HUD's Broken System
A Review of the
Residential Warranty Corporation
10 Year Written Warranty for New Homes
HomeOwners for Better Building
IF YOU SEE ANY ERRORS IN MY
INTERPRETATION OF THIS WARRANTY PLEASE CONTACT ME IMMEDIATELY SO I MAY
In November of 2000 the attorneys representing Centex Homes in Centex
Homes v. Buecher in the Texas Supreme Court, referred to the quality
of their "Expressed Warranty" of the Residential Warranty Corporation,
provided by Centex Homes. They argued that an implied warranty of habitability
wasn't required since the owners were provided a detailed, quality, expressed
The 10 year warranty has always been a selling point for the builders.
The "Ten Year " has a confidence building ring to it. but gives the homeowner
a false sense of security. Homeowners expect a bumper to bumper warranty
much like cars. Many car warranties cover at the very least 4 years 60,000
miles and with the quality of cars of today, an extended warranty is rarely
needed. Home warranties on the over hand have a 1-2-10 year warranty. The
10 year applies ONLY to Major Structural Defects (MSD). Most everything
else, roof shingles, windows, siding, carpet, tile, bricks, etc. have only
1 or 2 years warranty. The owners are given a false
sense of security when in fact the warranties are severely limited.
HOBB has obtained a copy of the RWC, the Residential Warranty Corporation,
and provides this review of the more interesting points of this warranty.
All unresolved warranty issues must be resolved with mandatory
and binding arbitration.
You must pay the arbitration fee before the matter is submitted to the
The decision of the arbitrator shall be final and binding upon all parties
Simply put, you cannot file a lawsuit
Conditions of Warranty Performance
If your builder defaults in its warranty obligations, the administrator
will process the request for warranty performance provide you pay a warranty
service fee of $250 for each request Years 1 & 2
In years 3-10 you must pay the administrator a warranty service fee of
$500 for each request
It costs money to get warranty service when your builder defaults
This warranty does not cover consequential or
incidental damages. Example: If your roof was installed incorrectly,
and while you were out on vacation a 3 day rain storm drenched the interior
of the home, only the repairs to the roof will be covered. Any damage to
belongings, furniture, carpet, your family tree photo album, etc would
not be covered. The roof is covered for only 1 year.
Major Structural Defects (MSD).
MSD is the ONLY thing warranted in the 10 year
warranty after the first 2 year period. All of the following conditions
must be met to constitute a major structural defect:
Actual physical damage
Causing the failure of the specific major structural components and
It materially affects the physical safety of the occupants of the home.
These restrictions account for why many homeowners with cracks running
the length of their homes in their foundations are surprised the warranty
does not cover them. Walls, as a result of these cracks, are not covered.
Reoccurring cracks in walls are not covered. Doors sticking, not covered.
None of these fit the definition of MSD.
What is NOT covered in the 10 year warranty after year 2:
non load bearing walls, walls not supporting the roof or structure of the
tile, tile cracking from the foundation moving
brick, cracking from foundation movement
stucco, cracking, leaks
siding, coming apart, or failing as in Masonite siding
paint and stains
If your builder fails to complete any part of
the Home that is reasonably foreseeable to cause structural damage
to the home, then it is your responsibility to complete such parts of the
home to avoid the structural damage. If you fail to complete the work,
then any resulting structural damage is not covered under this limited
Warranty Exclusions. (There are 37 specific exclusions including)
Loss or damage
Caused by soil movement (Houston gumbo)
Water which backs up from sewers or drains
Water below the surface of the ground
Loss o damage resulting from, or made worse by:
Intrusion of water into crawl spaces
the presence of hazardous or toxic materials resulting
in uninhabitability or health risk within the home.
Your failure to minimize or prevent such loss or damage in a timely manner
Quality and potability of water
Failure of your builder to complete construction
of the home
Any consequential damages
Personal property damage or bodily injury
Violation of applicable building codes
The removal and/or replacement of items Ísuch as wall paper, where removal
and replacement are required to execute a repair.
Sound proofing between rooms or floors
There are limitations in the warranty such as:
No where in this warranty or in the Residential Construction Liability
Act does it mandate the builder to determine the CAUSE of the problem.
The warranty provides many "acceptable" methods to providing a solution
to the symptoms, but without being a rocket scientist, how can you provide
a solution to a problem, if you do not know what the problem is? A common
example is reoccurring cracks in walls. The builder will often suggest
an "acceptable" method of repair by patching the cracks, without determining
why the cracks appeared in the first place.
An out of square wall (it is not a defect)
Wood twisting, warping or splitting is normal due to exposure to the elements
Wood door panel shrinks exposing unfinished surfaces
Cracks in stucco exceeding 1/8 inch will be patched 1 year warranty only
Hairline cracks are common
Paint or peels or deteriorates. 1 year warranty only
Condensation or clouding of panes in windows. 1 year warranty only
Excessive drafts and leaks. It may be necessary for
the owner to have storm windows installed
Cracks in ceramic grout joints. Builder will repair one time only. 1 year
Carpets fades, stains or discolors. Builder will fix prior to occupancy.
Premature wearing of carpet. No action required.
The expressed warranties are chock full of exclusions and loopholes
giving the illusion of a bumper to bumper warranty for the home, much like
a car. The "Ten Year" warranty is deceiving and requires someone with more
intelligence than a rocket scientist to understand.