Home defects a building controversy

Launce Rake and Diana Sahagun

Sunday, May 14, 2000 | 10:50 a.m.

Four months after moving into a new subdivision in northwest Las Vegas, Jim and Judith Rau aren't busy decorating their dream home, they're still battling to get it fixed.

The Raus moved into their $130,000 home in the Foothills subdivision in January, and quickly started noticing an unnerving rash of construction defects.

They couldn't close their front door without giving it a violent shove. They spotted crumbling plaster and 5-foot-long cracks snaking up exterior walls. A gaping sink hole in the yard left their foundation exposed, and one exterior wall was obviously bowed.

Worried, they hired an independent inspector, and he pointed out additional problems with the lot's drainage and misaligned roof trusses.

Their problems are an example of what some observers claim is a growing problem all over the Las Vegas Valley, a charge that is hotly disputed by building contractors.

According to the Nevada State Contractors Board, consumers have filed 8,100 complaints statewide for faulty workmanship in the last five years with most of those coming from Southern Nevada. Of that total, the board -- the state agency charged with oversight of the homebuilding industry -- has found 4,903 valid complaints.

In the acrimonious debate over the extent of the problem, people agree on one thing: The astonishing growth of the valley, with a five-year average of about 20,000 new homes going up a year, is the driving force behind the number of defect complaints.

Beyond that, the sides agree on little.

Homeowners associations and trial lawyers insist that while there are good builders and contractors, the defect problem is widespread among the tract subdivisions sprouting all over the valley.

But the Southern Nevada Home Builders Association and the lawyers defending the industry argue that the problem isn't widespread. The industry contends that home defect lawyers, drawn by the area's rapid growth and staggering number of new homes, are creating the perception of a problem in local residential construction by encouraging lawsuits.

Monica Caruso, director of public affairs for the home builders association, said the legitimate problems are in just a tiny fraction of the new homes -- a few thousand board-certified complaints in about 100,000 homes built since 1995.

If that's the case, Dan and Darlene Penn say they were one of the unlucky ones.

"Our house was a joke," said Dan Penn of the new Kaufman & Broad home the couple purchased in February.

Dan Penn said that upon their final walk-through before signing a contract there were holes in the walls that had been patched up with mismatched paint, holes underneath the kitchen sink, a bedroom with wavy drywall and a bowed ceiling.

"It took them five times to get the ceiling right," he said.

But Penn said that Kaufman & Broad is making all the necessary repairs, and has working at their Henderson home five days a week for the last month.

"It's inconvenient, but they're working with us, they are fixing it," he said.

Leah Bryant, president of Kaufman & Broad, said just like when a consumer buys a new car, there are going to be a few "tweaks" that will need to be addressed.

But she added that the company places a high emphasis on customer satisfaction and will make necessary repairs as soon as possible in order to make the home buyer happy. The company's policy, she said, is to respond to a homeowner within 24 hours after receiving a request for service.

"I'm not saying that we're perfect. We have a long way to go until we reach that level," she said. "We strive to improve our customer service every day."

Many of the complaints about shoddy workmanship go directly to the state courts, which don't track the number of lawsuits filed for home construction defects. But a survey of several of the leading attorneys in the field showed hundreds of cases currently in the courts or pretrial mediation.

Most of the cases reaching the courts, and often drawing insurance settlements, are class actions or suits from homeowners associations. Elizabeth Catalan, a North Las Vegas homeowner, is a member of one such class-action lawsuit.

When Catalan bought a Greystone home in the North Las Vegas Victory subdivision four years ago, she was wooed by glossy brochures and immaculate models of "picture perfect" houses.

She accepted Greystone's promise of "building upon tradition ... a tradition of value, quality craftsmanship and homeowner satisfaction."

But after her home started to sink beneath her several months after she moved in, Catalan joined a class-action suit with 23 other homeowners filed by Seldon Lynch & Hopper LLP against Greystone Homes, alleging improper soil preparation and poor construction.

Catalan said she joined the suit when she ripped up her carpet and found giant cracks spanning the entire living room.

"I almost threw up because I knew what we had as soon as we pulled back the carpet," she said. Other visible problems at her home include a back patio that is bowed in the middle and a back wall, which is separated from the side wall by about 2 inches.

But Tim Kent, Las Vegas division president for Greystone Homes, said none of the 24 homeowners involved in the suit filed a repair request before stepping into litigation. The Victory subdivision totals 410 homes.

"At the very beginning of this, we not only told Seldon, Lynch & Hopper but also the individual homeowners that we were more than willing to meet with them, review their issues and come up with a solution," he said.

When the company was served with papers -- the first suit Greystone has been involved in since it came to the valley in 1995 -- it recommended a settlement that was rejected by the lawyers, he said.

Kent said homeowners are persuaded to go through litigation with the belief that they can win a lot of money. But going through the company could have provided repairs quickly, he said.

According to tests conducted by Greystone Homes, there is "absolutely no evidence of any slab failure or movement," Kent said. He said some of the cracks or visible problems can be attributed to homeowners watering plants too close to the foundation. State Sen. Mike Schneider, D-Las Vegas, argues that the high number of cases ending up in court exaggerate the extent of the construction problems, and that homeowners associations and trial lawyers are just pursuing multimillion-dollar insurance settlements.

But the directors of homeowners associations and trial lawyers say court is often the last resort after builders ignore complaints. The directors of homeowners associations are in the difficult position of approving lawsuits that could affect the resale value of member properties, but failure to go after the builders would violate the directors' financial responsibility to the entire association, attorney Nancy Quon said.

The debate comes against the backdrop of a new, tougher approach from the state, through the State Contractors Board, to consumer complaints of bad workmanship in home construction. The new inspection and enforcement powers of the board were a response to years of complaints from the public that they weren't getting their homes repaired or were getting taken by unscrupulous contractors.

While the number of complaints has stayed largely the same over the last five years, averaging about 1,700 per year, the number of revoked or suspended licenses for contractors and the amount of penalty fines levied against those contractors have skyrocketed.

By the end of March, the board had imposed $403,700 in fines for the fiscal year that ends June 30, almost four times what it levied in fiscal year 1999, and more than 10 times what the board levied in fiscal year 1998.

While most agree that the 1999 reforms are working, both sides promise to revisit the issues in the 2001 legislative session.

A spectrum of people involved in the issue -- including home construction companies, trial lawyers and politicians who helped beef up the contractors board's power in the last legislative session -- argue that board statistics show that something is working.

But homebuilders and their legislative allies also argue that something needs to be done to rein in the number and size of legal settlements involving home construction defects. Both representatives from the industry and trial lawyers agree that there are many more cases in the court system today than there were 10 years ago.

There are also a lot more homes.

According to Home Builders Research Inc., an independent research company, in 1999 there were 21,162 new homes sold last year in the Las Vegas Valley, up from 18,978 sold in 1994.

The average cost of a new home on December 1999 was $147,750, up more than $25,000 over two years, according to Dennis Smith, president of the Las Vegas-based company.

Lawyers with the construction companies and the Southern Nevada Home Builders Association argue that the trial lawyers and homeowners associations are adding to the cost of homes.

Irene Porter, the home builders association executive director, said that people have unreasonable expectations on how long homes will last, that they fail to maintain properties and that homeowner associations sue for relatively minor problems.

"We don't live in a risk-free environment," agreed Mark Ferrario, an attorney who represents construction companies.

Outside the courts, the contractors board is the first place to seek a remedy for a construction defect. That's where the Raus went for help.

After the Raus filed complaints about the defects, inspectors with the contractors board gave their builder, Royal Construction, two weeks to rectify the defects.

The fixes are slowly being made, but the Raus are unhappy about the speed of repairs and the fact that they've had to spend months dealing with work crews.

Rochelle Wilson, general counsel for Royal Construction, said the company does its best to respond to homeowners' concerns. She said problems with paint or chipping plaster are simply cosmetic issues, due in part to the valley's hot weather.

Sometimes the remedies satisfy the homeowners. But the Raus, like many other homeowners, aren't happy with the fix.

"They come out here and do a Mickey Mouse job," Rau said.

Rau and his neighbors complain that it takes three, four or more complaints to fix a single problem.

But Ferrario and other representatives of the construction companies say they are frequently prevented from doing repairs, and in some cases don't know there are problems in a house before a lawsuit is filed.

The industry is much quicker to respond to problems than in years past, Ferrario said.

Lynda Angora granted that right on several occasions. She has been living in her home off Paradise Road and Windmill Lane for 15 months and just this month unpacked and took her furniture out of storage.

Angora, who moved into her home in January 1999, has been living in her bedroom until this month when the builder ripped up her wood flooring to make repairs.

"It seems like there was something wrong with everything..." she said a few weeks after moving into her Perma-Bilt home.

Angora payed for upgraded wood flooring. But said when she conducted her walk-through of the home the $12,000 floor was wavy, the support strips were lifting and seams between the planks were too large, she said.

First the contractors blamed it on the floor installer, then the type of glue used, traffic caused by her two pet poodles, the lack of humidity in the air, the foundation and the sprinklers, she said.

She filed a complaint with the the Contractors Board and the builder agreed to rip up the floor and install a new one last August.

"Here I have a brand new house, and I'm living out of boxes," she said.

Wendy Gute, manager of customer service for Perma-Bilt Homes, said while Angora's initial complaint with the flooring was with rough edges, at a later date the builder found the problem was defective glue.

Pointing out that she has a 2-inch-thick file on correspondence with Angora, Gute said the company made every attempt to correct the flooring problem. The delay, Gute says, was that the homeowner wanted time to conduct her own investigation and research cost estimates.

Angora insists, though, that her story has a happy ending. The new floor is in place, and she can finally start moving in her furniture.

"When people come to my house and I don't have pictures on the walls, they look around and say, 'Geez, you're not settled yet?' and I want to slap them," she said laughing.

Launce Rake covers growth issues for the Sun. He can be reached at (702) 259-4127 or by e-mail at lrake@lasvegassun.com.

Diana Sahagun covers North Las Vegas for the Sun. She can be reached at (702) 259-2320 or by e-mail at diana@lasvegassun.com.

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