Nearly four years after the San Antonio Housing Authority filed a lawsuit against the companies that built the failed Mirasol Homes project, the agency has joined hands with homeowners and heads into settlement negotiations today.

Public housing officials hope to resolve the costly and bitter legal dispute over their claims of shoddy work on 247 homes built by local developer Magi Realty and national home-building giant KB Home.

SAHA President and CEO Lourdes Castro Ramirez said housing officials are “very optimistic” that the two sides will reach an agreement. A settlement would end nearly a decade of troubles with the West Side neighborhood where one of every three homes sits vacant.

“While this has been going on, the community has been on hold,” Ramirez said. “We are very eager to get a just settlement that will get that back on track.”

In recent months, the housing authority has gained a string of victories that it lacked the last time it sat at the negotiation table, in October 2009. Housing officials said they have since uncovered widespread construction flaws in the homes, as well as evidence that KB Home and Magi scrapped the custom-built designs ordered by SAHA in favor of cheaper plans for tract-built houses.

But the housing authority might have gained its biggest edge last year, when it joined 66 homeowners who filed separate lawsuits in May 2009.

The homeowners, first-time buyers who could not afford the houses without federal assistance, lend a sympathetic human face to a legal case that deals largely with the technical intricacies of construction. In exchange, SAHA has laid open its considerable collection of documents and depositions to the homeowners, who lacked financing for so much research.

Using funds from the U.S. Housing and Urban Development Department, the housing authority paid about $20 million to Magi and KB Home for the Mirasol neighborhood, which was completed in 2001. Complaints from residents about loose cabinets, shaky fixtures and broken doors soon began. Since then, SAHA has spent more than $2 million on outside legal fees and about $7 million on repairs, including the replacement of central air-conditioning units in all the homes.

The attorney for the homeowners, Frank Herrera, said the plaintiffs are asking for more than $75 million for the development team to make good on the deal. Part of that sum also covers punitive damages, he said.

“We wanted to make KB an example of what not to do with the working poor,” Herrera said.

KB Home spokeswoman Cathy Teague said that because of the litigation the company “cannot provide comment beyond the fact that we are continuing to work to reach a resolution.”

Officials at Magi Realty and project manager Heery International did not respond to requests for comments.

The turning point in SAHA's legal case came a little more than a year ago, when the agency tore down two of the Mirasol houses to the studs. What inspectors found was a raft of basic structural flaws in the foundations, frames, roofs and water barriers inside the walls, SAHA attorney Tim Alcott said.

Most of the building flaws were problematic because they left the homes vulnerable to water damage, he said.

More recently, SAHA attorneys took statements from members of the development team who said KB Home and Magi disregarded the housing authority's specifications for custom-built homes and higher-quality materials.

The project's original architect, Christopher Kimm, with WestEast Design Group, told attorneys in November that he quit the job after an argument with Magi Realty CEO Rick Rodriguez, who told him that he intended to switch the building plans and use cheaper materials, according to a transcript of the deposition. It was a change that left SAHA out of the loop, Kimm said.

“I thought that — the fact that behind SAHA's back — that he's planning to change the quality was really dishonest,” Kimm said in the deposition. “So I told him that. And he said who is being dishonest? This is just business.”

Also sitting at the negotiation table this week will be project manager Heery International, which received $1.1 million from SAHA to ensure that builders did good work at Mirasol and other sites.

The housing authority contends that the company failed as a watchdog. Alcott, the SAHA attorney, said Heery inspectors missed major problems, including the use of untreated wood and the wrong kind of nails, along with frames that were improperly anchored to their foundations.

In cases where Heery did flag problems and told KB workers to fix them, Alcott said, Heery inspectors never followed up. SAHA traced Heery's repair orders back to the original errors and found that the problems remained unfixed. Nor did Heery inspectors check to see if those flaws had been repeated in other homes, Alcott said.

“There was no follow-up,” he said.

Ideally, homeowners would like to raze the houses and start building anew or recoup enough money to pay off their mortgage loans and buy new homes. SAHA, which is barred by HUD from reselling the homes because of the defects, wants to rebuild the neighborhood, but any plans will hinge on the settlement amount.

“We want them to do what's right,” SAHA's Ramirez said. “Just do what's right, settle and allow us to restore and rebuild that community.”

http://www.mysanantonio.com/news/local_news/article/Suit-on-faulty-houses-may-be-resolved-1045461.php

Read more: http://www.mysanantonio.com/default/article/Suit-on-faulty-houses-may-be-resolved-1045461.php#ixzz1G0zDMuJm