Patricia Kilday Hart
Home Buyer Beware
How a new state agency of the builders, by the builders, and for the builders makes it harder for you to sue, yes, your builder.
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While the agency touts that it has found in favor of the consumer in 92 percent of its cases, the statistic is phony. It applies only to cases that the commission determines are eligible for review. In fact, 814 consumers have contacted the agency with complaints, but only 186 cases were accepted as eligible. Homeowner advocate Janet Ahmad points out that the agency refuses to hear cases involving incomplete construction, even though one of the most common complaints against homebuilders involves those who disappear and leave behind half-finished projects. Ahmad conducted telephone interviews and found overwhelmingly that the consumers who had “won” their cases at the agency felt it did no good because they still had to pursue action in court against their builders.
Builders do have to register with the TRCC, at a cost scheduled to rise to a maximum fee of $500, but, as Duncan pointed out during a committee hearing, the commission conducts no screening of builders, nor does it require them to meet any standards in order to appear as registered on the agency’s Web site. “We’re giving them a badge that gives them elevated credibility with the public,” Duncan said. His legislation would have required the agency to make available to the public any court judgments or bankruptcy filings involving a builder. A bill by state representative Jessica Farrar, a Houston Democrat, that required registered builders to carry insurance also died this session after fierce opposition from the building industry.
Even the performance standards adopted by the TRCC, providing the first uniform definition of what should be covered under homebuilding warranties in Texas, have generated criticism. According to Mark Eberwine, a San Antonio home inspector, the standards—which are based on input from professional engineers and Texas A&M’s Construction Sciences Department—allow, among other things, a significant tilt in foundations, one-eighth-inch cracks in brick mortar, deficient water pressure, and dips and cracks in driveways. “The state has now sanctioned poor builder behavior,” he said. TRCC member Paulo Flores, a lawyer who has represented homeowners against builders, voted for the standards because they gave consumers some predictability. “Prior to what we’ve done, there was nothing,” said Flores. “As a lawyer, you never knew where you stood.” But Mickey Redwine, an East Texas cable construction company owner who was appointed to represent the public, abstained from voting, indicating, he said, his “personal belief that we could have stronger consumer protections.”
It is ironic that Duncan has become the TRCC’s chief critic, because he co-sponsored and later fine-tuned the bill that created the agency in 2003. The argument that he found persuasive was that lawsuits were a costly and time-consuming way to resolve homeowners’ disputes and that administrative findings against builders could lead to quick settlements. But that was before the governor saw to it that the commission would be so builder-friendly. During the 2005 session, Duncan proposed legislation that would have made the complaint process more attuned to consumers and forced builders to disclose possible defects. One draft was made available to Krugh, who responded by marking through pages to indicate his disagreement. “No counteroffers or suggestions,” Duncan said.
After losing the fight over the bill, Duncan decided to “send a message” to the TRCC by attempting to block Krugh’s confirmation. At one point, Duncan said, he had the necessary votes, but his efforts unraveled after an intensive lobby effort. “Nobody wanted to take on Bob Perry,” he said. The Senate ultimately confirmed Krugh, but not before long speeches by Duncan and Royce West, a Democrat from Dallas, harshly criticizing the TRCC.
In an interview at Perry Homes’ headquarters on Houston’s Gulf Freeway, Krugh called the controversy “both embarrassing and humbling.” A soft-spoken man who seemed honestly perplexed by the uproar, Krugh said that his years in the trenches with emotional homeowner lawsuits led him to seek the creation of an agency to help resolve disputes. “On the one hand, I saw lawsuits coming at builders based on criteria that would vacillate depending on whatever an expert had to say, as opposed to something uniform,” he told me. “On the other side, I saw consumers who had problems with their houses and, I thought, basically wanted to get them fixed. The old system drove them to their lawyers and their experts, and they got caught up in what I call this vortex of litigation, and they couldn’t get out. The third-party-intervention method at least gives the homeowners some control over what goes on before they get caught up in that vortex.”
Krugh said he believed the commission would adopt rules that would accomplish a lot of what Duncan hoped to achieve with his legislation and would “look at the methods by which consumers could obtain information about builders’ lawsuits and bankruptcy filings.” He also noted that the agency recently changed its rules to require the builder to communicate with the agency after it has inspected a home for a consumer complaint to let the agency know “what goes on between homeowners and builders with regards to resolution.” If a builder fails to do that, “it will be considered grounds for a potential fine, suspension, or revocation,” Krugh added. “If a builder does not respond at all, we’re going to take that into consideration.”
Clearly, the battle this session got Krugh’s attention. But did it get Rick Perry’s? The effectiveness of the agency depends upon the governor’s willingness to appoint commissioners who will not wear their builder’s hats when deciding how to protect the public against unscrupulous or careless action. With an announced Republican primary opponent, Comptroller Carole Keeton Strayhorn, already lambasting him, Perry might want to blunt an issue that would be easy to turn into an effective television spot. After all, bad foundations affect Republicans and Democrats alike.
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