Second Letter to Media and State Legislators: Defects in New Home Warranty Act exposed by Chinese Drywall situation (1 Viewer)

TheDeparted

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Warning: Very Long

If you have purchased or will purchase a new construction home in Louisiana, you really must read this. Every last word. :)ezbill:)


I'm now 10 months out of my 3 y/o house and away from my family 5 out of 7 days each week because my home was built using Chinese Drywall. Some people sign up for that kind of misery - I'm just a programmer. The doctor said not to go back, so we don't stay there anymore. Interestingly, this issue highlighted some deficiencies in an existing law originating in 1986 that has complicated or prevented my ability to seek remediation or other compensation.

I discovered this and its implications last summer when my lawyer initially pointed out that it prevented a successful lawsuit after the builder of my home flat refused to fix our house citing the New Home Warranty Act as protection. (This was before developing our current argument, which is still pending in the court system) Unfortunately, the legislative session had already ended so there was little sense of urgency from most of the Legislators I talked with. So, with the 2010 session right around the corner, I fired up a new letter.

I must have spent 6 hours writing this email and 30 hours revising over the past two days because I'm so darn picky with my language...and I was still nervous to hit send because I just knew I could word it better, was afraid I forgot something or thought it just wasn't clear enough :( Hell, I've already revised this post 5 times, and I haven't even submitted the thread!


Now, I'm no lawyer so I'll gladly hear whatever other insights any of you can provide, especially from builders/contractors - I know you're here. I need to know your opinions and get your perspective as it would do no good to knee-jerk the NHWA into something that favors consumers.



Anyway, this is much of my research into the "New Home Warranty Act" and why it doesn't help you, the home owner and why you should speak up to your Legislators about demanding it be changed to be more fair and balanced for both sides:

(There may be some assumed knowledge in the letter, so if something is confusing, just ask for clarification and I'll do my best)

Dear Sirs and Madams of Louisiana State Commerce Committees and other interested parties,

The purpose of this correspondence is to expose the gaping oversights in the New Home Warranty Act and the dangers that broad language poses when mixed with detailed, targeted scenarios and a restriction of consumer rights based on incomplete expectations. This type of issue affects all of Louisiana - not just those in my district, so I urge each and every Louisiana Legislator on a Commerce Committee to take this matter both personally and seriously. Although any future changes to this statute may not affect my case, currently in progress, it is still important to get it right for future home buyers in Louisiana who decide to invest so much into what should be a mainstay of any family.

Before I continue, I want to be sure that I am clear, as I have a certain propensity for eliciting confusion in my readers - the issue here is not "Chinese Drywall." "Chinese Drywall" merely exposed the issue for what it is. The issue is the existence of a statute that ties the hands of the consumer such that there no longer exists the requisite flexibility in the law to fairly handle this type of occurrence without the need for new legislation.


I have spoken with a number of you on the phone regarding this issue - both recently and last summer when these problems first came to light. Unfortunately, this problem arose at or near the end of the previous legislative session and so no tangible progress could be made as there simply wasn't enough time to digest the issue and develop a reasonable solution that is fair for all parties. I am contacting each of you because you are listed as members of a Commerce Committee, charged with the oversight of the "New Home Warranty Act" (NHWA), RS 9:[3141-3150], you have expressed interest in resolving the "Chinese Drywall" issue or you are a member of the media that might find this analysis interesting. Media members have been Blind Carbon Copied for anonymity.


The 2010 Legislative Session is nearly upon us, and again I call attention to the iniquities of the NHWA. I am including my original work, written and first sent in the middle of last summer when this issue first developed as well as my original email (appended to the bottom). My analysis began as a hardship letter to my mortgage lender, but quickly evolved into a case study of the NHWA as my research uncovered more and more information. Personal details in the document may be out of date, but the important discussion (beginning on page 6) remains valid today.


The New Home Warranty Act does not impart any rights to the consumer, but attempts to streamline the process of certain defect claims between home purchaser and builder/manufacturer. Like a typical product warranty, the NHWA gives the consumer a guaranteed period of time in which corrections to a defect may be requested directly between manufacturer and buyer, and which the manufacturer is legally compelled to accept without immediate escalation to a civil suit saving everyone time and money. This device is commonly offered to consumers as an incentive to choose one product over another and stresses the manufacturer's faith in their product. However, unlike a typical warranty, the NHWA claims the power to nullify the buyer's right to pursue justified legal action against the builder should a defect manifest outside the absolute and arbitrary boundaries created by the "express warranties" delineated within.


I have heard and read a great many opinions regarding this law and its intended and actual consequences. I feel comfortable in asserting that this legislation effectively blocks the use of all "implied warranties" of product manufacturing and sales, such as the implied warranty of merchantability. A home buyer should have a reasonable expectation that a new construction home can function as a safe and viable residence and will not itself cause undue harm to its occupants or their property. This expectation is valid for as long as the average lifespan of the components from which the house is composed, and there is never an expectation that the core components of a house will emit corrosive or otherwise hazardous materials if not exposed to an environment for which it is not designed.

By explicitly defining what legal action may and may not take place between a home buyer and home builder and by also denying access to any actions not enumerated therein toward the resolution of defect claims, the NHWA acts as an instrument by which the liabilities of home builders in total are reduced to static peremptive periods. Additionally, it does not allow for exceptional or unforeseen cases that fit with the spirit or intent of the law as they are not permissible according to the letter of the law. This has the unintended (?) consequence of insulating home builders from their own negligence and encourages builders to sacrifice Quality Control for higher profits or a higher rate of production as they understand that there is little to no recourse for the home buyer against them if a defect in workmanship or materials is not discovered within a short amount of time. The home only needs to stand for 5 years and one month.


In the case of "Chinese Drywall", however, one of the most egregious oversights is not in what the NHWA explicitly declares - it's in what the NHWA does not make clear enough. There are two major classifications of defect - 'patent defects' which are obvious upon inspection and 'latent defects' which are not. By not making this very important distinction, the NHWA claims to hold the solution to claims for both classifications of defect in a new home, when it clearly makes no provisions for latent defects. "[A]ll provisions of this Chapter shall apply to any defect although there is no building standard directly regulating the defective workmanship or materials." (RS 9:3141) For a document that intends to claim ultimate control over this situation, use of a broad, all-inclusive term such as 'defect' without ever using a proper qualifier makes one wonder whether the author was even aware that there were different classes of defect.

The differences between these two classifications in detection and remediation is staggering. Although one year from the date of purchase is a fair and reasonable time period to locate and repair most obvious cosmetic and functional defects in a home, it is not a reasonable period of time to detect latent defects whose symptoms manifest themselves over time and or through other objects, complicating detection and requiring destructive testing for verification. This is simply too much for the average home owner to handle within the currently designated peremptive periods as they possess neither the tools nor the expertise to make such a determination independently. Detection of latent defects is further delayed by the new home owners' reasonable expectation that their new construction home can function as a safe and viable residence which will not itself cause undue harm to its occupants or their property.


The NHWA also limits the penalties for failure to exercise proper Quality Control. For example, RS 9:3144 (B) states:
Unless the parties otherwise agree in writing, the builder's warranty shall exclude the following items:
(14) Bodily injury or damage to personal property.
(15) Any cost of shelter, transportation, food, moving, storage, or other incidental expense related to relocation during repair.


Using the implied warranty of merchantability, one can assert that a new home should not contain defects that could maim or kill a person. One could argue for the inclusion of (14) if implied warranties had not been systematically neutralized, allowing redirection of the suit toward some other legal instrument such as negligence (or something). As it now stands, however, the elimination of implied warranties coupled with the inclusion of clauses such as these only benefits the home builder who apparently cannot even be held accountable for the loss of life stemming directly from their own malfeasance without the home builder providing an explicit waiver of this automatic protection.

If a home has a major structural defect such that it is not suitable for living, why should the manufacturers not pay the relocation expenses of the affected family while dangerous repairs are taking place inside their residence if the implication is that the manufacturers are at fault for the relocation? If, as in the case of Chinese drywall, the manufacturers of the home must gut its contents to make repairs, the implication is that they did something very wrong - so bad that the eventual buyer of the house would not have purchased it at all, had these defects been apparent. This scenario is clearly covered under redhibition - but, as we will see later, redhibitory rights are explicitly targeted for exclusion. As it stands - if within the peremptive period, the total cost to the builder for invasive remediation is greatly reduced because the home owner is forced to share in the burden of the manufacturer's mistake. Not only are they forbidden to rescind the sale of their home for its defects, but must:
  1. Relocate themselves - possibly paying rent or a lease
  2. Continue paying their mortgage if they expect to retain the house
  3. Move some or all of their possessions at their own expense

Granted that it is possible for the builder and buyer to make an agreement to supersede this limitation, but what motivation is there for the builder to eschew the protections automatically granted to them by the state? There are no guarantees that the builder will accept terms that will put them at an additional financial disadvantage - assuming again that the defect was discovered within the prescribed warranty period. The threat of a civil suit that will be defeated because the builder is not legally compelled to comply with relocation expenses is no threat at all because the homeowner is not allowed to recover the expenses by any other means thanks to: the Exclusivity clause.


Although there are many facets to the iniquities of the NHWA, if I must condense the issue to a single point, its greatest problem lies with RS 9:3150 - "Exclusiveness". This section declares:

This Chapter provides the exclusive remedies, warranties, and peremptive periods as between builder and owner relative to home construction and no other provisions of law relative to warranties and redhibitory vices and defects shall apply. [...]


By limiting or denying the home buyer's access to the court system for legitimate civil claims that are not adequately represented in the legislation or are inadvertently dismissed through overly broad language, the NHWA creates a grave constitutional conflict. Article 1, Section 22 of the Louisiana Constitution states that:

All courts shall be open, and every person shall have an adequate remedy by due process of law and justice, administered without denial, partiality, or unreasonable delay, for injury to him in his person, property, reputation, or other rights.

With the first sentence alone, the Exclusivity clause of the NHWA nullifies the most pertinent Louisiana law on the books: CC 2520; Redhibition. “Redhibition is a civil action available under Louisiana law against the seller and/or manufacturer of a defective product.” With RS 9:3150 in effect, home owners are forced to seek creative, alternative ways to obtain restitution from the manufacturer of their home when the warranty periods are not sufficient - and many such avenues cannot fully ameliorate the damages incurred by the unsuspecting home buyer. It does not matter how defective a home is - in Louisiana, if you buy a home from a home manufacturer you're either stuck with it because no one will buy it for anywhere near what it originally cost due to the expense of remediation, or you sacrifice every penny invested in the home by returning it to the bank who will be less likely to loan to you in the future because the builder of your home cut too many corners. Meanwhile the builders have collected the purchase price in full from your lender. Another victory for the Louisiana Home Builders' Association.



It has now been ten months since my family was given doctors orders to vacate our home. Though others are trying, so far the St. Tammany Tax Assessor's office has been the only entity to provide us with any tangible relief, and I thank them for their swift and compassionate action. As I attempted to understand the situation in which I found myself and after so many months of accepting the charity of my friends and family who kindly sheltered me for 8 months with little to nothing in the way of compensation and absolutely no timetable until normalcy resumes, I've become afraid of overstaying my welcome with the erratic behavior my depression brings on.

Instead, for about the past two months I have opted to drive my in-law's van in lieu of my car so that I may have a comfortable environment in which to sleep during the work week over which I at least have some measure of control. This is a personal choice, but it represents the damage my psyche has had to endure through a grueling process with no promise of the end in sight. My family is still splintered and, despite the difficult job market and the added burden the loss of revenue would represent, I am contemplating leaving my stable job just so I can spend more than two days per week with my wife and my two children. The situation is complicated and we are not prone to making rash decisions, so delaying this scenario seemed necessary until now - especially with such a large degree of uncertainty for our future. Now we just need the stability and support that only a unified family can provide. I'm afraid my current job search will lead my family to another state though, as I have yet to find an appropriate position closer to my family and I will likely accept the first reasonable offer for my services, wherever that may be. My wife and I both have Masters Degrees earned in Louisiana; we are proud Louisianans, but after briefly flirting with a life of stability, somehow the circumstances surrounding this entire issue seem to be pushing us toward Texas or Wisconsin - or anywhere, as our priorities have undergone a dramatic shift.



With that, I thank you all for your time and your patience - each is precious to me. I hope I was able to provide some insights into a tiny but important piece of such a large and complex system. I can't pretend to know what it's like to manage so many disparate statutes, and I realize it's impossible to be aware of them all - you saw how much discussion I generated all by myself, and that was just regarding three sections of the first three thousand sections of the ninth chapter of the revised statutes. I have enough difficulties maintaining old source code, and it's at least nice enough to tell you if you did something wrong. Usually. If nothing else, this process has greatly piqued my interest in law. I know that each of you wants nothing but the best for the state of Louisiana, or you wouldn't even occupy your current positions to receive this email. I'm positive that with all of us now more aware of this perspective of the NHWA, we can figure out what changes would be most fair for home buyers and home builders alike.

Sincerely,

Denzien
[Denzien's contact info]


Aside: As is my way, I did my best to remain neutral and objective in my tone and my conclusions; but as this is a subject that I am naturally very passionate about, I may have strayed at times. Please be assured that if there is a perception of acerbic language or frustration, it is merely the cumulative effects this situation is having on me and should not be considered to be directed toward any specific person, place or thing.

Yeah, I know - tl;dr
 
Almost forgot - here are the names and contact information of the members of the State Commerce Committees all nice and compiled for you ('cause I'm a nice guy like that).

<table>
<TR><TH>Senate</TH><TH>Commerce Committee</TH><TD></TD></TR>
<TR><TH>Name</TH><TH>Email Address</TH><TH>Phone Number</TH></TR>
<TR><TD>Ann Duplessis</TD><TD>lasen2@legis.state.la.us</TD><TD>(504) 243-7795</TD></TR>
<TR><TD>A.G. Crowe</TD><TD>crowea@legis.state.la.us</TD><TD>(985) 643-3600</TD></TR>
<TR><TD>John A. Alario, Jr.</TD><TD>alarioj@legis.state.la.us</TD><TD>(504) 340-2221</TD></TR>
<TR><TD>"Nick" Gautreaux</TD><TD>gautreauxn@legis.state.la.us</TD><TD>(337) 740-6425</TD></TR>
<TR><TD>Robert "Rob" Marionneaux, Jr.</TD><TD>lasen17@legis.state.la.us</TD><TD>(225) 637-3623</TD></TR>
<TR><TD>Daniel "Danny" Martiny</TD><TD>martinyd@legis.state.la.us</TD><TD>(504) 834-7676</TD></TR>
<TR><TD>Michael J. "Mike" Michot</TD><TD>lasen23@legis.state.la.us</TD><TD>(337) 262-1332</TD></TR>
<TR><TD></TD></TR>
<TR><TH>House of Reps</TH><TH>Commerce Committee</TH><TD></TD></TR>
<TR><TH>Name</TH><TH>Email Address</TH><TH>Phone Number</TH></TR>
<TR><TD>Arnold, Jeffery "Jeff" J.</TH><TD>larep102@legis.state.la.us</TD><TD>(504) 361-6600</TD></TR>
<TR><TD>Waddell, Wayne</TD><TD>larep005@legis.state.la.us</TD><TD>(318) 219-9000</TD></TR>
<TR><TD>Badon, Bobby G.</TD><TD>badonb@legis.state.la.us</TD><TD>(337) 896-3482</TD></TR>
<TR><TD>Brossett, Jared</TD><TD>brossettj@legis.state.la.us</TD><TD>(504)286-1033</TD></TR>
<TR><TD>Carmody, Thomas</TD><TD>carmodyt@legis.state.la.us</TD><TD>(318)862-9956</TD></TR>
<TR><TD>Chandler, Billy R.</TD><TD>larep022@legis.state.la.us</TD><TD>(318) 899-1193</TD></TR>
<TR><TD>Foil, Franklin J.</TD><TD>foilf@legis.state.la.us</TD><TD>(225) 342-6777</TD></TR>
<TR><TD>Hardy, Rickey</TD><TD>hardyr@legis.state.la.us</TD><TD>(337) 262-2598</TD></TR>
<TR><TD>Henderson, Reed S.</TD><TD>hendersr@legis.state.la.us</TD><TD>(504) 278-6599</TD></TR>
<TR><TD>Jones, Rosalind D.</TD><TD>jonesr@legis.state.la.us</TD><TD>(318) 362-5476</TD></TR>
<TR><TD>LaFonta, Juan</TD><TD>larep096@legis.state.la.us</TD><TD>(504) 282-0265</TD></TR>
<TR><TD>Lopinto, Joseph P.</TD><TD>lopintoj@legis.state.la.us</TD><TD>(504) 456-3806</TD></TR>
<TR><TD>Monica, Nickie</TD><TD>monican@legis.state.la.us</TD><TD>(985) 652-1228</TD></TR>
<TR><TD>Ponti, Erich E.</TD><TD>pontie@legis.state.la.us</TD><TD>(225) 362-5301</TD></TR>
<TR><TD>Pugh, Stephen E.</TD><TD>pughs@legis.state.la.us</TD><TD>(985) 386-7844</TD></TR>
<TR><TD>Roy, Christopher J.</TD><TD>royc@legis.state.la.us</TD><TD>(318) 767-6095</TD></TR>
<TR><TD>Simon, Scott M.</TD><TD>simons@legis.state.la.us</TD><TD>(985) 893-6246</TD></TR>
<TR><TD>Talbot, Kirk</TD><TD>talbotk@legis.state.la.us</TD><TD>(504) 736-7299</TD></TR>
<TR><TD>Thibaut, Major</TD><TD>thibautm@legis.state.la.us</TD><TD>(225) 638-3811</TD></TR>
</table>
 
I'm involved in a handful of these cases and the one thing that has always seemed strange is the desire of anyone to fault, blame or sue a contractor over Chinese Drywall. Of course, I am a contractor. In Florida, the law favors the world in every way over contractors. It's actually rEdiculous in many cases how far behind the 8 ball contractors are with regard to rights, payments, and suits.

That said, contractors are not charged with the responsibility of determining the latent issues with commodity building materials. How any contractor should have or would have known the risks of Chinese Drywall is the question that comes to mind. We shouldn't. We order drywall from a distributor. We have no idea what brand or manufacturer or the origin of the product any more than I know the metallurgical properties of towel bars or faucets. I don't know that there are types of stone tile that give off fumes some people are allergic to and I don't know if the vinyl siding came from Mexico or Canada.

The EPA or the inspection facility that is charged with responsibility for inspecting and approving imported goods should be on the hook. Maybe the importer or distributor should bear some responsibility, but the manufacturer is ultimately to blame. They should have or did have testing done to acheive their required ratings. All products are analyzed and approved by the government. That approval should absolve any contractor, imho, of any responsibility.

Were it a house I built, I'd offer to remove it and replace it at my cost, but I would never do it at my expense. It's simply not the contractor's fault.
 
I'm involved in a handful of these cases and the one thing that has always seemed strange is the desire of anyone to fault, blame or sue a contractor over Chinese Drywall. Of course, I am a contractor. In Florida, the law favors the world in every way over contractors. It's actually rEdiculous in many cases how far behind the 8 ball contractors are with regard to rights, payments, and suits.

That said, contractors are not charged with the responsibility of determining the latent issues with commodity building materials. How any contractor should have or would have known the risks of Chinese Drywall is the question that comes to mind. We shouldn't. We order drywall from a distributor. We have no idea what brand or manufacturer or the origin of the product any more than I know the metallurgical properties of towel bars or faucets. I don't know that there are types of stone tile that give off fumes some people are allergic to and I don't know if the vinyl siding came from Mexico or Canada.

The EPA or the inspection facility that is charged with responsibility for inspecting and approving imported goods should be on the hook. Maybe the importer or distributor should bear some responsibility, but the manufacturer is ultimately to blame. They should have or did have testing done to acheive their required ratings. All products are analyzed and approved by the government. That approval should absolve any contractor, imho, of any responsibility.

Were it a house I built, I'd offer to remove it and replace it at my cost, but I would never do it at my expense. It's simply not the contractor's fault.


Ultimately, I believe the point is that every citizen has the right to make a claim against the builder (and vice-versa if there is such a need). Some claims - such as those of poor workmanship - may be valid, others may not. The NHWA prevents both valid and invalid claims from even being filed if it does not strictly adhere to the seemingly arbitrary guidelines it defines.

Tort reform already mitigates the damages that can be collected from any single party by dispersing liability up the chain.
 
We order drywall from a distributor. We have no idea what brand or manufacturer or the origin of the product any more than I know the metallurgical properties of towel bars or faucets.


Just as an aside - the company that built my home had a contract with their building materials supplier to only receive a specific brand of drywall. How can the builder use the argument you made when some portion of the materials they received were clearly marked as another brand and from another country? If they failed to inform their foremen of the company's expectations then that is a failure in their chain of quality control. They had every opportunity to see and correct the discrepancy.

Presumably, the contract they had was an effort to prevent something like this very issue. They knew what materials met their standards for construction; everything else - as you correctly implied - is an unknown, yet somewhere a decision was made in their organization to accept and install an inferior product. This decision ultimately caused my home to be labelled 'defective' and subject to the New Home Warranty Act.



If you manufacture entire homes and just accept whatever materials someone hands you, you might consider revisiting that policy. If you're just a contractor who is told to install whatever is in the box or laying on the ground - you can hardly be held accountable for anything but workmanship.
 

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