The O is doing an interesting series on the growing legal problems between home builders and new homeowners who are stuck with a shoddy product. Who would have ever believed shoddy condos and townhouses have been built in Portland's glamorous Pearl District? Well they have, and owners are paying the price because builders who went on the cheap are trying to do everything possible to legally distance themselves from the problems they've built. Builders are using legal loopholes to set up "special purpose corporations" which ultimately act as shields that protect the developers from their responsibilities. The case of the Johnson Street Townhouses is typical:
The developer, Johnson Northwest, is what is called a special purpose corporation formed expressly to build and sell the Johnson Street Townhouses. It is controlled by Tiffany Sweitzer, president of Hoyt Street Properties. Joe Weston and Clay Fowler, wealthy investors in Hoyt, both purchased stakes in Johnson Northwest.
Developers commonly build new projects under the umbrella of newly formed corporations, which help shield them and any parent company from losses if the building is embroiled in a legal dispute.
As is typical in these cases, by the time Johnson Street residents sued, Johnson Northwest had few assets other than its liability insurance.
Insurance companies have taken note and are now pulling out of the construction liability business entirely, as Mutual of Enumclaw has, or are limiting their own liability by raising rates on builders and excluding claims that involve mold and rot, which are the biggest problems in today's home building business. As reported in the second part of this series in today's O, the spokesperson for Zurich North America, one of America's largest insurance companies, explains why they've taken drastic measures to limit their coverage:
The ways homes are being constructed and the materials that are being used gave rise to more incidences of construction defects...
Builders have options when it comes to the materials they use. For example the contractors whom the Johnson Street owners hired to do repairs found that the builders had used an inferior product to frame the windows. It saved the builders thousands of dollars, but in the end the frames held water and became havens for mold.
With this in mind, even Homer Simpson would assume that the home builders would get their act together and change their building practices in order to prevent the common problems that are plaguing today's new homes. Instead they're taking the fight to state legislatures across the country, and that includes Salem. The Oregon Home Builders Association is aggressively lobbying our representatives in Salem to get laws passed that would essentially let them off the hook for the lemons their members are building.
They use powerful frames like "businesses are being lost" and "small towns are being damaged." Yeah, because the houses being built in those "small towns" are pieces of crap. And of course the term "frivolous lawsuits" is commonly used. The reality is, home builders are using frivolous materials to build frivolous homes that they turn around and sell for hundreds of thousands of dollars in profits and then run for their lives to their next frivolous building project.
Our problem is, the Oregon Home Builders Association brought their issue to Salem before consumer groups brought theirs. In doing so, the builders chose the playing field and started writing the rules of the debate before consumer advocates even got to the game:
There is no advocacy group representing homeowners at the Capitol, a fact that shaped the debate during committee hearings this spring. While contractor hard-luck stories were common, questions about building longevity, construction quality and factors that might be contributing to defective homes got little attention.
Let's get the game played on our field. What's it going to take? In the bigger picture, it's not just about the homes we buy, it's also about the quality of medical care we receive, the safety of the cars we purchase, the food we eat, the air we breathe... it's about what kind of country we want to live in. Jefferson Smith of the Bus Project once told me that by the time most people realize there's a problem, big business has already successfully lobbied our state's representatives to pass laws that protect and favor them. We have to be faster.
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