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Dream homes not so sweet



Published March 18, 2007

TEXAS CITY — In August, less than a year after moving into their new, $157,000 house, Demetrius and Chalon Mayes pounded a sign into the front lawn: “Ask me why not to buy a Legacy Home.”

Excitement about being homeowners in the Rain Song subdivision, a neighborhood of freshly planted lawns and young families on FM 2004 just east of Interstate 45, had faded.

The sign was a very public expression of frustration about a house state regulators say does not meet windstorm codes, a requirement for insurance and mortgages in hurricane-prone counties.

Houses built 20 miles inland of the Intracoastal Waterway after 2003 must be able to withstand three-second wind gusts up to 120 mph. Requirements are tougher for houses built seaward.

But state regulators say the roof on the Mayes’ Texas City home doesn’t meet those requirements.

When someone — they don’t know who — removed the sign critical of Legacy from the couple’s lawn, Refugio and Sherrie Alvarez lent the couple theirs.

The Alvarezes last year bought a $163,000 Legacy home, also in the Rain Song subdivision. The couple and their six children also are living under a roof that state regulators say doesn’t meet windstorm codes.

Just why an engineering firm submitted inspection reports to the Texas Department of Insurance certifying otherwise is the subject of a legal dispute.

Last week, the Mayes and Alvarez families filed a lawsuit in Galveston County Court at Law No. 3 against Meritage Homes Corp., which does business in Texas under the name Legacy Homes.

Along with Meritage Homes, Tomball-based DPIS Engineering, a firm Meritage hired to provide engineering evaluations and inspections, is a defendant in the lawsuit as are several individuals working at both companies.

Officials with DPIS Engineering did not respond to a request for interviews.

But Meritage said it has attempted to work with the families to resolve the dispute and repair the roofs on both houses.

‘Ready, Willing And Able’

“We regret that the Alvarez and Mayes families have been inconvenienced and would like very much the opportunity to complete the repairs that have been recommended and approved by the Texas Department of Insurance,” said Jane Hays, a spokeswoman for Meritage Homes, in a written statement. “As we have already communicated to the Alvarez and Mayes families, we are ready, willing and able to do so, as soon as they will allow.”

The Texas Department of Insurance is the state agency that establishes windstorm codes builders must follow.

Typically, a third-party engineer designs a windstorm compliance plan for each house, Hays said. That same engineering firm then inspects the house during construction to ensure builders are following the design.

When the home is built, the engineering firm “certifies” it and sends notice to the insurance department. Without such certification, homes can’t obtain windstorm insurance through the state-created Texas Windstorm Insurance Association.

Overruled?

According to allegations in the lawsuit, DPIS Engineering informed Meritage Homes that the Alvarez and Mayes houses did not meet minimum code requirements and failed inspections.

Among other structural deficiencies and issues, according to claims asserted in the lawsuit, the inspector called for the roofs to be replaced and rebuilt.

An on-site construction manager for Meritage Homes ordered building materials shipped to the work sites to correct deficiencies, according to the lawsuit.

But Meritage Homes management overruled the decision, the lawsuit asserts.

DPIS submitted documents to the state that claimed the homes passed code and inspection, though they hadn’t, according to the lawsuit. Those documents allowed Meritage to sell the homes, the lawsuit argues.

“Many of the homes would need to be rebuilt,” alleges the lawsuit. “But, in order to sell and close on the homes, Meritage Homes chose to conspire with DPIS Engineering to create falsified inspection reports and inaccurate applications in order to obtain the necessary documentation so it could proceed with closing,” according to claims in the lawsuit.

Among other things, the lawsuit asserts that Meritage, DPIS and other defendants created and passed off phony inspection reports to mislead the homebuyers, state agencies, insurers and mortgage lenders.

Flapping In The Wind

Both families, who bought their houses in January 2006, began noticing problems just months after moving in, they say. Demetrius Mayes and his neighbors had noticed the shingles on his roof flapping in the wind on more than one occasion, he said.

In early August, when the Mayeses returned from their honeymoon, they noticed wet spots on the wall in the master bedroom. The couple called the builder, who informed them the roof was leaking.

“I said, ‘Why the heck is the roof leaking?’ because I hadn’t had it that long,” Demetrius Mayes said.

In August, an inspector with the Texas Department of Insurance, at the request of the Alvarez and Mayes families, inspected the homes.

The roofs did not pass inspection, said Alexis Dick, deputy commissioner of the insurance department’s inspections division.

Meritage does not dispute that the homes need repairs.

Meritage Makes Offer

Meritage said that in the case of the two homes, DPIS Engineering, which is licensed by the Texas Board of Professional Engineers, certified the Mayes and Alvarez homes based on overall design, rather than construction.

After the state’s inspection in August, DPIS made specific recommendations to the builder for roof repairs, Hays said.

In September, the Texas Department of Insurance agreed that the recommendations would satisfy its requirements for windstorm compliance.

On Sept. 25, Meritage offered to make all repairs to the homes recommended by DPIS and approved by the state, Hays said. Those repairs consisted of removing the shingles and roofing felt, refastening the roof decking, then replacing the felt and shingles.

“This is a common procedure; happens frequently on older homes and could be completed in about two days,” Hays said.

But the Alvarez and Mayes families, citing other structural issues, say they want Meritage to buy their homes from them. They also are seeking monetary damages for what they say is “loss of enjoyment of life,” according to the lawsuit.

Rules For Suing

Suing homebuilders in Texas isn’t easy.

In 2003, lawmakers passed House Bill 730, which created the Texas Residential Construction Commission. Before homeowners can file lawsuits against builders, they must seek a final report from the commission, which sends out a third-party inspector to examine claimed construction defects.

Consumer advocates have argued that the legislation restricted homeowners’ rights to sue builders in court and created a lengthy and bureaucratic process.

But Patrick Fortner, a spokesman for the commission, said it saves homeowners and builders from each hiring their own inspectors in a dispute. Homeowners can still sue their builder, Fortner said. The commission’s report holds legal presumption or weight. Because the commission’s report is available to the judge, arbitrator or mediator reviewing defect allegations, the costs required for expert witness fees are reduced, Fortner said.

Beyond Defects

Christopher Dupuy, a League City attorney representing the Alvarez and Mayes families, said he was able to take the issue directly to court because it goes beyond product or construction defects. The lawsuit asserts fraud.

“This includes Meritage Homes’ refusal to take responsibility for its role in the creation and filing of falsified inspection reports or applications with the state,” Dupuy said Thursday in a written statement. “The homebuyers, in this case, who were tricked into buying homes that were not windstorm compliant, have pleaded with Meritage Homes for a fair resolution. Their pleas fell on deaf corporate ears.”

Meritage has acted to resolve the issues, Hays said.

“Additionally, Meritage offered to compensate to cover hotel expenses, dining and other associated expenses during the repair,” Hays said. “As of this date, neither homeowner has accepted our offer.”

‘They Are Willing’

Insurance department officials say Meritage and DPIS are not facing enforcement action. They declined to specifically comment about the lawsuit.

“They are willing to take corrective actions to put the homes in compliance,” Dick said. “We are working with them. We want to make sure the home is made whole and brought into compliance so they can maintain windstorm insurance.”

Because the homes don’t meet windstorm requirements, the Alvarez and Mayes families face 10 percent surcharges on their policies through the Texas Windstorm Insurance Association, state officials say.

‘That Was Before’

But the association so far hasn’t assessed surcharges.

Refugio and Sherrie Alvarez say they thought their home and neighborhood was perfect for their children to ride bikes and play. The Alvarezes were the first to buy a Legacy home in the Rain Song subdivision.

On Friday, Meritage Homes still was using a video testimonial from Sherrie Alvarez in its online promotions of Legacy homes and the Rain Song subdivision. She praised the company for its floor plans that accommodate large families. Meritage recorded the testimonial when the couple first bought the house.

“That was before everything happened,” she said.