Panel studies builder license Home warranties will also be subject of review in House

'We need to do more'

Subcommittee leader wants to strengthen consumer safeguards

November 17, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Prompted by consumer complaints against homebuilders, members of the House Economic Matters Committee hope to strengthen home warranty protections during next year's legislative session, the head of a subcommittee on home construction said last week.

The subcommittee led by Del. A. Wade Kach, a Cockeysville Republican, also is reviewing whether builders, like home improvement contractors, should be licensed in Maryland. Currently, no state agency regulates homebuilders, who are not licensed or bonded.

Kach, an advocate of tighter controls on the building industry since the mid-1980s, said changes in the law since 1990 -- one penalizing custom builders who misuse buyers' funds, another requiring builder disclosure on the availability of warranties -- have helped, to a degree.

"But when I hear from the attorney general and still hear from people around the state who call me with various problems, obviously we need to do something more," Kach said. "I would like to see us run the unscrupulous homebuilder out of Maryland. It's such a small number of them, and they give the industry such a black eye."

A study forwarded to the lawmakers in mid-September by Attorney General J. Joseph Curran Jr. says consumers face risks when buying a new home or building a custom home because of limited information about builders' track records, inadequate site access or inspections to prevent construction defects, and limited consumer protection after defects are discovered.

"When consumers encounter a problem with a new or custom home, they are often faced with the significant expense of hiring a lawyer to try to obtain redress or expending considerable resources to have defects corrected," according to the report by the Consumer Council of Maryland.

The council, an advisory body to the Consumer Protection Division of the attorney general's office, spent a year and a half gathering information from lawyers, bankers, builders, county officials and executives of homeowner warranty companies.

Information scarce

It found that information about builders is often difficult to obtain, without a single source on background or complaints available. Besides, the report said, builders often change company names from project to project.

The subcommittee, which has met twice with builders, warranty companies and representatives of the attorney general and state Department of Labor, Licensing and Regulation, has decided to focus on warranties, Kach said.

Since 1990, builders in Maryland have been required to disclose in writing whether they participate in a new-home warranty plan. Buyers must be given the choice of coverage or waiving coverage. All plans must offer at least a one-year warranty

against defects in materials and workmanship, a two-year warranty against defects in electrical, plumbing, heating, cooling and ventilation systems, and a five-year warranty on structural defects.

But not everything is covered, Kach said.

"Under current law, if you buy a new home and the brick facade separates from the home, that's not covered in a warranty," he Kach said. "There needs to be more protection."

The subcommittee also is looking into improving mediation between builders and buyers and, possibly, establishing some form of registration, said Simon G. Powell, a legislative analyst for the General Assembly.

Misunderstanding

Homebuilders -- opposed to both registration and licensing -- say problems often stem from buyers' misunderstanding the terms of their warranties.

Often, "the consumer has false expectations of what the warranty is," said Gary B. Blucher, president of the Maryland Builders Association. "The whole issue boils down to the house-buying customer's perception of whether he was treated fairly if he has to go through a dispute with a builder," especially if a dispute is decided in the builder's favor.

The builders association is proposing that new-home sales contracts include a mediation clause to resolve disputes.

The attorney general's office is recommending licensing. Such systems work best in states that have recovery funds, which can give homeowners relief in cases where construction defects are found and builders have gone out of business, said Lucy A. Weisz, assistant attorney general.

The office's Consumer Protection Division gets about 300 new-home construction complaints each year, about three-quarters of which relate to construction defects.

A consumer's struggle

The Department of Labor, Licensing and Regulation favors continuing to require mediation in warranty plans, but giving the homeowner the option of going to binding arbitration in lieu of court. The department would maintain a list of approved mediators and arbitrators.

One complaint to the Consumer Protection Division came from homebuyer Joyce Glass, who has struggled to get defects in her new Columbia home fixed since taking occupancy in April 1995.

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