What I Wish I Had Known Before Building a Home with a Custom Builder in Richmond.
The damage and tarp covered hole in the ceiling after faulty HVAC installation fell through. Builder: Covenant Building and Design, Rountrey Community, Midlothian, Virginia.
Building a custom home in Virginia should be an exciting and fulfilling experience, but that experience isn't complete upon move-in. New construction homebuyers could find themselves saddled with unfinished items on a punch list or defects the builder needs to correct, turning the dream into a nightmare. Purchase contracts sometimes prevent buyers from withholding money or delaying the closing which leaves ill informed buyers confused about how to compel their builder to meet contractual obligations while simultaneously legally forcing them into completing a purchase that is not what they signed up for.
Although many custom home builders tout warranties issued with the purchase of a new home as a failsafe for construction mishaps and punch lists, there are significant obstacles to overcome to get the warranty coverage promised. Most warranties include exemptions for themselves if a builder makes mistakes citing "poor workmanship." Such exemptions can leave homeowners between a rock and a hard place when a builder will not assist, warranties don't apply, and homeowner's insurance is not responsible for existing defects in new construction home builds.
Common Defects in Custom Homes
Structural Problems: Issues with the foundation, walls, or roof that can lead to significant damage if not addressed promptly.
HVAC Issues: Poor installation or malfunctioning heating and cooling systems can cause discomfort and increased energy costs. Be wary of any builders who do not present plans for HVAC duct placement. Track builders often place ductwork outside the conditioned spaces in an unfinished crawlspace or attic. Once standard practice, this type of design is now understood to cause water and mold issues in some climates. Building codes may need to reflect this understanding but fall behind in updating standards.
Water Leaks: Leaks can occur due to improper sealing or poor quality materials, leading to mold and water damage.
Electrical Problems: Faulty wiring can pose a fire hazard and result in power outages.
Poor Workmanship: Anything installed by the builder that is not industry standard falls under poor workmanship. Defects in flooring, cabinetry, and finishes can detract from the home's aesthetics and value, but more importantly, they will not be covered by most 1, 2, or 10 home buyer warranty products.
Real-Life Consequences
Our personal experience with a custom home in Virginia was nothing short of a disaster. Shortly after moving in, we faced an HVAC issue that caused our ceiling to collapse. Despite multiple attempts to resolve the problem with the builder, the warranty, and through the Department of Professional and Occupational Regulation (DPOR), we are years past the incident with no meaningful intervention by the state and a builder emboldened by regulatory compliance statements and exemptions which don’t pose fines or sanctions and transfers the burden of legal action back to us.
Our case highlights systemic issues within Virginia's regulatory system, where unlicensed contracting and lack of enforcement are prevalent, but this can occur in any state. As Virginia is one of only two states in the country that does not allow class action lawsuits, we inherited the costly repairs, health, and legal battles without the ability to unite resources with neighbors or the benefit of meaningful regulation.
If you are beginning the process, start with the basics.
Vet Your Builder: Research potential builders thoroughly. Check for licenses, reviews, and any past complaints or lawsuits. Ensure they are appropriately incorporated and insured not just during the build but also during the warranty period. Don’t rely on your realtor to do this for you. Search online court databases to ensure no lawsuits or judgments against your potential selection. Check the BBB website. Unlike Google, the BBB does not remove negative reviews and takes the time to investigate consumer reports. If you build in a planned community, join the neighborhood Facebook group page and see what your future neighbors think of your shortlist.
Ask questions about your potential builder's affiliations. Many trade organizations like the NAHB may assist builders with legal insights if a builder defect results in damage. These organizations work to ensure favorable outcomes for members and through legislative influence are very successful at transferring the costs of poor workmanship or negligence onto insurance companies and by default, buyers. They are one of the largest lobbying groups and a resource for builders nationwide. Ask if your builder supports or has affiliations that could limit your consumer protections politically or in court. Show preference to builders who invest in qualified labor, good materials, and safe outcomes.
Don't sign a builder contract. Hire an attorney and draft your contract to suit. Good agreements are infinitely cheaper than lawsuits. Spend a few hundred dollars to draft a purchase contract with a licensed attorney who will protect your interests and define what should occur if something unexpected happens. Engaging a lawyer specializing in construction law is the best choice for new construction homes.
After closing on your new home, do not grant any extensions on warranty work whatsoever without a legally binding written agreement that extends the builder's warranty for the missed deadline. Your rights are on a countdown after closing on a home. If the builder begins missing appointments, this could impact your ability to get punch list items completed or address warranty issues.
The good builders make it easy to forget that there are bad actors out there. Unfortunately, the worst builders are well-educated about the time limits most states have on consumer protection. If builders miss deadlines, those consumer protection timelines DO NOT extend. The bad actors can run out the clock and avoid repairs. Please rely on your attorney to guide you through any unforeseen issues so you can address them in time.
Keep every exchange written. If there was a conversation, send a follow-up email summarizing the exchange and asking for a confirmation of receipt. Utilize video whenever possible to document the build and the outcome. Post-closing, make sure to include any warranty companies in all communications. Send everything via their preferred method, including a second copy by certified mail and email.
When disaster hits, there is a defect, and all else fails.
File a Complaint with DPOR. Although this process can be slow and challenging, filing a complaint with DPOR has one overwhelming benefit: all records are available by FOIA request once a file is closed. These files may be helpful to you in your civil case and can become part of the public record, alerting others about violations.
Lawyer up! Meet deadlines to mediate, arbitrate, or file a civil suit. Consult with your attorney frequently pre-, during, and post-build and review your status. Civil trials are different than regulatory complaints. It may be necessary to file both. Regulatory actions benefit the community by stopping dangerous practices, while civil suits may help recover repair costs and damages depending on the details of your situation.
Leave Reviews. Assuming all other attempts at resolution have failed, don't leave others hanging out to dry. It's most likely not an isolated event if it happened to you. Be respectful, but honest. Say something.
Encountering defects in a custom home can be frustrating and stressful, but understanding your rights and options can help you address these issues effectively. Preventative measures are always best, but engaging qualified legal representation can improve your odds of a better outcome.
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"Who is Legally Responsible for Defects in Construction?" - Manchin Injury Law. https://www.manchininjurylaw.com/who-is-legally-responsible-for-defects-in-construction/
2. "How to Buy in New Construction," HGTV. https://www.hgtv.com/lifestyle/real-estate/how-to-buy-in-new-construction
3. "Big Win for Contractors in Illinois Construction Defects Case," NAHB.org
https://www.nahb.org/blog/2023/12/construction-defects-insurance-case-illinois
