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ABC Special Report
Investigation: New Home Heartbreak
Trump - NAHB Homebuilders Shoddy Construction and Forced Arbitration

Outrageous! Buy a New Home - Don’t Sue and Shut Up
Homebuilders will stop at nothing – Now Buyers must agree not to Speak

Beware of New Builder Clause – Homebuilder requires that homebuyer sign clauses forcing buyers to give up their constitutional rights.  It’s a decision between constitutional rights and the American Dream. 

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PLUS: It's Your Choice, Homebuilder Contracts - Hold Harmless

Frisco - People vs. Goliath. Vote “Yes” on Proposition 1 and 2!
Friday, 29 April 2005
Must Read: The Texas Observer
The Exurb Rebellion
Immediately after moving in, the Beckas say they began to have serious problems with their $318,000 home. Pipes burst behind walls and in the foundation, causing persistent flooding; an uncapped gas line leaked gas into the house; toilet water poured from the ceiling into the kitchen. The water damage spawned fast-growing toxic black mold. For more than five years, the Beckas put up with these problems and what they say were Huntington’s band-aid fixes...In January 2004, the Beckas approached the Council for help with a few commonsense ordinances...city officials did nothing...The Beckas warned their elected officials that if they did not cooperate, they would take the issue to the voters by collecting enough signatures to put amendments to the City Charter on the ballot...Take Back Your Rights presented the City Secretary with the fruits of six months of labor on the streets of Frisco—9,600 signatures, enough to force the City to put the amendments to a vote.

The Texas Observer
The Exurb Rebellion
Dateline Texas:4/29/2005

he fastest growing areas in Texas are no longer the suburbs, but instead remote, once-sleepy     towns far from the city center. The media has taken to calling these boomtowns of suburban white flight, “the exurbs.” The city of Frisco, the last stop on the North Dallas Tollway, is one such place. Frisco has gone from a remote farming outpost of 6,000 residents in 1990 to a burgeoning city of well over 75,000 today. By 2015, the city is expected to boast a population of 140,000.

Everywhere in Frisco there is evidence of a development gold rush. Many farm fields feature signs that read “for sale” and “proposed for zoning change.” Instead of cotton and wheat, a now-familiar crop of corporate chains like Starbucks and Wal-Mart rise seemingly overnight from the rich, black soil. Farm roads once traversed by tractors are becoming thoroughfares for real estate developments that promise the American dream of a spacious, affordable home with a large garage and St. Augustine grass. In 2004 alone, the City of Frisco issued 3,200 permits for new home construction.

But signs springing up on the yards of homes scattered around the city indicate a brewing revolt against business as usual in Frisco. The signs read: “People vs. Goliath. Vote “Yes” on Proposition 1 and 2!” The people in this case are a group of newly minted activist-citizens who are fed up with what they say is an unaccountable building industry that all too often sells faulty homes. The Goliath they face is an alignment of area builders and City of Frisco officials who are pouring resources into trying to stop the consumer revolt. The battle is being joined over Propositions 1 and 2, amendments to the City Charter that supporters believe will strengthen homeowner rights, but which developers and city officials decry as a death knell for the city. Voters will get the chance to decide for themselves on May 7th.

The leaders in this grassroots revolt are an unlikely group of activists. A self-described Republican, military family, the Beckas—Carol and Dr. David and their adult daughter, Carolyn—moved to Frisco in 1997 after Dr. Becka retired from a 28-year career as an Army orthodontist. Looking forward to owning their first new home after a lifetime of constant moving, the Beckas contracted with Huntington Homes, a major Texas builder, for their dream home in the Starwood development, a gated “luxury home community,” as the subdivision’s website touts it. Starwood is an idyllic enclave for the affluent, launched by Blue Star Land, a development company run by Jerry Jones, owner of the Dallas Cowboys.

Immediately after moving in, the Beckas say they began to have serious problems with their $318,000 home. Pipes burst behind walls and in the foundation, causing persistent flooding; an uncapped gas line leaked gas into the house; toilet water poured from the ceiling into the kitchen. The water damage spawned fast-growing toxic black mold. For more than five years, the Beckas put up with these problems and what they say were Huntington’s band-aid fixes. (Three calls for comment from Huntington were not returned.) Eventually, the mold and the flooding became such health hazards that the family moved into a hotel and later an apartment where they now reside. In August 2003, they sued Huntington, a legal battle that continues to this day.

During their multi-year headache, the Beckas began talking with other homeowners in Frisco with similar problems. It seemed to them that there was a home-buying horror story around every corner. Some had moved into their new homes only to discover serious structural flaws, but couldn’t do anything to get their builder to fix the problems. Others had in good faith signed a contract with their builder, only to discover later, when they wanted to sue for defects in their homes that they had inadvertently given up their right to the courts because of a binding mandatory arbitration clause in the contract. A few of the aggrieved had tried to use the dispute resolution process of the newly created state regulatory agency, the Texas Residential Construction Commission only to find that their money, time, and effort had been squandered because the commission had no enforcement power.

The Beckas concluded that their situation was far from unique and something had to be done. “We wanted to help other people out so they don’t have to go through what we went through with our house,” says Carol Becka.

As they saw it, the fundamental problem was that the relationship between buyers and builders was poisoned by an imbalance of power. Builders, if they chose to do so, could get away with cutting corners and lousy workmanship because there was—and is—little consumers can do about it. And they put little stock in the Residential Construction Commission, which is overly tilted in favor of builders, to solve their problems (See “The Agency that Bob Perry Built,” February 4, 2005). With nowhere else to go, they took their concerns to the City of Frisco.

he City Council, the Mayor, and the city staff are immensely proud of their management of Frisco. Fundamentally, they see their role as stewards of the area’s explosive growth. In order to maintain low taxes and pay for the City’s expanding infrastructure—a new $30.5 million city hall and a public library currently under construction, for instance—they believe they must maintain sky-high population growth. As a result, the construction industry and the City have a shared interest in keeping development booming. The Council fiercely guards its authority to carry out this mission. So when the Beckas brought the Council their demands for stronger homeowner protection, city officials were less than receptive.

In January 2004, the Beckas approached the Council for help with a few commonsense ordinances. Specifically, they wanted the city to require builders in Frisco to secure either a $250,000 bond for an individual home or a $2 million bond for multiple homes. Then, homeowners could make claims against these bonds if there was a problem with a new home. They also proposed an “informed consent” ordinance, requiring builder-buyer contracts to include full disclosure of warranties, binding mandatory arbitration agreements, and any risks or hazards of the home that may be otherwise hidden from the buyer. In essence, the amendments would attempt to mitigate the “Buyer Beware” situation that has plagued the new home market in Texas.

The Beckas warned their elected officials that if they did not cooperate, they would take the issue to the voters by collecting enough signatures to put amendments to the City Charter on the ballot. On the Dallas-affiliate Fox 4 News in February 2004, Mayor Mike Simpson promised to “do something” with the proposed ordinances as he waved the written copies in the air. Instead, city officials did nothing. In May, frustrated by their local government’s intransigence, the Beckas formed a political action committee called Take Back Your Rights. They recruited a motley bunch of exurban rabble-rousers and began collecting signatures for the two charter amendments. In Miracle-Gro Frisco, city officials—and the area’s vocal and powerful construction community—seemed blindsided by the Beckas’ perseverance. On November 8th, Take Back Your Rights presented the City Secretary with the fruits of six months of labor on the streets of Frisco—9,600 signatures, enough to force the City to put the amendments to a vote.

To prepare for the May 7th election, city officials called two work sessions, one in January 2005 and another in March, to discuss the proposed amendments. While these were ostensibly fact-finding meetings, DVDs of the sessions reveal meetings consumed by acrimony and divisiveness. The Beckas have taken to calling them “work-over” sessions. Builders, developers, trade association representatives, and participants in the bond industry showed up en masse to testify against the amendments. Bob Pavlis, president of the Homebuilders Association of Dallas and the head of Bob Pavlis Custom Homes was there to complain about the high cost of regulation. David Siciliano, a local developer and political campaign contributor to two councilmembers, explained that disclosure of binding arbitration clauses was unnecessary since consumers have a personal responsibility to read their contracts. Meanwhile the city council took turns haranguing the Beckas about their lawsuit against their own homebuilder, accusing the family of turning a personal problem into a public crusade that did not really have grassroots support.

At the January work session, Mayor Mike Simpson told the assembled audience, “We have some bad doctors; we have some bad lawyers; we have some bad citizens.”

The builders and their allies in the audience broke out in applause. Dr. Becka went to the dais to respond. “You people are elected officials. You represent the citizens. You don’t represent special interests just because you’re trying to build a city.”

JoAnn Hamilton, a member of Take Back Your Rights and a 75-year-old Republican activist, remembers with bitterness appearing in front of the Frisco City Council. “[The council] was treating me like a little old lady who was out looking for her lost cat,” she recalled. Her fellow activists, she said were treated “like a bunch of terrorists who came to town just to ruin the builders.”

pponents of the ordinances are doing their best to scare the voters. The message is simple: The Charter Amendments Will Destroy Frisco. The cost of bonding will drive construction costs up, pushing builders to develop territory that’s even more unregulated. The City will have to raise taxes and cut services in response to the lagging revenue. Frisco’s progress will come to a grinding halt and the boomtown will bust.

To drive home this alarming message, the opposition quickly cobbled together an Astroturf political action committee named Citizens United for Frisco’s Future or CUFF, which, as of April 11, was flush with almost $100,000. According to Andrew Wheat of the Austin-based campaign watchdog group Texans for Public Justice, at least 95 percent of this total comes from the builder industry. A who’s who of area builders and developers are listed as CUFF contributors: Huntington Homes ($500), Sotherby Homes ($5,000), Darling Homes ($5,000), Pavlis Homes of Texas ($500), and Warren Clark Development ($10,000), among many others. One City Council member, Joy West, has even chipped in $25. With this money, CUFF is running professionally produced TV commercials in Frisco that show firefighters unable to put out fires, children unable to go to school, and elderly folks barred from the hospital, all because of the charter amendments. CUFF has also spent $3,500 with Ohio-based Fallon Research and Communications, a Republican polling firm with ties to the housing industry, and $13,000 with Cornerstone RSCS for the production of the aforementioned TV ad. Both these companies have been hired by builder-financed PACs in recent years to help defeat citizen initiatives around the country.

City officials deny that there is a systemic problem of shoddy home construction in Frisco. Councilmember Maher Maso told the Observer that he had not received a single e-mail from a citizen in recent memory complaining about his builder. But the Observer found one street, Arrowhead St. in the Starwood development, where at least six homes have been struck with foundation and other structural defects in the past few years. (Oddly, Mayor Simpson, who lives on Widgeon Way, several streets over, claims also to have heard very little about bad homes in his city.)

According to Matt Davis, the attorney for Steve Roberts Custom Homes, which built the six faulty homes, litigation involving the homeowners and the builder ended in confidential settlements. Under the terms of the agreement, the homeowners are barred from discussing their homes’ problems. Collin County Appraisal District records show that the six homes were bought back from their owners by builder Steve Roberts. One of the homes was repurchased by Roberts twice. Carmen Roberts of Steve Roberts Custom Homes claims that the problems involving these houses are an isolated blemish on the company’s 30 years in business and that no one is sure what went wrong.

The builders don’t like the “informed consent” amendment—educating homebuyers on their contract—any more than they like the bond proposition. “On the surface informed consent sounds reasonable,” says councilmember Maso. “But as a homeowner, I have a responsibility to find out what I’m signing.” Maso himself ended up in arbitration when he bought his home in Frisco. He admits, “There’s a problem [with builders],” but insists that, “Most of the problems are resolved.”

Hugh Preacher would disagree. He and his family moved into his new Huntington home in Frisco in September 2000. Prior to moving in he noticed that a door didn’t fit well. “I can still remember [the builder] telling me he thought it was due to new construction that needed to settle in.” Within weeks, however, he noticed that everything was a little… crooked. The curtains didn’t hang quite straight, the kitchen floor slanted, the doors didn’t shut. An inspector told Preacher that the foundation had been poured at an angle that no amount of framing or external correction could fix. Preacher hired a lawyer. But as it turned out, he had signed a contract without realizing it had an arbitration clause. Preacher said that despite his reams of documentation of the house’s flaws and the apparent negligence of the foreman, the arbitrator was only interested in the definition of “structural defect” contained in the home’s warranty. The arbitrator ruled in favor of Huntington and demanded $1,000 from Preacher for the proceedings.

“Arbitration was a waste of my time and my money,” says Preacher.

Preacher is stuck with his house, which has been devalued from $370,000 to $153,000. (The Texas Association of Builders estimates that 80 percent of the new home construction in Texas is built by only 20 percent of its builder members and that the contracts of its member builders almost all contain arbitration clauses.)

The builders’ criticisms of the propositions are not without merit. For example, it does seem likely that some small builders will not qualify for the bonds. The amounts—$250,000 and $2 million—are so high that bond companies will probably only issue them to large-sized companies with considerable assets. Whether the City can write ordinances to exempt small builders is open to debate. In addition, the city engineer’s role in determining the builder’s code compliance could be complicated when four parties—the City, the homeowner, the bonding company, and the builder—all have a stake in the dispute.

Proponents of the amendments argue the city has enough leeway to resolve these issues. “The City has a tremendous amount of discretion in implementing the charter amendments,” says Fred Lewis, one of the authors of the charter amendments and the president of the Austin-based Campaigns for People.

Lewis explains charter amendments work like amendments to the Constitution in that they only provide a framework; the specifics must be worked out through the implementation of ordinances and, usually, the intervention of the courts. The activists pushing the amendments have already signaled that they hope the City uses its discretion to meet some of the builders’ concerns as well as tease out some of the finer points.

What may, for the City, be a nasty local fight has statewide implications for the builders. “The [Residential Construction Commission] is the big trump card in all this,” said Paul Cauduro, the director of government relations for the Homebuilders Association of Greater Dallas and a frequent participant at Frisco city council meetings. “These are not City of Frisco issues. They should be decided on by the [commission].”

But residents like Robert Baldwin don’t trust the state agency.

“Why do I want to go to an agency that’s not going to help me? They’ve been given no power to do anything to the builder,” said Robert Baldwin, whose dream home on the outskirts of Frisco turned out to have major foundation problems. “Builders are the biggest lobby in the state and they’re getting away with bloody murder.”

The Beckas also tried to enlist state officials in a solution. In August, they visited with their state representative, Ken Paxton (R-McKinney), at his district office in McKinney. They briefed him on their concerns and asked him for help at the state level. The meeting was anti-climactic. “He appeared uninterested and yawned through most of [it],” wrote Carolyn Becka in an e-mail message.

Seven days later, Paxton received $10,000 from the single largest Republican political donor in Texas, real estate developer Bob Perry. This may have been a coincidence in timing, but it sure didn’t put the Beckas on equal footing with the construction industry. In November, Paxton helped arrange a meeting between Frisco city officials, the Beckas, and the construction commission. “The purpose of calling the meeting was to bring all the parties together to have a dialogue,” said Paxton’s District Director, Sheacy Thompson, who, herself, has donated to the Frisco builders’ PAC. According to all parties, little came of the meeting.

On February 22nd, Rep. Paxton filed House Bill 1237, a bill that would require builders that use contracts with arbitration clauses to include a notice that defines arbitration. However, the language required falls far short of the proposed Frisco amendments.

“The notice in this bill could easily lull Texas homeowners into thinking arbitration is no big deal, or that it is actually good for them,” says Ware Wendell of the Austin-based public advocacy group Texas Watch. “Paxton’s notice fails to mention how consumers forfeit their constitutional right to a trial by jury under binding arbitration. This is a glaring omission.” Paxton’s chief of staff, Paul Powell, insists the bill is in no way related to the “Informed Consent” amendment in Frisco.

Whatever happens in Frisco on May 7th, it’s probably not the last we’ll hear from disgruntled Texas homeowners. By trying to shunt all consumer complaints through a feckless state agency and strip consumers of their rights through mandatory arbitration, the building industry is inviting more local revolts whenever it reduces quality on homes to extract more profit.

Forrest Wilder is a freelance writer living in Austin.
Texas Observer - Frisco and the Becka's

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