Texas Home Builder Warranties – Bet on the Roll
You have their equivalent hanging in a tight little roll on your bathroom wall. Third-party warranty companies sell their warranties to home builders. These are insurance companies who make a profit by minimizing coverage and denying claims. Just how good could these warranties be?
If you buy a $64.99 monitor from Wal-Mart you get a manufacturer’s warranty and the ability to return it to Wal-Mart within a certain period of time if it is defective. If you buy a $13,900 Kia Soul you get a 10-year and 100,000 mile bumper-to-bumper warranty, plus you are covered by both state and federal lemon laws. But, in Texas, if you buy a new house for any price you get, at the very best, a warranty that will cover nearly nothing during the first 2 years other than what is covered by equipment manufacturer warranties, and absolutely nothing of value in your 10-year structural warranty.
Don’t believe it? Let’s examine this more closely. One of the biggest selling points that a builder harangues clients with is his warranty. Many will not even allow you to view the warranty until after the initial paperwork is signed. Wonder why? Well, it’s quite simple actually. The warranty is a farce.
One of the leading warranty companies says this about what they cover if you have a foundation failure:
“A Major Structural Defect is:
1. Actual physical damage;
2. to the designated load-bearing portions of a Home;
3. caused by failure of such load-bearing portions that affects their load-bearing functions; and
4. to the extent that the Home becomes unsafe, unsanitary, or otherwise unlivable.
All four portions of the definition must be met to qualify the Home for Major Structural Defect Warranty coverage.”
Just how bad does a foundation have to be distressed in order to meet all four of those criteria? “ . . .to the extent that the Home becomes unsafe, unsanitary, or otherwise unlivable.” Pretty bad, huh? In other words, they will do nothing to repair your foundation unless you can actually no longer inhabit the house. Sad, but true.
This is the case with nearly every aspect of the house and the warranty. In addition to this lackluster coverage, take a look at the list of exclusions:
“B. EXCLUSIONS – Items Not Covered By The Warranty
The following exclusions from warranty coverage apply to any and all warranties issued by (NAME REDACTED), including Workmanship, Materials, Systems and Major Structural Defect warranties. The Home is warranted as constructed by
the (NAME REDACTED) approved Builder. (NAME REDACTED) does not warrant deficiencies or defects regardless of (a) the cause of the excluded event; or (b) other causes of loss; or (c) whether other causes acted concurrently or in any sequence with the excluded events to produce the deficiency or defect. The following are excluded from coverage under this warranty:
1. Deficiency or defects to any property, or part of the property, that was not included in the Closing Contract Price shown on the Warranty Confirmation page;
2. Off-site improvements or any improvements installed after the Warranty Start Date whether provided by the Builder or others;
3. Drainage deficiencies that do not affect the structural integrity of the Home;
4. Any and all landscaping (including sodding, seeding, shrubs, trees, and plantings) and landscaping irrigation systems including but not limited to sprinkler systems, sprinkler heads and/or sprinkler control systems;
5. Fences, boundary walls, retaining walls and bulkheads, except those retaining walls and bulkheads that contain structural or foundation walls at the Home and/or provide structural support to the Home;
6. Outbuildings, sheds, storage buildings, porches, cabanas or any other detached structures including but not limited to detached carports and detached garages (except those outbuildings which contain the plumbing, electrical, heating, cooling or ventilation systems built or installed with and serving the Home);
7. Patios, decks, balconies, sidewalks, walkways, driveways, swimming pools, hot tubs, spas, exterior steam rooms, covered screen enclosures, and/or other recreational facilities;
8. Any damage caused by soil movement, if compensation is provided by state legislation or covered by other insurance;
9. Any damage as a result of insufficient (or change in) load-bearing capacity of the soil, sub-soils or surfaces of the soil or sub-soils on a lot prepared by You;
10. Any damage caused or made worse by inadequate, excessive or uneven watering of soils within close proximity of foundations in areas with active soil; or damage by trees planted within 10 feet of foundations;
11. After the first year, concrete floors of basements and attached garages that are built separate from foundation floors or other structural elements of the Home;
12. Failure of the Builder to complete construction of the Home or any component part of the Home in conformity with construction plans or specifications or building codes or to complete agreed upon walk-through “punch-out” items;
13. Failure of the Builder, their employees, agents, or subcontractors to perform pre-closing cleanup of any kind or failure to remove any spillage, or debris from construction site;
14. Any defects or deficiency caused by materials, design, construction, or work supplied by other than the original Builder of the Home, or their employees, agents, or subcontractors;
15. Changes, alterations or additions made to the Home by anyone other than those performed under obligations of this warranty;
16. Changes of the grading of the site by anyone other than the Builder originally building the Home or their employees, agents, or subcontractors;
17. Deficiency or defects caused or made worse by owners, occupants, or guests;
18. Any deficiencies or defects in workmanship, materials or structural portions normally covered by another warranty or insurance policy whether or not paid by such warranty or insurance policy;
19. Deficiency or defects resulting from accidents, riot, civil commotion, terror attacks, war, or Acts of God; including but not limited to fire, explosion, smoke, water escape, windstorm, mudslide, erosion, hail, lightning, hurricanes,
tsunamis, falling trees, aircraft, vehicles, flood, earthquakes, sink holes, underground springs, volcanic eruptions, saturated soils or change in the level of the under ground water table;
20. Deficiency or defects resulting from burn holes, buried debris, or organic materials;
21. Any contamination caused or created by natural or man-made chemicals, compounds, or substances, or breakdown or adverse effects of chemicals, compounds, or substances used in the construction of the Home or site. Such contamination is not covered even if the Home is rendered unlivable;
22. Insect damage including termites;
23. Any damage caused by water intrusion, including but not limited to roof leaks, window sealants, plumbing or failure of vapor barriers, except as provided in the Workmanship, Materials and Systems warranty;
24. Dampness or condensation due to Your failure to maintain adequate ventilation;
25. Any loss, damages or other condition which is not a deficiency or defect of construction;
26. Consequential Damage: Any property damage or bodily injury which follows as a result of structural damage, or other defects covered under this warranty including defects in plumbing, electrical, heating and cooling;
27. Normal wear and tear or normal deterioration;
28. Cost of transportation, food, storage, moving contents, shelter, or other incidental expenses related to Your relocating during repair;
29. Any loss or damage which may arise while the Home is not being used primarily for residential purposes;
30. Any loss or physically inflicted damage which is not a construction deficiency or defect, including but not limited to chips, scratches, and dents in materials, fixtures, appliances, or other types of equipment;
31. Failure by You to give notice to the Builder and/or BBWG of any deficiencies or defects within a reasonable time or as specified in this warranty;
32. Negligence and/or improper maintenance or improper operation of items warranted under this warranty;
33. Failure of You or anyone to comply with the warranty requirements of manufacturers of appliances, equipment or fixtures;
34. Any loss or damage which You have not taken reasonable timely actions to minimize;
35. Any dispute received by (NAME REDACTED) later than 30 days after the applicable Warranty Expiration Date for claimed items of deficiency or defect;
36. Any alleged deficiency or defect for which there is no evidence of deficiency or defects at the time of the claims investigation; or which has been repaired prior to a (NAME REDACTED) claims investigation unless such deficiency or defect is considered by (NAME REDACTED) to be an emergency repair which was repaired by You after the Builder failed to respond within a reasonable time. Emergency items will be determined by (NAME REDACTED) considering imminent danger of resulting damage to the Home. Emergency items will not include items of comfort to You such as but not limited to problems with air conditioners;
37. Any condition which does not result in actual physical damage to the covered Home;
38. Diminished market value of Your Home.”
While many of the above items may sound reasonable when they relate to deferred homeowner maintenance, what is not said is more important. If the builder constructed the house in such a manner so that it was not code-compliant you may be liable for his sins. One example is that the builder does not properly grade the soil to provide positive drainage around the foundation perimeter. The foundation fails due to this lack of proper drainage. Even though you did nothing to cause this, you will be held responsible for not maintaining the proper grading and drainage, thus making your already lame foundation warranty void.
In almost every circumstance these useless warranties are written so that the myriad of defects which arise during the warranty period will not rise to the level of distress required for the warranty company to take any corrective action.