Driven from dream home by safety issues, Corona family at odds with builder over compensation
By LESLIE BERKMAN
The Press-Enterprise
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A Corona homeowner's battle to fix building defects, combined with the sagging Inland real estate market, is creating a dilemma neither the builder nor the owner ever expected.

Cracking walls forced Zack Jalanbo's family of six out of their upscale south Corona home and into negotiations with the builder, Centex. The Jalanbos want the home repaired. Centex has offered to buy it back and help with moving expenses. The problem, Jalanbo says, is the going rate for his home is hundreds of thousands less than he paid for it and would leave him with no money to buy another house.

Jalanbo, 55, said because Centex also has stopped providing rent for the family's temporary housing, he may not be able to keep up the mortgage on the house that he and his wife love and into which they have sunk their life's savings. He said he dreads that the house, which he believes was once worth nearly $1 million, could go to foreclosure.

 

Stan Lim / The Press-Enterprise

Zack Jalanbo, shown with his wife, Abbey, says the family can't afford to rent other quarters while still making the payments on their dream home, which has serious defects.

Jalanbo said Centex, from whom he bought the house for $841,000 in 2006, advised him in March to move his family out as a safety precaution while the company investigated a soil compaction problem with the construction of an underground sewer drain between his house and a house next door.

He received a letter from Centex's former warranty manager that said Centex would pay "for any reasonable relocation costs until we have remediated the problem and confirmed that your house is safe."

Centex paid room and board for the family, including three teenage daughters and a 20-year-old son, to stay in a Corona hotel for five months, then instructed them to take a lease on a house, said Jalanbo. But in October, three months into the lease, Centex halted the rent payments, he said. He said the e-mail he received from Centex "said they had paid enough."

Centex spokeswoman Jacque Petroulakis said Centex paid an unreasonably large amount of money -- more than $100,000 -- in relocation expenses for the family since March.

But Jalanbo said he is over a barrel. His business selling telephone cards declined sharply in the last two years, and it had become a struggle for him to pay his mortgage. To pay the mortgage on one house and rent on another has forced him to borrow from friends and relatives, he said.

"I am afraid I will lose the house before I get any justice," he said.

LAWSUITS FILED

In July, Jalanbo filed suit against Centex in Riverside County Superior Court to force the builder to fix the defects. Centex, in turn, has denied it is at fault and cross-sued the subcontractors on the project, including soil engineers.

In its cross-complaint, Centex said in May it had offered to pay $569,500 to take back the house, which is less than the $650,000 mortgage that Jalanbo said remains on the property. Centex says its buyout offer includes $490,000 for the house -- a price it says reflects the recent real estate crash -- as well as moving costs and various other expenses.

Centex acknowledged in court documents that because the price being offered for the house is less than what the Jalanbos owe on it, a buyout would require the approval of Bank of America, which holds the mortgage. Also, Centex said the current value of the house may be far less than the cost of repairing it.

Petroulakis said owners of the house next door to the Jalanbos had a similar problem with cracks and they accepted a cash buyout from Centex. She said the Jalanbo family should do the same because Centex needs to take title to both properties before it can tackle the soils problem.

Zack Jalanbo and his lawyer, Chris Hagen, argue that Centex is legally required to fix the soil compaction problem and return the house to his family or give him enough money for remediation, and Centex has chosen to do neither.

Jalanbo said because his neighbors did not have a mortgage, they could use buyout money from Centex to purchase another house. But Jalanbo said because he owes more on his house than Centex is willing to pay for it, he would be left with no funds to start over.

FORECLOSURE PRICE

He objected that the price Centex is offering is what the bank would get for his house if it were in foreclosure. By taking that offer, he said, he and his wife would forfeit their $240,000 down payment, $25,000 in closing costs and $140,000 they spent on upgrades like marble flooring, crown molding and cherry cabinets.

 

Stan Lim / The Press-Enterprise

The Jalanbos first noticed hairline cracks in the concrete floor of the garage of their Corona home. The cracks widened over time and began to spread to the house.

"The property is not for sale. I have nowhere else to go," Jalanbo said.

The house high on a hill in south Corona was his wife's dream, he said. He said the couple had waited five years for the chance to buy what they considered the best lot in the Centex development.

On a visit to the house last week, Jalanbo pointed to the view from the master bedroom window, where he said on most days you can see as far as Rancho Cucamonga.

Jalanbo said in June 2006 on the initial walk-through of the 4,000-square-foot house, he had noticed hairline cracks in the concrete floor of the garage but didn't think they were significant. About a year later, he said, the cracks had widened and he notified Centex, which he said dealt with the cracks by caulking them.

A year after that, he said, the cracks spread up the wall of the garage and into the house. "That's when we knew for sure that something was terribly wrong," he said. Centex sent numerous experts to inspect the property, Jalanbo said, and in February reported there was a soil compaction problem.

At that point, he said, he put Centex on notice that he would give the builder an opportunity to fix the problem under warranty but otherwise would sue. He said that also was when Centex told the family to leave the house for safety reasons.

BUILDER 'DID RIGHT'

"All along we did the right things," said Petroulakis, the Centex spokeswoman. "We identified the problem and had the initial study done. Since March we have paid this homeowner in excess of $100,000 in relocation expenses and have not yet been able to reach an agreement."

She said Centex and Jalanbo are in mediation and she felt it was awkward discussing a customer's situation in public. "We don't think mediation should be influenced by the media," she said.

Mediation is often a good way to speedily resolve construction defect disputes, said Thomas E. Miller, a Newport Beach lawyer who wrote a legal textbook on construction defect litigation and represents homeowners associations in such actions.

Miller said it is rare when construction defects cost more to repair than the value of a house. But he said a homeowner is under no legal obligation to accept a buyout.

INSURANCE ISSUE

Miller said large companies like Centex, which was acquired in August by Pulte Homes, the nation's largest homebuilder, have insurance to reimburse them for construction defect losses and are sure to collect damages from subcontractors who did faulty work.

Jalanbo said he is negotiating with Bank of America to modify the terms of his mortgage to lower the monthly payments on the family's house.

Jalanbo said each day his wife drives to the house on Langtree where she tends to her roses and often breaks down in tears.

Hagen said although homeowner grievances about construction defects are not uncommon, this one is not run-of-the-mill.

"It is unusual that a builder will step up, acknowledge the problem, inform the homeowner it is unsafe to live there, move him out, pay for his relocation expenses and then financially cut him off, leaving him hanging," he said.

Reach Leslie Berkman at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or 951-368-9423.
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