Homeowners seeking vote on builders rules

Some homeowners are calling for a ballot measure that would require builders to post surety bonds on every new home. The Schertz proposal would require home builders to post a $25,000 surety bond to cover home repairs if a builder did not address the problems. Homeowners hope to gather 925 signatures, enough to get the proposal on the May ballot.They estimate that of 210 homes in Phases II and III of the Fairhaven neighborhood, 70 have reported problems. More than 40 residents have asked the builder to buy back their homes. Baldwin said the city is willing to talk about changing ordinances. And he said he's sympathetic to the idea of a home lemon law. That's something the advocacy group Homeowners for Better Building, which is advising some of the Fairhaven owners, has been fighting for in Austin.  Related Features: Pulte Homes Foundation

Homeowners seeking vote on builders rules
By Jennifer Hiller
Members of the building and insurance industry said the measure could make homes more costly, push home construction outside of the Schertz city limits or knock local home builders out of the market in the popular bedroom community.

Getting a surety bond is more common on commercial construction projects — such as a hotel or a project done for a city government — and the approval process is akin to taking out a bank loan, requiring detailed financial information and a list of works in progress so the bonding company can evaluate cash flow.

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The Schertz proposal would require home builders to post a $25,000 surety bond to cover home repairs if a builder did not address the problems. Homeowners hope to gather 925 signatures, enough to get the proposal on the May ballot.

A second charter amendment would require builders to disclose warranties and binding arbitration agreements to a homebuyer before a contract is signed.

Binding arbitration agreements are common in home building and keep homeowner-builder disputes out of the courts and away from the public.

Typically, warranties and binding arbitration agreements are provided at closing.

“All of a sudden, you're at closing. You have no idea what binding arbitration is. You're ready to move into your house tomorrow,” Touve said. “You would have to agree to that right up front instead.”

But it is the surety bonds proposal that has caught the industry's attention.

Jim Gavin, a director at the nonprofit Independent Insurance Agents of Texas, said surety bonds are like a line of credit.

“Most of the time, surety bonds aren't a guarantee of workmanship. They're a guarantee to complete,” Gavin said. “I'm not sure the bond will fix what they're trying to fix.”

He also said it could be difficult for small builders to qualify for a surety bond.

Anderson, a former president of the Greater San Antonio Builders Association, has gotten surety bonds when doing demolition work for the city of San Antonio.

“To get any kind of bond is like a loan application. It's an extensive process,” he said.

Ned Muñoz, vice president of regulatory affairs and general counsel for the Texas Association of Builders, said he's aware of one Texas city that requires home builders to post a surety bond in case sidewalk repair is needed.

“I think that could really raise the price of a home and even cause homes to not be built in certain circumstances,” Muñoz said.

In Schertz, some Fairhaven homeowners are in a standoff with builder Pulte Homes over issues such as sticking doors and foundation cracks through the center of homes.

They estimate that of 210 homes in Phases II and III of the Fairhaven neighborhood, 70 have reported problems. More than 40 residents have asked the builder to buy back their homes.

Many residents have been attending weekly City Council meetings, speaking to bring attention to their plight.

But Mayor Hal Baldwin thinks the homeowners should be negotiating with Pulte instead.

“I'm convinced that Pulte is not going to buy all of their homes. What is going to happen to those folks who do not get their homes back?” he asked. “They need to be negotiating with Pulte to get their homes up to some sort of livable standard.”

Baldwin said the city is willing to talk about changing ordinances. And he said he's sympathetic to the idea of a home lemon law. That's something the advocacy group Homeowners for Better Building, which is advising some of the Fairhaven owners, has been fighting for in Austin.

“Homeowners do need to have some legislative help,” Baldwin said. “You can't fight that at the city level.”

Bruce Touve, Faye Touve's husband and a retired military officer, filed last week to run for the Place 1 City Council position. He said an ordinance change would be faster, but also could be easily undone. “What we're trying to provide is something permanent,” he said.

Pulte officials last week started holding “small neighborhood meetings” with groups of homeowners.

Valerie Dolenga, a spokeswoman for Pulte, said the builder hopes to start work on many homes in the next 30 days once it gets a list of recommended fixes from its engineers and visits with owners.

“We're still finalizing repair protocols,” Dolenga said. “Each home is so varied with their issues.”

Pulte is the parent company of Centex Homes, which in early 2010 saw a rock-clad retaining wall fail dramatically between the Rivermist and Hills of Rivermist neighborhoods on the Northwest Side. The builder eventually repurchased 22 homes.