney Miller currently is representing owners at an upscale Beverly Hills condominium complex who are suing their builder, general contractor and subcontractors, alleging a faulty roof system (involving drains, thresholds, flashings, roofing vents); poorly installed, rotting balcony decks; leaking door thresholds; blistering stucco; and leaking exterior planters.
The complex has units featuring high ceilings, marble entryways, high-end kitchen appliances and a high-tech security system; they each sold for more than $1 million.
The lawsuit was filed in July 2006; the plaintiffs want a settlement of at least $5 million, Miller said. The defendants’ attorney declined comment on the case.
Building-industry experts are hopeful that improved quality control and buyer due diligence -- in researching the builder’s reputation, for example -- will create a less litigious atmosphere, but the verdict is not in yet.
“There are so many people involved in home building,” mediator Hart said, “that almost every project seems to have some litigation.”
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Buyer safeguards
A little due diligence goes a long way in protecting your home investment. Here are some tips for buyers:
Make sure your builder is licensed. Contact the California Contractors State License Board: (800) 321-2752, www.cslb.ca.gov.
Research your builder’s reputation. Ask neighbors if the builder responds satisfactorily to complaints. Also, check Homeowners Against Deficient Dwellings at www.hadd.com and the National Alliance Against Construction Defects at t.web ring.com/hub?ring=defect. Consumer complaints are at the Bad Business Bureau, www.badbusinessbureau.com.
Consumer complaints and legal actions against builders also can be checked through the state license board at (916) 255-4041.
Inquire about the training your builder’s workers and subcontractors have received. Not all laborers are licensed.
Hire an independent licensed inspector. The cost is about $400.
Thoroughly read and understand your contract. Read warranties, as well as mediation and arbitration clauses. Do not forfeit your right to hold a builder accountable in court.
If purchasing a condo, drive around the neighborhood and see how buildings in earlier phases are holding up. If buying a resale condo, ask the association president if there have been any structural problems reported by other residents. Walk around the property and check for rotting wood, deteriorating stucco and water stains, especially on or near doorways, windows and ceilings.
Sources: Kelly Hayes-Raitt, former director of the HomeSAFE Campaign, a consumer advocacy group; the Miller Law Firm; Hartmann & Kananen law firm; and La Jolla Pacific.
-- Diane Wedner
