AP NEWS

State Bill Aims To Regulate Construction Of New Homes

April 1, 2019

Republican and Democratic lawmakers introduced a sweeping piece of Pennsylvania legislation last week aimed at better regulating new home construction, a multibillion industry that for the last few years has faced a swelling number of claims from consumers who have encountered defects in their homes. The bill, introduced by State Rep. John Galloway, D-Bucks, with bipartisan support from four Southeastern Pennsylvania legislators, would establish improved protections for consumers buying new homes — and would better hold builders accountable when defects arise. Specifically, any home builder or limited liability corporation would be required to register with the Pennsylvania Attorney General’s Office every two years, comply with specific language in purchase contracts, and notify consumers soon after the company becomes aware of a construction defect. The legislation would also establish a fund from which consumers could collect money if their builder does not or cannot pay out the settlement awarded by a court. The pool, to be administered by the Attorney General’s Office, would be financed by a $50 fee that every home builder who enters into a contract with a buyer would pay each time a building permit is issued. Galloway said his legislation, dubbed the New Home Construction Consumer Protection Act, was prompted by a November 2018 Inquirer investigation that examined how shoddy new residential construction overseen by at least 27 builders had left hundreds of homes severely damaged by water intrusion. The investigation found that a combination of rushed production, undertrained workers, lower-quality materials, and lax oversight allowed water to seep into the walls of new homes, leaving homeowners with repair bills that can cost as much as hundreds of thousands of dollars. Yet by the time many homeowners discovered the problem, layer after layer was already damaged, sometimes bringing infestations of mold, termites, and phorid flies, the Inquirer investigation found. Other houses had become so water-ravaged that they were structurally unstable. When some homeowners approached builders with their discoveries, they were told that too much time had passed — and the problem was out of builders’ hands. “This bill was really something that came from the reporting (the Inquirer) had done, which showed that this was a much bigger problem than just stucco,” Galloway, said. “It was born out of the fact that consumers had very little recourse. Their hands were tied, and the contractor was holding all of the cards.” The bill was referred to the Committee on Consumer Affairs this week, where it now awaits a hearing. State Rep. Brad Roae, the committee’s Republican chair, was not available to comment on when a hearing may be scheduled. Galloway’s legislation —detailed across 30 pages —marks one of the most significant regulatory steps that have been taken since water intrusion in new construction has swelled to what some observers have called “epidemic” proportions within the last few years. Pennsylvania has often been described as the crisis’ epicenter, largely because of its wide variations in weather, the types of home-building materials used, and the massive building boom that the region experienced during the mid-2000s. Initially thought to be a crisis affecting only stucco homes, the Inquirer’s reporting disclosed that water intrusion has also damaged brick, vinyl siding, stone, and fiber cement homes — some of which were 10 or 20 years old, while others were brand new. Still, recent regulatory legislation has not been able to gain significant traction. In 2017, State Rep. Bernie O’Neill, a now-retired Bucks County Republican, introduced two bills that similarly targeted construction defects, one of which would have required builders to notify customers when problems are discovered. Neither advanced. “There are not adequate protections in the statute in Pennsylvania for individuals having new homes built,” said State Rep. Thomas Murt, R-Montgomery, a co-sponsor of the latest bill. “We have to address this in a meaningful way.” Daniel Durden, the CEO of the Pennsylvania Builders Association, a statewide trade organization whose political committee is a financial contributor to state lawmakers and committees, said that while the association “sympathizes with the [bill’s] intent ... we don’t believe it’s the correct way to do it.” Specifically, he said the association is opposed to how the Home Builder Guaranty Fund is structured, including the fees that a home builder must pay when obtaining a permit. He said the group is also opposed to a requirement that each home building company must pay a $25 fee, which cannot be billed more than once a year, if the fund’s balance falls below $1 million. “Any additional fee on permits is going to increase the cost of housing and make affordability that much more difficult at the entry level,” Durden said. Galloway’s legislation also covers a wide-range of defects. For example, one provision requires that home builders notify their customers within three months upon discovering a “defective building material, product, special order material, or building technique,” of any kind. Homes less than 30 years old would be eligible. The bill, which would not apply retroactively, does not address the Pennsylvania law that currently allows homeowners to bring claims against a builder within 12 years, and in some cases, 14 years after a home is built. Under Galloway’s bill, that time frame would remain.