And They Built A Crooked House, by Ruth S. Martin

PART VI: DON'T THINK WE'RE UNIQUE. THIS COULD HAPPEN TO ANYONE.

CHAPTER 34.

It Happens Everywhere

The upshot of all this is the fact that regardless of the area
of the country, shoddy construction goes on all the time
right next to excellent construction.
Robert Irwin, Tips and Traps When
Buying a Home, McGraw-Hill, 1990.

What happened to us and our house may be one of the worst individual cases on record but defective residential construction is a universal problem. It happens all over the country. There is no national clearinghouse for residential construction disasters, even those that go to trial. Lawyers searching a legal data base for cases involving residential construction would not find ours, because it was not appealed. Only appellate cases are published and therefore retrievable by computer search. (Of course if you know of a specific case you can obtain a copy of the written opinion where the trial took place.) Nor is the problem widely appreciated. No author has taken it upon himself or herself to publish the dark side of home building, the obverse of House, Tracy Kidder's celebrated story of quality home construction in Massachusetts. Information in this chapter comes from newspaper and magazine articles, and other homeowners who have contacted us, many asking for advice.

In all the stories we have heard or read about there is a constant theme: if the builder won't fix the problem the homeowner is out of luck. When the builder reneges the result is untold aggravation and despair, and often financial hardship. There is no "lemon law" to protect buyers of defective homes. In truth, the American consumer has more protection when buying a refrigerator or television than a new home. There are several explanations for this sad situation. First, houses are built by people who are unlicensed and unregulated. Anyone can call himself a contractor and build a house for sale. There are no tests of competency, financial solvency, or even literacy. If the builder is incompetent in structural matters there is no one to stop him or make him correct mistakes once they are made.

Second, many local builders are undercapitalized. They build the next house with profit from the last one. Although several large firms build homes nationwide, custom-designed construction is usually handled by local contractors, and most of them cannot afford expensive mistakes. When confronted with a construction disaster the local builder may reason that his best course is to simply ignore the complaint (unless he is of unusual integrity). If he is sued and loses in court he can always file bankruptcy and then have no obligation to pay anything. We've heard of this scenario many times. A third reason buyers of defective homes are unprotected is because significant construction problems are seldom functional. Mechanical, electrical, and plumbing systems invariably work in new houses or, if defective, they are apt to be fixed before the homeowner takes possession. Most construction horror stories come from people who, like us, can live in their defective dwelling.

The major disputed problem is usually a structural or design flaw such as sloping floors, bowing walls or leaky basement: situations where it is all too easy to dispute a homeowner's complaints ("optical illusion" is what we were told) or blame some other party. It's harder for a builder to argue if something plainly doesn't work; a functional problem will usually be fixed, even if the homeowner has to do it himself. (Occasionally people would comment: "Well, you're living in the house so it can't be that bad," or "The plumbing's working so what are you worried about?") But if the floors slope or the walls bow or the basement floods or the roof leaks the builder can dawdle or deny the problem or just blame someone else. The September 6, 1987, Atlanta Journal and Constitution, under headline "The home horror stories getting told to the judge," listed several major residential construction disasters in the Atlanta area, including a

$700,000 house [with] hardwood floors that buckled as a result of improper drainage, sagging ceilings caused by roof leaks, unsafe wiring in the attic...

The article went on to note:

Horror stories have not become the norm but they are increasing in metropolitan Atlanta...Generally, lawsuits involve more expensive homes and cases involving more than $10,000 in repair costs. Attorney _____ , who has handled construction cases in several metro counties said, "When [people] buy a $100,000 house and things are not right, they find out they have to hire experts - an architect, appraiser, builder, etc. - to testify on what is wrong." Those costs scare them away from litigation, he added. ...an independent Atlanta house inspector who specializes in luxury homes and properties involved in litigation, is zealous in ferreting out defects that he says can prove to be "cancer wrapped in ribbons and lace." Even in the most expensive homes, he said, builders sometimes put in low grade or defective wood where it will be covered by finishing materials. ...increasingly, brokers and their agents are encouraging home buyers to hire private inspectors to check properties, thus relieving some of their liability...

A related story on the same page told of a metropolitan Atlanta couple whose $145,000 home was defectively built in such a way that

the weight of the house was not properly distributed on its foundation and ...joists were of inferior quality or had been damaged during construction. When their homeowners insurance coverage expired at the end of the first year in their house, they were unable to obtain liability insurance on the house and got structural insurance only through an expensive high-risk policy from a pool of insurance companies. Last month they moved out of the house when their builder...bought the house back from them as part of a $176,000 settlement of the lawsuit in which they alleged fraud and a house "unsafe to live in." The settlement was reached the day before the case was to go to trial.

Most purchasers of a defective new home are not so lucky as that Atlanta couple. From the Cleveland Plain Dealer, April 3, 1989:

When the [Homeowners] decided in 1986 to build their dream home, they never thought they would be caught in a battle with their builder. But the family said that since ...contracting to build their home, they had had so many problems they couldn't enjoy the house. [Community], where the [Homeowners] live, last year revoked the builder's license... because of residents' complaints about the firm. "We want our house fixed," [Mr. Homeowner] said. "We just want our children to be able to enjoy what we worked so hard for." [Mr. Homeowner] said he filed suit last month in Cuyahoga County Common Pleas Court as a last resort. The suit seeks the money to repair the home and punitive damages. "They're not willing to negotiate,"the builder said. "They're lying. These people are not reasonable."

Later in this Cleveland article the builder's attorney is quoted:

"People expect perfection in a home, and there is no builder in the world that can build a perfect home." Homeowners become emotional and are bound to have small disputes with a builder, he said. "On a big-ticket purchase like a home, there's always going to be some disputes," he said. "To build a home and have a dispute with the builder is not at all uncommon." FOOTNOTE. See my letter to the editor, page 176.

A fourth reason homeowners are unprotected is that local governments are immune from lawsuits over defective construction. The homeowner may think an occupancy permit means the house is structurally sound but that is simply not so. Local building inspectors are often criticized for letting defective construction pass, but that's as far as it goes; they and the community government are legally protected by the doctrine of "sovereign immunity."

From the Ft. Lauderdale News, 1989 (italics added):

[Homeowner] said that when his home was completed in June 1987, he was obligated under his contract to close on the property because the building department had issued a certificate of occupancy...The certificate was issued despite a list he compiled of 17 noticeable flaws... [Homeowner] blames [Builder] for a poor construction job and the city's building department...for issuing a certificate of occupancy without checking to see if the house was fit to live in. [The building inspector] did not return repeated calls from the Fort Lauderdale News and Sun Sentinel. Among the problems: an uneven tile roof, a kitchen floor that had flooded, a garage that floods every time it rains, a crack along one side of the outside wall, a crooked inside wall and a ruined $5,000 black awning streaked with white paint. An independent company hired by [Homeowner] last year inspected the property and issued a report detailing 38 flaws that would take $56,370 to repair.

Another article, from the Ft. Lauderdale Sun-Sentinel, August 9, 1989, detailed the structural problems in some houses that are sinking because they were built over a canal filled with rubbish (italics added).

No one can explain why the canal was allowed to be filled with rubbish or how a developer was able to build homes there. [Homeowner] said the problems at his home greatly increased in 1976, when an 11-acre lake about 50 yards away was dredged... Now the same developer...wants to dredge the lake again...Residents...said that if the town grants another dredging permit, their homes will be destroyed. [Homeowner] said he spent $25,000 to repair the home. He raised the back end by a foot and poured 46 truckloads of fill into the back yard to even it out. After discovering that the homes were built on a landfill he sued the town for issuing the building permits, but the suit was thrown out of court. It was determined that the town followed procedures in effect at the time.

From the Denver Post, October 9, 1989 (reporting a problem in Aurora, Colorado):

A builder who built a cluster of condos a decade ago that still produces complaints of shoddy workmanship from unit owners is facing those angry owners in a zoning dispute over whether he should be allowed to build again before settling those grievances. Since 1979, residents of the [----- Condos] have struggled with flooded basements, peeling paint and crumbling retaining walls in the 33-unit project by [Builder]. "We've been fighting with the builder since the day we moved in," said the president of the homeowner's association. "I feel like he owes us something. He should either buy the units back from us or get them so they're impervious to water."

The Aurora, Colorado article goes on to detail the dispute with the builder. As in most disputes we've heard or read about, the builder denies responsibility. But so does the community. The article quotes the Aurora building inspector:

"I can verify that that roof is put on the way the city-approved drawing says. But the uniform building code does not cover workmanship. The builders come in and they build strictly minimum standards."

One might think that builders and developers are more responsive to a large condominium project, where dozens of homeowners can generate more clout than just one. That is not necessarily so. The following is from the Miami Herald, February 18, 1990, under headline: "Condominium owners want builder to pay for repairs."

Tired of an unsettled dispute with a developer over what they claim are construction defects in their condominium near Hallandale, a group of owners took their protest to the streets. They put up a sign on the grounds of the 88-unit condominium, telling the world about their woes. "I want to go further," said [one unit owner]. "I think we should picket." ...other condo owners detailed numerous problems: leaks in ceilings, rotting garage doors, cracks in doorways, sloping bathtubs, peeling pain and beige facades that turned dark because they weren't treated for mildew. "It's been a financial hardship," said [homeowner], who has been living at the condo since it opened in 1986. "We're a young couple and we bought new so we wouldn't have all these things." Condo board president...said, "We've had to assess our people twice already because we could not live with the problems. Buildings that were a year and a half old looked like they were 50 years old."

The Miami Herald article goes on to mention how there have been "two years of negotiations" and "the attorneys are dealing with it."

The July 15, 1990 Ft. Lauderdale Sun-Sentinel published a page one article headlined "Condo industry crumbling."

The door is slamming shut on the carefree lifestyle at many South Florida condos. Mismanagement, shoddy construction and lax regulation threaten to cost condominium boards thousands of dollars and are prompting a spate of lawsuits and foreclosures.

The article goes on to document the thousands of condominium complaints filed each year in South Florida, most based on shoddy construction. Many condominium owners in that part of the country are experiencing the same aggravations and nightmarish expenses we had with our single-family home. The article also points out something that should not surprise readers of this book:

Even if a condo board sues a developer and wins, it usually cannot force the other side to pay its legal fees, a major cost.

Thus a final reason homeowners are unprotected and the one hardest for us to swallow is that the law is stacked heavily against buyers of defective construction. Even if homeowners subject themselves to the tremendous aggravation and expense of filing suit and getting to trial, it is almost impossible to recoup losses or come out financially whole. Why? Homes in good neighborhoods go up in value. Since it takes years to litigate a major dispute, the value of the home (properly built) is invariably higher at the time of trial than when it was purchased, yet the law doesn't recognize this fact. It costs a fortune to bring a builder into court; the law doesn't recognize your expenses. It costs money to "prove" defects; the law doesn't care about this either.

And suppose you win a judgment? A legal judgment against a builder or developer is not worth much if the defendant cannot or will not pay. He can declare bankruptcy, in which case the homeowner is out of luck. Or the builder can simply ignore the judgment, which will then require the victimized homeowner to incur more legal expenses in an attempt to find and attach assets. Builders who don't pay a legal judgment aren't stupid. Debtors don't go to jail. And chances are, the luckless plaintiff won't find many assets to attach. (Certainly if the builder is truly bankrupt we can't fault the law. But such may not be the case. We have heard of situations where the builder's corporation that constructed the house is bankrupt, and where "bankrupt" builders go right on building under a different name. The law, apparently, is powerless to do anything about it.) What about arbitration of disputes with the builder? Arbitration is also potentially treacherous. Take the case of a Virginia doctor whose bylined article appeared in Medical Economics, March 6, 1989.

"My wife and I thought building a new house would make us happy. Instead, it has given us nearly five years of misery. Two mistakes led to our unhappy results. First, we chose the wrong builder, who left our $180,000 home badly flawed. Second, we went to arbitration for a settlement."

The physician then details how he ended up with an unfair arbitrator a local builder!

"The hearing was held in the kitchen of our house...The arbitrator's decision came a month later. It was a shock. He ruled against us on all but one of the five major flaws, and his award was inadequate. "We've paid $8,000 for repairs, and we'll probably have to spend another $4,000. We won't fix the kitchen or put in new flooring. That would cost $24,000, more than we care to spend. "[My wife] says she's lived in the house for nearly five years without being able to enjoy it because an army of engineers, architects, builders, and other people keeps marching through to inspect it and tell us what's wrong with it. Maybe when we finish the repairs, we'll finally be happy in our new home."

* * *

If all this sounds dismal, it is. No homeowner in his right mind wants to go through the nightmare of a lawsuit: experts invading your home; mountains of paper work; dozens of meetings; enormous legal fees; and time taken away from living and working. There is only one reason any sane homeowner sues his builder: he has NO OTHER CHOICE. Anyone who thinks otherwise should suffer a defective home built by an uncaring builder. Over one million new homes are built each year in the United States. Why don't we hear more about defective construction? Why is my book just about the only one on the subject that you will find in print? Defective construction must be more common than just a handful of isolated news articles. I believe it is quite common, although surprisingly little is written about the subject on the national level. (Both the Wall Street Journal and The New York Times periodically publish special sections on buying and owning residential property. They cover just about every aspect except one: defective construction and the legal nightmare it causes.)

In the first six months after our nightmare became public we personally heard from ten people with construction horror stories of their own. Seven of the ten had already hired lawyers and had either sued their builder or were about to do so. The other three asked for the name of our attorney. We suspect that these people are just the tip of a large group of oppressed, angry, new-home buyers. Probably most construction complaints settle without litigation. The builder fixes the problem or the homeowner gives up and does it himself. Certainly many homeowners don't have the resources to sue their builder all the way through trial.

FOOTNOTE. Or a lawsuit is not economically feasible. At the very first meeting our litigator remarked that if the defects cost "only $20,000" to fix a lawsuit may not be worthwhile. As it turned out the defects cost almost $100,000 to properly fix and a lawsuit was still not worthwhile.

It is likely that most homeowners just swallow their loss and give up the fight, or else reach an unfavorable settlement with their builder. This was simply not feasible in our case. When the builder and architect refused to properly investigate our complaints we had no rational choice but to call in experts to find out what was wrong. When the experts' reports showed major structural defects we were caught in a bind. We could not legally sell the house without disclosure of the reports. With disclosure the house was for all practical purposes unsalable. Yet at no time was there any offer by the defendants to fix our house properly. Can such a nightmare be prevented? Yes it can. I saved that for the last chapter.

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