Dream Houses, Nightmare Construction: Home Buyers Beware

Anyone can be a contractor in an unregulated industry. Bill Thomas bought a $265,000 lemon.

The Cherokee County house was supposed to be his dream home: five bedrooms and a full basement on a cul-de-sac lot backing up to a shady stand of trees. Ornate moldings, built-in bookshelves and columns grace the interior. The subdivision, BridgeMill, boasts an 18-hole golf course with a clubhouse bar and grill.

But nearly a year after the purchase, Thomas handed his builder a punch list of problems to be fixed before the warranty expired. The air conditioner wasn’t cooling the upstairs. Drywall needed repair in the master bedroom. A crack in the basement floor needed to be filled.

The builder refused. Suspicious, Thomas began peeling back the layers of the house. What he found, most homeowners never see.

This was the beginning of Thomas’ journey into the underbelly of Georgia’s home building industry, a largely unregulated boom business that offers consumers few protections and little recourse when things go wrong.

Thomas cut a square through the wallboard in the bathroom closet. He crawled through to find exposed water pipes near the house’s exterior, waiting to burst at the next hard freeze. He cut round core samples from the concrete floor in his garage and discovered a sinkhole beneath the slab. Behind the brick exterior, Thomas found that a barrier designed to keep moisture from rotting the wood wallboard had not been installed.

Thomas didn’t have to hunt for other serious defects: His “silent” floor system squeaked. A basement wall sagged from the weight of the two stories above. A cracked upstairs toilet leaked onto the kitchen ceiling. Attic beams barely touched the top of the roof they were meant to support.

Frustrated, Thomas halted his landscaping and home improvement projects because they seemed suddenly futile. “It’s like rearranging the furniture on the Titanic,” Thomas fumed.

The defects weren’t just costly — they were against the law. Two private engineers identified more than 50 violations of the state’s building code, according to inspection reports Thomas provided to The Atlanta Journal-Constitution. A half-dozen heating and air, roofing, foundation, framing and erosion inspectors also cited problems in written reports.

Canton-based Blueridge Residential declined to respond to Thomas’ claims, citing a confidentiality agreement the company has now signed with him.

It’s impossible to say how many shoddy homes are built each year in Georgia. But it is known that the state does little to protect homeowners.

Georgia continues to lag behind much of the country when it comes to regulating home builders and enforcing construction standards, despite being home to one of the country’s largest residential construction booms.

Consider:

Georgia is the only Southeastern state that does not require home builders to meet a minimum level of expertise. Anyone with financing and a business license can become a general contractor. It isn’t uncommon to see CPAs, pilots or homemakers building homes in their spare time. As one building official put it: “All they need is a wheelbarrow.”

State officials do not keep records of who builds houses in Georgia. And the state does not track complaints against residential contractors.

While Georgia sets minimum construction standards, the standards are not enforced statewide. At least 64 rural counties do not enforce the standards at all. Even though metro Atlanta counties have code enforcement programs, inspectors are spread so thin — many tackling 20 to 30 inspections a day — that they often miss construction defects.

Consequently, Georgia consumers are easy prey for incompetent home builders or those willing to maximize profit at the expense of quality.

The Better Business Bureau of Metro Atlanta gives an “unfavorable” rating to about 20 percent of the 400 home builders listed in its database, meaning the contractor was not responsive to complaints. Critics say high demand for housing, a shortage of skilled labor and consumer pressure for bigger houses have pushed some builders to cut corners.

New home buyers who discover defects after the sale often find they have nowhere to turn but the courts, where lawsuits can take years and thousands of dollars. And some defects go undetected until it’s time to sell, and the homeowner is stuck shelling out big bucks for repairs.

Three years after his purchase, Thomas settled the dispute with his builder for an undisclosed amount, but only after spending $50,000 in legal and expert fees and countless hours away from his family and small business.

Richard Stanley, an executive with Blueridge Residential, said the settlement bars both sides from discussing the case. “We don’t really feel like we need to say anything, nor can we,” Stanley said.

Thomas talked to the Journal-Constitution about the dispute prior to signing the agreement last fall. He has not commented on Blueridge or the case since. Thomas is, however, allowed to discuss his feelings about the industry.

“The builders are free to do whatever they want to do with impunity, and they know it,” Thomas said. “Consumers assume there are standards there that, in fact, do not exist.”

In Georgia, the Rule is Buyer Beware

The Chapel Lake subdivision off Wesley Chapel Road in south DeKalb County is like many built during metro Atlanta’s boom: One- and two-story houses with brick or stucco facades and a two-car garage.

First-time home buyers flocked to the development during the early 1990s, drawn by tray ceilings, vast closets and prices in the mid-$100,000s.

But Robert Miles and other residents say they have been victimized by Georgia’s lax regulation of home builders.

A retiree, Miles has spent years and more than $7,000 replacing substandard siding, digging out and refilling a builder’s pit containing construction debris, replacing rotten window sashes and shoring up an unstable roof on his $126,000 house.

Miles tried to get relief from his homeowner warranty, but got mostly excuses from his builder, Cheryl Simoni. “That warranty, it wasn’t worth the paper it was written on,” Miles said.

Simoni did not return calls seeking comment for this article.

One street over, Mike McKine, an air traffic controller, found termites swarming in his basement shortly after he bought his new house in 1994 for $177,000. It supposedly had been pre-treated.

For months after moving into her new home a few houses down from McKine, flight attendant Angela Gregory couldn’t figure out why her dining room carpet stayed wet. Frustrated, she eventually discovered a leak in the wall. “My little brain just wouldn’t comprehend that my brand-new home was leaking,” Gregory said.

The leak, which took three repairs to stop, destroyed the wallboard in her garage and rotted siding. Eight years after buying the home for $124,000, Gregory is still dealing with damage. She recently hired workers to replace rotted siding around her chimney, which hadn’t been properly waterproofed. The repairs have cost her thousands of dollars, including $2,000 to replace a rotted window.

The Mess Leaves Miles Shaking his Head.

“The architect did a great job on this house,” he said, surveying the open floor plan of his kitchen and attached den. “It’s just the materials and the workmanship and the fact that the builder is not accountable.”

Not accountable, in part, because the state does not license residential builders, even though they are responsible for coordinating the work of laborers assembling hundreds of thousands of dollars’ worth of materials.

Barbers, cosmetologists and interior decorators must be licensed to ply their trades in Georgia. The state boards that oversee them can write regulations, hold hearings on complaints and discipline those caught breaking the rules.

Residential contractors, meanwhile, are virtually on the honor system.

Unique in the South

All other Southeastern states license builders. Georgia is one of 20 states nationwide that do not license or even keep track of builders.

Florida, considered to have some of the toughest licensing requirements in the country, requires builders to pass a written test covering business, finance and construction methods. Builders also must show they have at least four years’ experience, good credit and sufficient net worth.

North Carolina, South Carolina and Tennessee require less experience but have similar testing and financial requirements. In all of those states, officials can pull a bad builder’s license and shut him or her down.

Licensing gives states a tool to weed out builders who lack the expertise necessary to do quality work, said J.R. Carden, director of Alabama’s licensing program. It also gives consumers a place to start when looking for a reputable builder.

Alabama’s contractor licensing board revokes 20 to 25 licenses a year, and imposes up to 100 disciplinary actions. The actions are published in an industry magazine.

A few Georgia counties and cities have enacted their own protections. Cobb County requires general contractors to post a $10,000 bond before they can build homes. A board hears cases filed by disgruntled homeowners. Columbus and Valdosta actually license builders.

Two state reports by the Occupational Regulation Review Council, which reviews proposals to license professionals, pointed out the gap in protection for consumers in 1997 and 1999.

“Residential contractors need specialized training and the general public has a very limited ability to identify qualified contractors by existing mechanisms,” read the second report. “Residential contractors can build substandard housing without fear of recourse” because Georgia has no authority that can take away their ability to work.

“The public welfare will continue to be negatively impacted if nothing is done to address the problems consumers are encountering,” the report concluded.

Leaders in the state Legislature have looked the other way.

Proposals Die in Legislature

Stephen R. Been nearly triggered a revolt against Georgia’s home building industry 10 years ago. Been was among the state’s largest residential builders, constructing nearly 400 homes a year primarily in Cherokee, DeKalb and Gwinnett counties.

State investigators found rampant complaints of shoddy workmanship ranging from faulty plumbing to structural cracks in homes built by Been’s Countryside Investment Co. In 1993, the state fined Been $65,000, the largest levy against a builder in state history. A DeKalb Magistrate Court followed up with a $56,000 fine after finding evidence of dozens of code violations in Been houses.

The investigation sparked angry rhetoric about building practices in Georgia. State lawmakers pledged to better regulate home builders; then-Sen. John Parrish (D-Decatur) sponsored a public hearing. “We need builders to be regulated and licensed just like a CPA or a dentist or a doctor,” Parrish said.

When the 1994 legislative session opened, though, opponents put down the revolt. And in the years since, the Legislature has ignored five bills seeking statewide licensing for home builders.

Four compromise bills that would have forced general contractors simply to register with the state also failed during the 1990s. Just this year, lawmakers killed a bill that would have merely created a study committee to evaluate the issue.

Former state Rep. Vernon Jones of DeKalb proposed the bulk of the reform bills considered.

“It was easier to pass the changing of the state flag than to pass a recourse for consumers in the state of Georgia,” said Jones, who served four terms in the House and is now DeKalb’s chief executive officer.

The opposition was led by the Home Builders Association of Georgia, which represents more than 4,800 construction companies building an estimated 80 percent to 90 percent of new homes in the state, said Executive Vice President Ed Phillips. The building industry argued that the proposed changes would be unnecessary government intrusions.

“Anything that had to do with builder licensing, we opposed it any way we could,” Phillips said.

Since 1992, the association’s lobbying arm, Builders Political Action Committee, has donated more than $730,000 to Democratic and Republican state legislators, county commissioners and city officials.

But in 1998, the association changed course and endorsed licensing. Already, residents moving from states that license contractors were demanding change, Phillips said. And some builders favored licensing as a way to weed out bad builders who hurt the industry’s image.

Legislators apparently hadn’t gotten word of the shift before killing the proposal this year to create a study committee on licensing.

“Everyone thought we were against it,” Phillips said, admitting the association did little to promote the position change. “They didn’t talk to us; they just assumed.”

George McClure, a board member of the Home Builders Association of Georgia, warns that licensing contractors can create a false sense of security. “If someone wants to beat you, they’re going to beat you, licensing or not,” McClure said.

While he supports licensing, McClure believes concern about shoddy construction practices is overblown and consumers’ expectations unrealistic.

“You cannot build a perfect house,” McClure said. “There’s only one perfect carpenter and they crucified him.”

The majority of code violations, McClure said, are technical problems that rarely affect a house’s structural integrity. He said construction codes are designed with heavier than normal loads in mind, making up for possible mistakes.

Builders also point out that the state already licenses several of the most crucial subcontractors found at residential construction sites, including plumbers and electricians.

But the question remains: Can a builder effectively oversee work without at least a basic understanding of the job?

Jones is not waiting for the state to act. Complaints of shoddy construction are widespread in DeKalb’s booming southern end. Jones has already imposed a new set of tough residential construction codes that target building quality, not just safety. He is also evaluating ways to kick bad builders out of DeKalb for good.

“If you want to build shoddy construction, go somewhere else,” he said.

‘Chump Change’ Settlement

When builder Cheryl Simoni refused to fix most of the problems a private inspector later identified in Roberts Miles’ DeKalb home, he sought help from the Governor’s Office of Consumer Affairs. The agency, charged with mediating and investigating consumer complaints against Georgia businesses, turned Miles away.

According to a 1995 letter from a Consumer Affairs investigator: “We cannot take action on your complaint at this time without proof that the business has engaged in widespread unfair or deceptive activities which affect the public interest at large.”

Miles, a manager at the Georgia Emergency Management Agency at the time, wrote then-Gov. Zell Miller a letter asking for help. He also encouraged his neighbors to file complaints with the state.

Consumer Affairs took the case. A couple of years later, investigators sent their findings to the agency’s lawyers at the attorney general’s office. They rejected the case, saying the department didn’t have the resources to pursue it, state records show. The lawyers changed their minds after Miles wrote letters to local newspapers and pressed his connections.

The state finally sued Simoni on behalf of homeowners in five subdivisions in DeKalb and Gwinnett counties, accusing her of using siding that had not been approved for residential use. The utility-grade wallboard was manufactured for sheds, not houses, according to state records. The suit further accused Simoni of refusing to address claims under the warranty she provided.

After six years, Simoni settled for $24,000, which was divided among 10 plaintiffs.

Miles’ portion of the settlement was $3,137, less than a third of the $10,000 he said he has spent to correct the defects. “It was chump change,” Miles said.

Gregory’s $2,400 won’t come close to covering her problems either. “I just feel like all my efforts were certainly not worth the $2,000 or so I got. I felt like it was a joke.”

McKine wasn’t even aware of the case, so he was on his own.

Simoni, who did not admit any wrongdoing, is still chief executive officer of two of the companies listed in the suit, Cottage Properties and Atlanta Development, state records show.

Investigators Drop by Half

Despite being arguably the state’s most powerful consumer agency, Consumer Affairs does little to stop bad builders or even track complaints. Since 1986, Consumer Affairs has recorded 11,400 consumer calls concerning residential contractors. Spokesman Bill Cloud was unable to say how many of those calls were complaints. The total includes everything from simple inquiries to calls about pending lawsuits against contractors.

“I don’t have the greatest faith in our reporting system on this topic,” Cloud said.

John Smith, an attorney who oversees the agency, said the office doesn’t have enough investigators and other resources to aggressively pursue complaints.

While the annual number of residential building permits more than doubled in Georgia during the 1990s, the number of investigators handling consumer complaints fell by half, to about 15.

Consumer Affairs has the authority to investigate home builders for misrepresenting their products and can seek court fines of up to $5,000 per offense. But Smith provided records of just five cases the department has won against residential home builders dating back to the early 1990s, including the Simoni and Been cases.

Smith said the agency has three new cases under investigation.

Ken Thompson opted not to spend the roughly $300 it would have cost to hire a private inspector when he purchased his new home seven years ago in the Windsong Trace subdivision near Duluth. (Private inspections of new homes are not required by law). He assumed Gwinnett County building inspectors wouldn’t have approved the house for sale if it wasn’t built right.

Thompson Couldn’t Have Been More Wrong

When bricks began falling away from the house, Thompson hired a private inspector who traced the problem to faulty foundation work on one wall of the garage. In all, the private inspector identified 52 construction defects, including a list of alleged code violations, according to state records.

The house was among those included in the state’s settlement two years ago against Simoni. Thompson, who was paid about $4,400, has spent $3,000 making repairs and expects to spend thousands more before he can sell.

“Most of the major problems were things that should have been caught in the county inspection process,” said Thompson, a Presbyterian minister. “I don’t think that it was really inspected.”

Counties and cities enforce the state’s building code voluntarily and officials make no guarantees about what they will uncover. The residential construction code is itself a minimum standard designed to ensure the dwelling’s safety, not quality.

Most of the 64 Georgia counties that do not enforce the state’s residential code are rural; the closest to Atlanta is Pickens in the North Georgia foothills, home of the high-priced Big Canoe development.

Local governments that do enforce residential construction codes typically hire inspectors to monitor the key points of construction. Houses must pass a series of inspections before the county will approve the structures for sale. Plumbing, electrical, foundation and framing inspections are common.

Experts agree the system leaves plenty of room for error. DeKalb code inspectors failed to catch the unapproved siding Simoni used. The inspectors also failed to notice that there wasn’t enough support for the roofs in several Chapel Lake homes, including the one Robert Miles purchased.

When Miles complained, he said DeKalb building officials admitted the department had been swamped. “What I found was, most of it was windshield inspections,” Miles said.

Drive-by inspections are a dirty secret within local code enforcement programs. Faced with a torrential residential construction market, pushy builders and staffing shortages, local inspectors sometimes have too little time to even get out of their trucks to evaluate a house.

Or they shorten the inspections.

In 1991, Cobb County’s 24 building inspectors handled 65,300 commercial and residential inspections. By 1999, the number of inspections had nearly tripled to 171,000 — and the same staff of 24 inspectors handled them.

During that decade, the average length of a single Cobb inspection dropped from 15 minutes in 1991 to about 8 minutes in 2000, county officials said. A typical house gets four to six different inspections, which means a Cobb inspector spent less than an hour total inspecting a single home.

Giving inspectors time to do their job might not be enough. Georgia law does not require code inspectors to have even minimum training. Two years ago, the Legislature declined to pass a proposal that would have required county inspectors to be certified as construction code experts.

DeKalb County inspector Gary Englebert also said some builders use bully tactics, subterfuge, even friendship to push inspectors to overlook substandard work.

“They intimidate you,” he said. “It’s basically a game played a lot of times between the builder and the inspector and the person who buys the house.”

Englebert once caught a builder moving a sapling tree from yard to yard to meet DeKalb’s tree ordinance. Sometimes, Englebert will ask a builder to get an engineer’s report certifying a structural aspect of a project that is out of the norm. Englebert has busted engineers certifying work they have never actually inspected.

“With any rule there’s always a way to bend it,” Englebert said, “and some of these guys know how to bend it just right.”

Author: Contributor