Frequently Asked Questions:
Will a lawsuit harm my home’s value or my neighborhood?
An unnecessary lawsuit concerning the construction of your home could lower the value of your home and the ability to sell your home in the future. "When a subdivision is in litigation against its builder, the property value for the entire neighborhood drops significantly. In fact, the adverse impact on property values can even affect homeowners who decline to participate in the litigation."
(The Business Journal / August 30, 1999)
When I sell my house, will these litigated "defects" require disclosure to potential buyers?
Under California law you must provide full disclosure when selling your home, which includes everything regarding perceived problems with the construction of your home and any major repairs and lawsuits relating to your home. The seller of the home must provide any potential buyers with a transfer disclosure statement – listing all defects to the property known to the seller. The statement must be presented to the potential buyer prior to entering into any sales contract – reports usually extend the normal marketing time for the property and discount the potential selling price on the property 10%-20% depending on how extensive the defect list.
Will litigation effect my ability to buy another house or get another mortgage loan? What about refinancing my home or obtaining a second mortgage/home equity loan?
Due to California’s full disclosure law your lender will be put on notice and may require proceeds from any lawsuit be applied to your loan due to the loss in home value as a result of the suit. Joining in an unnecessary lawsuit may also prevent homeowners from ever being able to sell or refinance a home, at least without proving all of the required repairs have been made.
How long does it take to settle a lawsuit?
If you are considering filing a lawsuit, have plenty of time on your hands – it is a very lengthy process and can take as much as two to five years to be settled. Running up costs and running down housing values. The lawsuit may also require destructive testing on your home to prove the defects exist. Unnecessary lawsuits only benefit defect lawyers while harming homeowners and small businesses throughout California.
How much will you really get from the settlement? Will my mortgage lender require some of the possible settlement proceeds from the litigation?
"The promise of "easy money" may be very tempting – but you should know as much as 70% of your settlement could go to the attorneys and their paid experts in the case. These "experts" also often grossly inflate repair estimates to justify large settlement claims and pay their huge legal bills. Bills the homeowner is responsible for whether you win or loose the case. Homeowners could also be liable for the cost of the builder’s defense if their suit is unsuccessful.
Lenders may also require proceeds from the settlement due to the loss of value as a result of the suit. Unnecessary construction lawsuits are a form of extortion – only benefiting the defect attorney who brought forth the unreasonable claim."
(The Business Journal / August 30, 1999)
Will the lawsuit affect my ability to obtain homeowners insurance?
Most likely – if your home is labeled as defective it will be much more costly to insure, expect your premium rates to skyrocket in the future. In fact, homeowners insurance may not be available at all, rendering your house nearly impossible to sell.
Shouldn’t the City building codes and inspectors prevent construction defects from occurring?
City’s are interested in making sure all homes meet building code requirements and inspect each home at various stages of construction before it is approved. Inspections may include for example window flashings for water tightness, roofing, plumbing, fire blocking and installation of exterior waterproof paper are to be completed by city building inspectors. All inspection records are on file at the City building departments and available for the homeowner’s review. In order to protect future homebuyers city’s often require homeowners to repair the defect(s) with settlement funds, list the defects on a disclosure statement to potential lenders or buyers and the city may also file a correctional or information lien on the home title to assure protection of future owners.
What if I have a legitimate concern about my home?
There are instances where homeowners have legitimate concerns about the quality of their home’s construction and they must first contact the homebuilder directly to arrange for repairs rather than joining an unnecessary lawsuit. If the builder will not resolve the legitimate problems, complaints may be filed with the appropriate governmental agency and trade associations.
Will proper home maintenance prevent defects?
Under California law homeowners are expected to maintain their homes – performing preventative maintenance on a regular, seasonal and one time task basis. Homeowners are often provided with suggested maintenance checklists by their insurance companies and encouraged to follow manufacturer’s recommendations. Insurance companies recommend homeowners use licensed contractors for any task they are unprepared to complete – doing it properly the first time will save homeowners time and money in the long run.
How do you withdraw from a lawsuit?
If you and/or your neighborhood have filed a lawsuit and you would like to decline and/or withdraw participation send a letter to the lawyers organizing the lawsuit stating "I understand that you filed a lawsuit on my behalf against my homebuilder. I have decided not to pursue the lawsuit. Please dismiss me from the case now and send me something in writing confirming that I have been dismissed."
