Md. law likely to boost home warranties Builders all but forced to offer extended policies

December 23, 1990|By Dan Reese

Most buyers of new homes in the state will enjoy extended warranty protection next year, under a new law expected to make such guarantees standard in Maryland.

The New Home Warranty Security Plan disclosure law, which requires builders to notify buyers whether their homes are covered by extended warranties against faulty workmanship or defects, should also boost quality standards in the industry, says a Baltimore real estate attorney.

"The bill should spark a healthy competition to provide quality construction in new homes," says Richard L. Miller of Cable, McDaniel, Bowie & Bond.

Although the law stops short of mandating extended warranties for new homes, prospective buyers can terminate their sales contracts if the plans are not offered, or if builders fail to disclose that homes are not covered.

The upshot, say those in the industry, is that builders will be all but forced to offer the coverage.

"Although builders are not required to participate in a security plan, the new law may prompt builders to become participants to avoid cancellation of contracts with buyers," Mr. Miller says.

Dwight Griffith, vice president of Griffith-Brilhart Builders Inc. in Fallston, takes a similar view.

"Any builder that does not offer an approved warranty program will be forced to by the demand of the consumer," says Mr. Griffith, who stepped down as president of the Maryland Home Owners Warranty Council last month. "We expect builders to come flocking to the program."

The HOW Council is the regional representative of the National Home Owners Warranty Corp., a builder-owned mutual company that warrants its members' homes.

Builders were briefed on the legislation earlier this month at a HOW Council seminar. Michael Beccio, new HOW Council president, predicted after the meeting that more than half the builders who don't now make extended warranties available will do so next year "because of the marketing aspect."

"Based on the turnout for the seminar we had, probably 60 to 70 percent of the builders who don't currently offer a warranty will probably offer one," says Mr. Beccio, president of Owings Mills-based Beccio Homes Inc.

For builders who choose to offer new-home warranty security plans, minimum coverage in the plans must include at least one year free from defects in materials and workmanship; two years free from defects in electrical, plumbing, heating, cooling and ventilation systems; and five years free from structural defects.The coverage expands on implied guarantees already provided in the Maryland code.

Before a sales contract is signed, a buyer must be told, in writing, whether the home is registered with a warranty plan. If it is not, the buyer can cancel the contract within five working days of signing it and receive a refund of all money paid to the builder.

If a contract does not include a written acknowledgment of the builder's non-participation, the buyer can terminate the contract.

Builders who choose to participate do not have to offer the warranties on all their homes; they may offer the plans as an option for buyers to purchase.

Warranty plans must be approved by the state Department of Licensing and Regulation, which will review the companies providing the coverage.

Mr. Griffith, the previous HOW president, says that fellow builders already are scrambling in response to the law, and he predicts its effect on the industry will be immediate.

The law takes effect Jan. 1, although the Department of Licensing and Regulation will continue to fine-tune its regulations during the first three months of the year.

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