Birth of the Texas Home Warranty
Saturday, 25 June 2005
Home Warranty or Builder Disclaimer?
Texas Lawmakers Undermine the American Dream
By Janet Ahmad, National President of HomeOwners for Better Building
After the last legislative session, homebuyers are not sure what to think of lawmakers ignoring them this time. In 2003 the Legislature created the Texas Residential Construction Commission (TRCC) that regulated new homebuyers.
Before the law passed, the homebuilding industry promoted TRCC as a bill to resolve disputes of homeowners with defective homes and avoid expensive litigation. They also promoted that all registered builders would have to build to International Residential Codes (IRC). Unfortunately, those promises mislead lawmakers and the public.
Controversy beset TRCC when Governor Perry appointed the VP of Perry Homes, John Krugh, to the commission. State and national news media, as well as irate consumer groups, pointed to nearly $8 million in political campaign contributions by Krughs boss Bob Perry, as the reason. Undaunted by criticism, Governor Perry appointed 8 more industry related commissioners.
For the past two years hundreds of complaining homeowners were advised by the Governors office, the Attorney General, and TRCC to consult legal council. IRC codes didnt go into effect, so hundreds of thousands of homes in the county areas were not built to even the lowest of minimum standards.
Homeowners discovered that not just any homeowner could file a complaint. Only 1 out of 4, who tried, could actually ask the agncy for assistance provided they were willing to pay up to $650 for the previlege.
Of the 63 homeowners completing the TRCC inspection process, 22 were contacted for comments about their TRCC experience. Only 2 were optimistic, but were headed to litigation. The other 20 were unhappy, angry and/or felt they were misled when TRCC officials advised them to get an attorney and litigate.
The list of home problems excluded from TRCCs jurisdiction is shocking. Among those excluded were new town homes and condominiums, homes that didnt comply with IRC standards, misapplication of funds, construction incomplete, builder abandonment of construction, real estate transactions, false and misleading advertisement, and outstanding judgments against builders.
TRCC seems to have no authority to help homeowners, but has plenty of authority to help builders. The agency set a new standard for good enough for the public, meaning substandard minimums. Behind these standards is a scandal involving Texas A&M and the Construction Science Department that got a $40,000 TRCC grant to draft a State Limited Warranty and Performance Standards. The co-principals heading the project are two attorneys who are not construction experts, but in fact Business Risk Management experts.
The standards fall short of protecting homebuyers, allowing foundations to crack and tilt significantly. Unlimited interior and exterior cracks throughout homes are now the acceptable standard.
Builders continue to control the commission despite concerns even from Senator Robert Duncan who crafted the law in 2003. When I saw there was such resistance to giving the agency more ability to deal with problem builders who cheat people, who build poor homes and give the industry a bad name, that kind of bothered me, complained Duncan.
Things didnt get any better this legislative session despite the deluge of TRCC condemnations. Only one homeowner-related bill got a hearing, and then died.
In the wee hours of the morning of April 19, Representative Jessica Farrars HB3404 was heard in committee. Critics of the agency argued that if TRCC is supposed to be good for homeowners it should be optional, free, and effectively enforced. Farrars bill would have required proof of builder experience, knowledge and financial responsibility and made filing a complaint with TRCC optional for homeowners.
What gives Texas builders an incentive to build a home that will last the life of the mortgage if the consumers are the ones being regulated? For now, Texas homebuyers are stuck with TRCC and the Limited Warranty that serves the industry as a builder disclaimer to shirk responsibility, offering the least buyer protection in the nation.