Suing a builder is not all that easy for the individual homeowner. Large builders have deep pockets, and they can easily survive prolonged litigation.

Agreements of sale developed by many residential builders in this area require individual homeowners to go through an arbitration process first in an effort to settle disputes. In addition, the 10-year new-home-warranty program offered by many builders automatically takes disputes first to a third-party independent arbiter.

The real problem for builders comes from class-action suits originating from condominium and homeowner associations. By sheer strength of numbers, and increasingly sympathetic juries if the cases go to trial, a lawsuit by a group of residents of a subdivision or condo complex could bring a builder to its knees.

There is a multiplier effect, too. The more developments a builder has, the greater the chance for lawsuits, and the bigger the potential for disaster.

Thomas E. Miller, who handles lawsuits for homeowner associations in six states, said he believed the builders by and large had brought this problem on themselves.

"It was the builders' idea to set up these associations in the first place to preserve, enhance and maintain property values," Miller said.

Another reason was to limit litigation over defects to homeowner association versus builder, rather than having hundreds of suits from individuals in each development going on at once, he said.

That idea has backfired, said Miller, who contended that he had recovered more than $450 million from builders for these associations.

"We step in only after the associations have failed to get the builder to act," he said. "I have approached these builders on the associations' behalf, and the response generally is that they aren't interested or that it isn't a problem to begin with."

In turn, the builders blame the association members for not maintaining their properties properly.

Miller acknowledged that there were maintenance issues and sometimes underlying defects, but said that "the choices the associations have are either to increase member assessments to fix the problem or try to approach the builder to do it."

Mick Pattinson, who has faced Miller in court a number of times, said Miller and other lawyers encouraged homeowner groups to sue, even if the associations had not experienced problems.

Pattinson is president of Barratt American, one of California's largest home builders, and of the state's builders association. He was instrumental in getting the legislature to enact a law in 2002 that provides alternatives to litigation.

Before the so-called Fix It law took effect on Jan. 1, 2003, California builders were required to ensure that new houses remain in perfect condition for 10 years. Otherwise, builders were liable for any repair work.

"Things were just getting out of hand," Pattinson said. "After we'd been notified of these problems, we'd go in and make all the repairs, and we'd still be sued -- sometimes twice.

"We'd exhaust our insurance, and then have to pay the cost of the litigation out of our pockets, which resulted in delays and other problems at other communities."

One of Barratt's condo developments, Charlemont, cost $15 million to build in 1988-89, with each unit costing $69,900. The litigants wanted $18 million to fix it, Pattinson said.

"The insurers immediately paid out $9 million, exhausting the policies to avoid paying defense costs in future cases," he said.

Litigation has reduced builder profit, driven many builders out of business, and intensified consolidation in the building industry, Pattinson said.

He added that his company had not made an insurance claim in six years, owing to employing third-party private inspectors.

"However, it takes 50 percent longer to build homes today, turning 16 to 18 weeks into six months," Pattinson said. "We won't build houses with flat roofs, nor balconies that sit over living areas.

"This, of course, is part of the natural evolution any product goes through," he said.

Many builders have reinforced their customer-service departments in response to litigation, Pattinson said.

California is now one of eight states with Fix It legislation on the books, and 14 more are considering such legislation to keep construction defects out of court, Miller said.

He doesn't like it.

"Imagine having a builder who made the mistake in the first place coming back to fix it?" Miller asked.

But Pattinson argued that "builders have the same obligations as retailers under the guidance of codes and inspections to make sure that our products meet quality standards."

Published: January 15, 2004

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Al Heavens writes about real estate and home repair and improvement. He is the author of What No One Ever Tells You About Renovating Your Home: Real-Life Advice For Hassle-free, Cost-Effective Remodeling.