Lawsuits Against Builders, Developers Steadily Increase
Sarah Wear never thought that buying a new townhouse could be as much of a hassle as it has become.
Since moving into her 2 1/2-year-old North Hollywood condo unit, she said she’s been doing battle with the developer over water leakage from the walls and roof, missing doors, leaky electrical cabinets and a noisy water heater. “It’s like a full-time job dealing with the problems,” she said.
“All the problems went beyond the one-year warranty period offered by the developer,” Wear said. Now, she and the 13 other unit owners in her complex are contemplating a lawsuit against the developer in an effort to get some of the problems remedied.
Wear and her neighbors aren’t alone. The number of lawsuits against developers and builders has been steadily increasing, and so have the number of lawyers who specialize in the emerging business of litigating construction defects. Builders and developers aren’t too happy with all these lawsuits. They maintain that construction litigation is costing them millions and making it harder to build homes in California.
Kelton Lee Gibson, a partner in the Ventura law firm of Myers, Widders & Gibson, is one of the growing cadre of attorneys suing developers and builders on behalf of home and condo owners.
Many attorneys who handle these sorts of cases do it on a fixed-fee basis.
In Canyon Country, Gibson and his firm are pursuing a $1-million lawsuit against the developer of a 7-year-old condo project with 128 units. The homeowners are suing over leaky roofs, problems with retaining walls and stucco, and other alleged defects. Gibson said that he is close to settling the suit and that kicking into the plaintiffs’ recovery will be the developer, general contractor, various subcontractors and several insurance companies. Homeowners are also recovering for damages to their residences through individual homeowner insurance policies.
In the city of Ventura, Gibson is also representing an association of 233 townhomes built in the mid-1980s. This is another million-dollar case relating to supposedly poor workmanship and roofing problems that have caused some of the condos’ wood to start rotting. This suit is just in its infancy, Gibson said, so there’s plenty of legal wrangling expected before the homeowners can recover.
It is much harder for single-family homeowners or owners in a small condo complex to do battle with builders and developers, who can more frequently afford to hire the best attorneys, said Gary Aguirre, partner in the San Diego law firm Aguirre & Eckmann. Condo residents are most likely to sue their builder or developer through a homeowners association, Aguirre noted. Individual homeowners may not have an association and, even if they do, the association is usually limited to suing over problems in the common areas--of which there are few in a community of single-family houses.
“It’s a disaster for the individual homeowner when there are major defects,” Aguirre said. “For small homeowners, the system is out of their reach.”
“The cost of litigation can get out of proportion to the recovery that’s possible for owners in smaller developments,” said Lee Barker, partner at the law firm Barker & Richardson in Pasadena, which has represented numerous homeowners associations in the San Fernando Valley and Ventura County.
Homeowners who don’t have the cash to pay an attorney may have to agree to fork over to the lawyer between 30% and 40% of any award. That can be a major part of the money needed to make repairs.
Barker is convinced that the nature of the housing industry produces shoddy construction. “Construction is a boom and bust industry. When the economy was good, there was tremendous pressure to produce housing units quickly,” he said. “Since the market has gone bust, there’s been pressure to cut corners on construction budgets.”
Either way, Barker said, buyers often end up with poor construction.
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Developers counter that they’re getting a bad rap. Buyers expect their homes to last forever without maintenance, builders and developers say. Many homeowners and their associations are cutting corners with maintenance and repair, building industry officials say. Instead of taking care of their properties, some builders say, residents are instead being too anxious to call up a lawyer and file a lawsuit.
Many problems that are the focus of lawsuits are related to soil being improperly compacted or graded, especially in hilly parts of the San Fernando Valley, said Leslie Marks, partner and head of the construction defect litigation department at the West Los Angeles law firm Wolf, Rifkin & Shapiro. He said water intrusion is another big problem, stemming from defects in the manufacture, construction or installation of roofs, framing, stucco or windows.
Plaintiffs can recover for latent--or not easily observable--defects for up to 10 years from the substantial completion of a home or condo, according to state law. The statute of limitations in California for patent--or obvious--defects is four years. Homeowners can get the cost of repair or the diminution in property value attributable to a building defect.
It’s very difficult to get punitive damages because a plaintiff has to prove intentional conduct by a developer, but some courts are beginning to award recovery for emotional distress. Only about 10% of all the construction defect cases actually get to court, however. Most cases are either settled privately, or through mediation or arbitration.
Besides contacting a lawyer, homeowners who have complaints about their builder are advised to contact the California Contractors State License Board, which licenses and regulates contractors as an agency of the state’s Department of Consumer Affairs.
“I advise homeowners to try us first. It’s a lot cheaper than hiring an attorney,” said Paula Watkins, regional deputy for the board.
Statewide, the board received more than 31,000 consumer complaints within the last year. These complaints led to 1,774 licenses being either suspended or revoked and 1,617 citations against unlicensed contractors. More than 600 cases were referred to a district or city attorney for prosecution. Before the board acts against a builder, it generally launches an investigation and sends out a building expert, who writes up a free report for the complainant.
This, along with properly photographing and documenting alleged building defects, is a good way to build a case for recovery. It’s also advisable to check with the board about builders and developers before making a purchase of a new home or condo.
The board’s phone number in Van Nuys is (818) 901-5168. In Ventura, the number to call is (805) 654-4515. There’s also a statewide toll-free number, which is (800) 321-2752.
