Construction litigation comes to Yuma

An out-of-town law firm has been soliciting Yuma homeowners regarding alleged construction defects in their neighborhoods and inviting them to join an investigation that could result in a financial recovery of several thousand dollars.

Sound like Christmas?

Maybe so, but in the end it's not free money for the homeowner. And it can have repercussions that impact the entire community, warns Ken Rosevear, executive director of the Yuma County Chamber of Commerce, who saw a similar situation take place in Imperial County while he was a businessman there several years ago.

“I witnessed it firsthand. A law firm comes in, recruits clients, files lawsuits claiming construction defects, gets a big settlement, takes their cut and leaves town.”

But it may backfire on homeowners who participate, said Rosevear. That's because after they pay their attorney one-third of any recovery plus his costs, expert fees and expenses, the homeowner doesn't have enough money to make the repairs. That becomes an issue when the homeowner tries to sell the house and is required to disclose that it has unrepaired “defects.”

The construction litigation trend by a handful of law firms began in the 1980s in Southern California, said former Yuma attorney Bill Nebeker, who now heads up the Phoenix office for Koeller, Nebeker, Carlson and Haluck. The law firm specializes in defending home builders, contractors and developers against such suits.

The construction “defect” claims have since moved on to Las Vegas and are now active in Arizona. They tend to target the major national home builders, particularly of homes that have been occupied about five years when the house begins to settle and show some need for maintenance, Nebeker said.

And now at least one law firm is targeting some Yuma subdivisions.

Shinnick & Ryan LLP began contacting homeowners in Yuma late last year, inviting them to meetings to learn about construction defects the firm is investigating in their neighborhoods and their rights against the developer.

Identical letters sent to homeowners in various subdivisions state: “... there's a good chance you've discovered, or will discover, that your home suffers from one or more construction defects. These defects can range from peeling paint and fence problems to leaking roofs, cracked stucco, mold issues and window problems, to name a few.

“Left alone, these defects, large and small, can lead to major damage to your home and loss of value. The upcoming meeting will give you a unique opportunity to learn more about construction defect issues, the scope of the current investigation, and what your rights are against your builder.”

The letter also advises the homeowner that there are no out-of-pocket costs to participate and that the attorney's fees are on a contingency bases.

The website for Shinnick & Ryan describes the firm's mission “is to provide the expertise, commitment and professionalism to effectively resolve complex construction and design deficiency claims through mediation, litigation or trial.”

A call to the firm for comment was not returned.

Nebeker said the usual mode of operation is to seek $6,000 to $8,000 per homeowner so the home builder will opt to pay the settlement rather than fight a protracted lawsuit, he said. “(The law firms) look at how much money they can collect ... it's not really based on what's wrong with the house.”

He continued: “At the end of the day, there will be a report that X, Y or Z is wrong with the house that will cost $30,000 to fix but (the homeowner) settled for $8,000 and got $2,000 of that. Then they will need to disclose the problems when they go to sell the house.”

Lose the case, and the homeowner can be held liable for payment of the builder's costs and legal fees, he noted.

If several homeowners in a subdivision sign up, that can adversely impact the property values in the entire neighborhood, Nebeker said. And it can add a few thousand dollars to new home prices in a community to cover builders' potential litigation costs.

“For builders, it's a cost of doing business these days. If they build it, they will be sued.”

Nebeker's advice to homeowners is to make sure there is a real problem with their house. “If something legitimately is wrong, they need to have someone come look at it. It's better to have a contractor than an attorney.”

John Weil, attorney for Hall Construction, one of the home builders being targeted, said the company is trying to educate homeowners about the issues. And home builder Brian Hall has made a commitment to bring in experienced inspectors from Phoenix for a third-party opinion if people think they have a problem with their home, said Weil.

“We'll tell them exactly what the condition is. We'll fix the problem if it is a legitimate problem or tell them if it's a maintenance issue.”

Weil also noted that homes are built to city codes and regularly inspected during construction and before occupancy.

Hall Construction and most other home builders have warranties to cover their work, such as a 2-plus-10 in which most things in the house are covered for the first two years and structural issues for 10 years, Weil said. As another recourse, homeowners with unresolved issues can file a complaint with the Arizona Registrar of Contractors

“We know the standards and what's required,” he said. “If we don't, we could lose our license.”