By Deborah Goonan, Independent American Communities
This week ABC News aired its investigative consumer report on the home building industry’s handling of construction defects. The report highlights what homeowner advocates have been complaining about for years, especially in the past decade.
If you have missed this report, take a few minutes to watch it here:
New Home Heartbreak: When Dream Homes Turn Into Nightmares (VIDEO)
There’s no doubt about it. New home builders are cutting corners on quality and safety. And it’s not just buyers of new construction that are affected. We’re also seeing similar results in redevelopment of older homes and apartment to condominium conversions. Problems are particularly vexing for multifamily housing.
Among the common issues reported:
- Leaky building envelopes that allow water infiltration
- Use of toxic materials such as Chinese drywall and imported wood flooring
- Poor ventilation resulting in chronic growth of mold
- Failing stucco
- Warped vinyl siding
- Structurally unsound foundations
Multifamily properties may have the additional issues:
- Failure of balconies
- Large windows that spontaneously break and shatter to pieces
- Fire sprinkler systems that burst suddenly and cause flooding
Then there are problems with the building site itself, or with infrastructure:
- Homes and condo towers sinking into soft soils
- Poor storm water drainage, resulting in flooding and property damage
- Premature failure of roads in subdivisions
- Failure to mitigate contamination of soil or ground water
Here on IAC, you can read dozens of blogs on construction defects, as well as legislative efforts by homeowners and the home building industry alike. Consumer protection is very difficult to achieve, because lobbyists for home builders and construction companies vehemently fight to prevent homeowners from holding the multi-billion dollar industry accountable.
Widespread public awareness is key, because, with time, it will help shift consumer attitudes and expectations. There’s simply no good reason why housing consumers should be expected to accept poor, unsafe construction, especially without any meaningful recourse to recoup their financial losses. In some cases, defects create environments that adversely affect personal health.
Homeowner advocates have been sounding off about Mandatory Binding Arbitration requirements in home sales contracts for several years. The fact that out-of-court settlements are stacked in favor of home developers is only part of the problem.
The ABC News report makes reference to a South Carolina Supreme Court decision, where a judge ruled that requiring homeowners to make construction defect claims only through Arbitration is patently unfair. Some claim this may offer consumers a ray of hope. But upon closer inspection, the SC Supreme Court ruling may prove to be a rare exception. It seems that a careful rewording of future sales contracts will easily override the “unconscionable” ruling. Here’s a bit of detail on that issue.
South Carolina Supreme Court Finds Homebuilder’s Arbitration Provision Unconscionable
Here’s what the ABC News report doesn’t mention
The secrecy surrounding these private arbitration settlements makes it next to impossible for buyers to research a home builder’s reputation for quality and attention to detail. The industry doesn’t want consumers to know about all of its mistakes and efforts to cover them up, or its tendency to avoid making things right.
But another factor that’s not mentioned by ABC is the fact that the vast majority of new construction in the past decade has put developers and homebuilders in control of housing projects and subdivisions by way of creating Common Interest Association Governed Communities.
Developers not only control the content of sales contracts for individual homes and condo units, they also control the content of Covenants, Conditions, and Rules (CC&Rs) and ByLaws for hundreds of thousands of homeowners, condominium, and cooperative associations.
While construction is ongoing, it is the developer, home builder, and their affiliates that make up the board of directors for these single family or multifamily planned communities. That means a squeaky wheel – the homeowner who becomes vocal about poor construction and/or the lack of favorable response by the builder – can potentially become the target of abuse by the Homeowners Association.
Want to complain about your leaky townhouse roof? Unhappy with poor drainage that floods your back yard or your basement? Tired of getting the runaround from the builder on your warranty claims?
What happens when homeowners and residents speak up about construction defects?
Of course, some builders do respond with professionalism. But too many will exploit their opportunities to ignore valid requests and delay responding. Some will put enormous pressure on consumers to drop the issue entirely, or may retaliate against what they see as a threat to their reputations.
The homeowner should be prepared to have the HOA start noticing small or petty violations to the CC&Rs or “architectural standards.” And they shouldn’t be surprised if the HOA starts to selectively neglect common maintenance services such as lawn mowing or snow removal.
And owners should also be aware that similar Arbitration Provisions may be written into the CC&Rs. Those provisions, combined with absolute or majority control of the association’s board for many years, provide the developer/homebuilder an effective shield against legal liability for defects in the common areas – creating a potentially expensive future obligation of the owner-controlled association to repair or rebuild major components of the community.
So, in addition to making forced Arbitration provisions illegal, housing policy makers need to seriously consider abolishing developer-controlled governance of housing. That could be accomplished by either avoiding common interest communities, or by establishing common ownership governance alternatives that restore and retain Constitutional protection of individual due process and private property rights.