Your year-old home’s foundation could have a crack as wide as a pencil eraser. Or it could have a leaky roof that lets rain ruin your couch.
If a bill now before the South Carolina legislature passes, you won’t be able to sue your homebuilder for the cost of a fixed foundation or a new sofa.
Homebuilders want a state law that allows them to offer standard warranties for new homes. The warranties would guarantee houses won’t suffer problems caused by poor workmanship for one year and from major defects for 10 years.
Less critical damage, including damage to furniture and, after a year, that foundation crack, could be excluded from the warranty.
Consumer groups are incensed. They say the warranties would replace broader protection state courts have given consumers for 25 years. And, they worry, builders would get to exempt a menu of items from coverage, even defects caused by bad materials.
Homebuilders argue the bill will reduce frivolous lawsuits and provide clearer protections than the courts do now. The builders also say consumers would save on the cost of recovering for serious defects because they won’t have to go to court for warranty claims.
Consumer protection or a liability cap for builders? With the two sides still negotiating-and the bill in subcommittee-legislators have just begun to listen to both sides.
But one consumer believes he knows the answer already. “The individual should have recourse,” said Dave Bower, a Columbia resident who sued the builder of his home after he found his house wasn’t anchored to its foundation. “And no one should build a house if they don’t know what they are doing.”
The authors of this bill say they agree with Bower. They say their standard warranty would encourage better building.
Consumers will find the warranty simpler to understand and easier to use than automatically running to the expensive, time-consuming legal system, supporters of the bill say.
“All warranties in South Carolina are a matter of case law,” homebuilder Stewart Mungo told a Senate subcommittee earlier this month. “It is a very confusing system for the layman.”
The bill, called the “Homebuyers Protection and Warranty Act,” allows builders to offer a standard written warranty with new homes.
In the first year, the house must be free from defects caused by bad workmanship, poor materials or a builder who didn’t meet building standards.
For two years, the heating, cooling, electrical and ventilation systems are guaranteed.
And for 10 years, the home must not suffer problems caused by major structural defects, like big foundation cracks.
Those coverages mimic warranties homebuyers can purchase now. The warranty would be transferred with the title of the home to future buyers until its coverage expires.
If a home develops a problem covered by the warranty, the builder could decide whether to repair it or pay the homeowner to do so. But no claims could cost more than the home originally did.
To pay warranty claims, the bill requires builders to carry insurance or post a $25,000 bond. The bond also would protect homeowners whose builders go out of business, leaving repairs behind.
“The home purchase is such a tremendous investment for most people,” said James Brannock, executive vice president of the Home Builders Association of South Carolina. “But that process is fraught with confusion.
“Through this specific warranty, we will make it clear to each side what their rights and responsibilities are.”
Great idea, consumer advocates say of the bill, but lousy execution.
They aren’t sure the bill protects consumers when builders go out of business. A warranty and $25,000 bond is little protection if a broke builder leaves behind home repairs that cost $100,000 or more, they say.
Columbia car dealer Darrell Hudson sued his warranty company after he found his house had “walls out of plumb and almost every building violation there was.” His builder had gone out of business, and Hudson’s warranty covered just one-fourth of the repair costs.
“I took a substantial loss,” he said. Critics say the bill is packed with so many liability limits and exclusions that it should be called the home builders’ protection act.
Twenty-seven exclusions protect the builder from anything but the cost of repairing major structural flaws after the first year of coverage, no matter how inhospitable lesser flaws make the house.
The current draft of the bill allows builders to exclude coverage of garages, pools or outbuildings, even those built by the same company that built the house.
The warranty doesn’t have to cover belongings inside the home, even if they are damaged as a result of poor building.
Most important, the warranty can refuse to cover any defect that doesn’t cause damage.
That means a house like Bower’s wouldn’t be covered. In Bower’s case, a building inspector found the house’s weight bearing on the house’s four-inch outside brick wall, instead of a thicker concrete one. Though the defect, a violation of building codes, could have led to serious damage, it never did.
Bower sued The Mungo Co. and Stonehedge Construction Co. anyway. He knew he would have to disclose the code violation, along with 15 other violations of building codes and trade standards, when he sold his house in Northeast Richland County.
As a result, Bower probably would lose money on the sale. Who would want to buy a home not anchored to its foundation?
“When (hurricane) Hugo came through, I was sitting there shuddering,” Bower said. “One good gust of wind and my house would be down in the cul-de-sac.”
The builders settled the case, paying Bower $100,000.
When Bower sued, 25 years of court decisions had reaffirmed the right of consumers to livable houses. The South Carolina Supreme Court, in 1976, had ruled that homes were such an expensive and special purchase that their developers have a particular responsibility to make sure they are built well.
Even if no official warranty is ever written, the courts have said, home construction should be careful and diligent. If a builder or developer sells a house, the doctrine goes, the house better be fit to live in.
Over the years, the Supreme Court re-emphasized the responsibility of builders to build well. “We have made it clear that it would be intolerable to allow builders to place defective and inferior construction into the stream of commerce,” the court wrote in a 1989 opinion.
The bill allows builders to replace the broader legal precedent with the limited warranties.
Home builders say that’s fine for their industry and for consumers.
In contracts, some builders disclaim implied warranties when they sell homes anyway.
