Changing the law on new-home defects

Lisa Snedeker

Friday, Dec. 18, 1998 | 11:17 a.m.

When Vickie Fort purchased her dream home in 1992, little did she realize she would find herself embroiled in a six-year nightmare.

The interior walls of the North Las Vegas resident's home at 2118 Pilar Ave. are spidered with cracks caused by structural damage. Mold spores from a leaking roof blemish the ceiling. And the wall of the fence that should be attached to the house has separated, leaving a gaping hole.

"This was supposed to be my last home, my dream home," Fort said.

Fort is just one of 34 homeowners in the Golden Triangle area who has filed a lawsuit against the builder, Horizon Communities, for creating what they claim are structural defects in their homes.

"There is no way they (the builder) can possibly repair this house," she said, adding that the damages are a result of unstable soil beneath her home.

Four years ago, the only recourse a homeowner such as Fort had after purchasing a house that later was revealed to have structural or other problems was to take the builder to court.

Then the 1995 Legislature adopted Chapter 40, otherwise known as the construction defect law. After coming up for review in 1997, the legislation will once again come before the 1999 Legislature.

That's if state Sen. Mike Schneider, D-Las Vegas, has his way.

"Everything regarding construction defects in this state will be on the table (during the 1999 session)," he said. "We're putting everything out there and saying, 'Now let's discuss it.' We're looking at major public policy and it is incumbent that everyone comes to the table."

Fort also was behind the initial legislation. She went back to support the legislation in 1997 and she plans to head to Carson City in March to ensure changes are not made that could hurt unsuspecting homeowners.

"I don't want this to happen to anyone else," she said.

Fort is among 27 Horizons Communities' homeowners who are represented by local attorney Francis Lynch.

"Unfortunately they filed their lawsuit before the construction defect law went into effect," Lynch said.

After 3 1/2 years of mediation attempts, the case was scheduled to go to trial in District Judge Nancy Becker's courtroom Jan. 5. Lynch said. Because a federal court judge has issued a stay on all creditors going against Horizon Communities, however, the trial has been postponed indefinitely.

"This could postpone things for months, if not years," he said. "It's going to be terrible for them (homeowners)."

Reached this morning in his San Diego office, Larry Simon, president of Horizon Communities, said there are two types of homeowners: litigating and non-litigating. With the non-litigating homeowners, he said, any problems have been fixed.

The construction defect law requires the homeowner and the home builder to try to come to a resolution through mediation before a lawsuit can be filed.

"When they go in front of a professional mediator, everyone knows they've got to play ball," Lynch said.

Not only does the law protect home buyers, it protects builders by giving them a chance to repair problems before lawsuits are filed, according to attorneys on both sides of the issue. Once a builder receives written notification from an owner, the builder has 35 days to inspect the defect and 45 days to repair it or pay for the repairs. If the builder does not make reparation, the matter then goes to mediation.

Lynch said the law has built into it penalties against the builders if they doesn't mediate in good faith. And during mediation, the builder has several options, including buying back the house.

"If that happens I don't get a dime," Lynch said. "That has happened more frequently since the new law. I tell my people to take it. Vickie's house ought to be bought back."

The builder's other options include paying out to the homeowner enough to cover the cost of the repairs or hiring a contractor to do the work.

"Most of the time they offer a cash settlement," Lynch said.

Attorney Jim Wadhams, a lobbyist who represents Southern Nevada home builders, said cash settlements concern him because often home owners don't spend the money on the needed repairs.

"If something is wrong, we want to make sure the houses are repaired," he said. "They get the cash, but they don't get the house fixed. The house is our first priority, otherwise the consumer gets hurt.

Wadhams said the creation of the construction defect law was in response to the high number of lawsuits being filed against builders by home buyers.

"We actually have more lawsuits filed now," Wadhams said.

Therein lies another of Schneider's concerns.

Schneider, who supported the original construction defect bill, said the home builders have pointed out some frivolous lawsuits that have been brought about under the law.

Wadhams said some lawyers have persuaded homeowner associations to sue builders over defects that may only affect one or two units, but the lawsuit covers the entire project.

As a result, Wadhams said, the home builders are going to ask the Legislature to make a provision that an association has to identify the specific problem.

In addition, Schneider said home builders and subcontractors say it is becoming more difficult, meaning more expensive, to get insurance to build certain types of housing, such as condominiums, because of all the lawsuits.

"The bottom line is it comes out of the consumer's pocket," he said.

Home builders also want to shorten the time homeowners have to bring a lawsuit against a builder to four or six years.

"Right now it can take 12 years," Wadhams said.

Schneider said he would like the legislation to eliminate class action lawsuits for millions of dollars using a blanket defect for multiple housing units.

"Let's stop the frivolous lawsuits and protect the consumer so they can get the best price," Schneider said.

Wadhams agreed that many attorneys want to represent homeowners associations, rather than individual home owners, to receive larger settlements and a larger percentage.

The way the law reads now, according to Wadhams, attorneys for the homeowners automatically receive fees if the case is won against a builder -- another provision home builders would like to see changed.

"We think they should only get them (fees) if the judge thinks they should," he said. "In every other lawsuit, attorneys fees are at the discretion of the judge."

In multiple-unit lawsuits, attorneys will argue that some aspect of the construction doesn't meet uniform building codes such as the nails used in the drywall or the light-switch box, Wadhams said.

"These building codes are supposed to be guidelines," he said.

"We understand that if you sell a house you have an obligation to stand behind your product," Wadhams said. "This law doesn't do anything for the homeowner whose builder disappears. The people who built Windsor Park are long gone."

Windsor Park, located just south of the Carnival homes, is a subdivision that is literally sinking and the subject of a federal bailout.

Robert Maddox, president of the Nevada Trial Lawyers Association and a consumers' construction-defect attorney, said the Nevada home builders are mounting a major offensive for the upcoming legislative session to change the 1995 law.

"They want to put profits over people," he said.

He said he and those in his camp, including Fort, are trying to ward off those changes.

"We want to make sure homes get fixed when they start falling apart," Maddox said.

According to Maddox, the home builders want to change the law to make it difficult for homeowners who buy a defective house to get the builder to fix it or pay to have it repaired.

Maddox, who was the chief negotiator for homeowners during the 1995 Legislature concerning the legislation addressing the construction defects, has been litigating on behalf of home buyers for 22 years.

Maddox said the big home builders are putting together a war chest and a strategy to see that various changes are made to the legislation under the direction of Wadhams.

Irene Porter, of the Southern Nevada Home Builders Association and a lobbyist for home builders, denied allegations about the home builders collecting funds for a legislative fight.

She said the home builders are not proposing anything that would change the right of homeowners to sue.

Porter said the home builders' main goal is to make sure people get their houses fixed.

Maddox said in 1995 the builders wanted to eliminate the possibility of punitive damages being awarded. Now they are planning to ask for a provision stating that if a house passes final building inspection, there is nothing wrong with it.

"That's like saying the city or the county is insuring the home," he said.

Wadhams disagreed.

"If we get a certificate from the building inspector, it means we have satisfied the law," he said.

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