Major Home Construction Defects Are All Too Common, But State Laws Help Shield County Inspectors From Accountability

BY STEVEN T. JONES

"The oak work is magnificent!!! From the stunning oak floors in the entry and kitchen, to the breathtaking raised panel walls and intricate railwork at the stairway, to the functional and beautiful built-in home entertainment center in the family room, there is no doubt that the craftsmanship and quality is top of the line."

When Bob and Diane Kvalstad stepped into the entryway of this San Luis Obispo Country Club Estate home on that day in 1989, they couldn't agree more with the advertisement's description.

The oak work was magnificent. Strolling through the 3,500-square-foot new home, they were told it had been a labor of love for the independent builder. There was no doubt in their minds about the craftsmanship; the quality did seem top of the line.

"We looked at it and went, ‘Yeah, this is some quality construction,’" said Diane Kvalstad. "Everyone who sees it says, ‘What an awesome house!’"

They gazed at the fifth fairway of the golf course from the redwood deck, feeling like this was everything they wanted in a refuge from the growing madness of the Southland. A gorgeous two-story ranch house with a beautiful master suite, bedrooms for each their three children, three fireplaces, high ceilings, and a sparkling tile kitchen.

The asking price was $650,000, well within the range of a successful radiologist, and their offer of $580,000 was accepted. After having the builder make a few changes, they moved in just before Christmas.

"We really loved this house," she said.

And with the exception of some expected minor problems over the years, it proved to be a great house. There was a problem with drainage under the laundry room that required significant repairs in 1992, but the contractor took responsibility for an improperly installed drain, so that seemed like no big deal. They still thought they had a great house.

That would all change in early 1997. In January, Diane Kvalstad noticed a musty smell, so she called a contractor friend, Pat Coyes, to come take a look under the house. He couldn't make it, but sent contractor Dave Staniec to check it out.

Staniec discovered problems with the drainage and venting that were beginning to rot the boards, but that was the least of his concerns. Most startling, he found that many of the hold-downs that keep a house on its foundation during an earthquake were missing or improperly attached.

"It was just so blatant," Staniec said. "And the more I looked it got worse and worse."

Coyes, Staniec, and structural engineer Robert Vessely did destructive testing of the house's structural integrity, cutting holes in the drywall to investigate shear walls and beam connections at points key to the home's structural stability.

They concluded that not only was the house improperly connected to the foundation, but the first floor wasn't properly connected to the second, and the second floor was improperly connected to the roof. It was fine if gravity was the only force on the house, but if there was an earthquake....

"I estimated that three-quarters of the structural system used to resist earthquake loads was missing," Vessely said, noting that the house could collapse in a 6.0 earthquake or 70 mph wind.

The problems were confirmed by officials with the San Luis Obispo County Building Department, whose own inspector, a longtime carpenter who might have had a poor appreciation for modern seismic safety dictates, had signed off on the house in 1989.

"This house had not been inspected properly or built properly for its lateral design," said current supervising building inspector Mike Whitaker.

But discovering the problem–and having building officials acknowledge their role in that problem–didn't mean solving it. As the Kvalstads were to learn from their journey into the complicated world of construction defects, responsibility doesn't translate into financial liability.

In the last three years, a glut of construction-defect cases stemming from the building boom of the late ’80s has been blamed on sloppy contractors, poorly trained and overworked building inspectors, and/or aggressive lawyers filing cases before the 10-year window of liability for construction defects closed.

"That was a time when construction was going wild around here," Vessely said. "Lots of people were building, lots of houses were going up."

San Luis Obispo County building inspectors performed a frenetic 30,000 inspection stops in 1989, compared to about 20,000 last year, which has been the busiest since the ’80s building boom.

But the county had more bodies to do the inspecting in 1989, a total of 14 building inspectors. Today, even with an additional inspector spot created in this year's budget, there are just nine.

Nonetheless, principal building inspector Forrest Wermuth said inspections have gotten better and more thorough in the last 10 years as the building-inspector profession has gotten more competitive and demands have increased for higher levels of training and expertise.

"With more demand for the jobs, we have more skilled people," he said.

The new generation of building inspectors has also been weaned on the importance of lateral stability and seismic standards, a focus that was still evolving in the late ’80s.

"The whole area of seismic design has changed considerably since the late ’80s," Wermuth said. "We are looking at things with today's level of expertise, which we didn't have at that time."

Still, he concedes that the problems in the Kvalstad house–with missing and improper shear walls, beams not firmly connected to one another, hold-downs not attached–should have been caught, and he is at a loss to explain why they weren't.

"Our policy is to look at every wall. And if the inspector didn't do that, he wasn't following policy, even then," Wermuth said. "You can relate policies to people, but if they get followed is another question."

To deal with that very question, Wermuth said, the department has started a program to have supervising building inspectors do random rechecks of work done by other building inspectors as a way to gauge whether things are being missed.

"But our workload is such that supervising inspectors are out doing inspections, too, so we haven't been able to implement that good policy," he concedes.

Inspectors cover an average of 10 sites per day. While slightly higher than the average workload in many other counties, Wermuth said department staffing levels are adequate. And with higher levels of expertise and training, he doesn't believe mistakes like those made on the Kvalstads’ home are getting by today.

"We should catch anything that is missing or not in compliance with plans," Wermuth said.

"It has gotten better," agrees contractor Jerry Reiss. "The building departments realize there are problems out there. And they have the chance now to see what their predecessors overlooked."

Yet even when done properly, a building inspection doesn't ensure that a house will be safe.

"The nature of the job doesn't ensure a proper house. That's up to the contractors. And, unfortunately, we've had some real shoddy contractors here," Reiss said.

Reiss, a former San Luis Obispo city councilman, these days spends much of his time doing destructive testing and expert testimony in construction-defect cases. He has handled several dozen cases in San Luis Obispo County alone, mostly single-family homes.

"The thing I see a lot of is the people doing the work don't realize the consequences of their actions," Reiss said. "It is a serious problem."

The late ’80s were a time when many inexperienced contractors were trying to take advantage of the boom times and when often equally inexperienced building inspectors struggled to keep up with a rapid pace.

As critical as he is of many building contractors, Reiss is equally critical of the lawyers that exaggerate the problem for financial gain.

"A lot of the cases are blown out of proportion, but a lot of them are real," he said.

Many of the real ones are never brought to the attention of the public and are instead quickly remedied by contractors who stand by their work and/or don't want their reputation hurt by allegations of problems.

"A lot of the cases I get involved in are settled quietly out of court," Reiss said.

Both Reiss and Wermuth said the number of defective homes being built does seem to be decreasing. But there still could be many homes out there that may have major problems in an earthquake.

"Things have been better and better built over the last 20 years," Wermuth said. "But you'll always have an occasional exception."

Since discovering the home's structural problems, the Kvalstads say they have spend nearly $200,000 just to bring the home up to code and endured a year's worth of having to live on an active construction site with every room in the house affected.

"The entire house had to be re-engineered," Diane Kvalstad said.

To pay for the work, they've had to refinance their home twice, dip into children's college funds, sell a car, divert retirement contributions, and devote much of their time and energy to a problem not of their making.

"I was devastated," Bob Kvalstad said. "I would come home and there would be more things we had to do. We were amazed and astonished at how this was built–and that it was approved."

But they say the worst part has been the "what if," as in, what if there was an earthquake while they were home? What if their dream home had literally come crashing down?

"We could have been killed," she said, "and that's the scary part."

One crucial beam that Staniec said was not properly supported ran over the front door, "so if someone was running out the front door in an earthquake, it could collapse on them."

The Kvalstads filed a civil lawsuit against the contractor but were limited in how aggressively they could pursue the matter. That's because the contractor had filed for bankruptcy a few years earlier, with the Kvalstads listed as creditors because of $12,000 he owed them for their rebuilding of the walls and floor of the laundry room from the 1992 drainage incident.

"I'm so amazed that we couldn't go after them with their bankruptcy," Diane Kvalstad said.

Eventually, after the suit brought in others connected to the home (real estate agents, investors, the foreman, etc.), the matter was settled for $70,000, but the Kvalstads say they had to pay their attorney, Clayton Hall, nearly $45,000 for his efforts in the complicated lawsuit.

And what about the county’s admitted complicity in the problems?

Vessely said a home's lateral support structure needs to be rigid enough to keep the house from swaying during an earthquake or strong wind. And with a sprawling ranch-style house like the Kvalstads’, the connections between sections are all-important, even though he said they were often found missing or improperly connected.

"In some cases it looked like ignorance; in other cases it looked like neglect," Vessely said of problems at the Kvalstads’ house. "There are often problems [with houses], but I've never seen anything quite as bad as this.... You expect a building inspector will pick it up."

"Our feeling is it is a 50-50 liability thing, because the builder has liability, but the county should be, too," Diane Kvalstad said. "Otherwise, why do we have inspectors?"

Yet, after the Kvalstads went from their civil suit into efforts to find relief and accountability from other sources–holding the county liable for its flawed inspection, trying to get state regulators to take action–they hit nothing but roadblocks.

Construction-defect problems may be widespread, but so are the immunities of those responsible.

Both building inspectors and public agencies like counties and cities are immune from liability in all construction-defect cases, even the most egregious of violations, under state laws enacted in 1963.

"A public entity is not liable for injury caused by its failure to make an inspection, or by reason of making an inadequate or negligent inspection, of any property, other than its property," reads Government Code Section 818.6, while Government Code 821.4 extends the same immunity to public employees.

Such immunity is a notable exception to the accountability of most public entities, which Government Code 815.6 makes "liable for an injury of that kind proximately caused by its failure to discharge the duty...."

Yet the Legislature justified the exemption of building inspectors: "Because of the extensive nature of the inspection activities of public entities, a public entity would be exposed to the risk of liability for virtually all property defects within its jurisdiction if this immunity were not granted."

In other words, given the prevalence of construction-defect cases and the likelihood that public entities would be named in every single one, many counties would go broke if held accountable for their building inspections.

Subsequent court challenges of Government Code 818.6 have been entirely unsuccessful, with courts upholding immunity even in cases of a failure to inspect, fraudulent inspections, inspector knowledge of dangerous conditions, and cases of "gross negligence."

Only a single California case, Cooper v. Jevne in 1976, found a building inspector liable for a seriously flawed inspection, but it relied on attacking Government Code 822.2, which exempts all public employees from civil liability for official actions "unless he is guilty of actual fraud, corruption, or actual malice."

In that case, the court ruled that "for building inspectors to issue approval to any project which is known not to be in conformity with code constitutes actionable, intentional misrepresentation."

But that ruling appears to be an isolated one and of little precedental value compared with Government Code 818.6 and the body of court rulings that support it.

Similarly, there are limits on the ability to hold contractors accountable through state regulatory channels, such as the Contractors State License Board.

Contractors can be held liable in civil court for construction defects up to 10 years old but are immune from anything older. But until legislative changes that went into effect in 1995, the CSLB couldn't take action in cases more than three years old.

A bill by then-Assemblywoman (now Senator) Jackie Spier extended the regulatory liability of contractors to four years and for the first time added the ability to investigate cases of major structural defects up to 10 years old.

Yet an interpretation of the law by the Attorney General's Office ruled that the 10-year reach couldn't extend to before 1992, the extent of the CSLB's reach before the law changed, effectively giving a free regulatory ride to contractors who did shoddy work in the late ’80s.

Even when CSLB investigators have a bona fide complaint about a bad contractor, they face an difficult task in proving a case against a contractor, said Sondra Vaughan, chief of field operations for the CSLB.

"We're required to have ‘clear and convincing evidence to a responsible certainty,’" Vaughan said. "It's a higher burden than civil law," which requires a "preponderance of evidence."

For that reason, she said, many of the complainants will be told they would be better off pursuing the matter in civil court, even though a resolution of such cases can take years.

That could also help explain why out of the 26,076 complaints filed with the CSLB last year just 239 contractors had their licenses suspended.

Vaughan said cases in which structural defects were discovered after several years–the case with the Kvalstads–are some of the most difficult.

'We have to prove it was something the contractor did at the time of construction, not lack of maintenance," she said.

Diane Kvalstad has already learned about the limitations in seeking help from the state and county, lessons that she says point to a need for legislative changes.

"We need a degree of accountability," she said, "because I don't think there is any."

Among those who have helped champion the Kvalstads' cause is County Supervisor Katcho Achadjian, who organized meetings in May that ended in apologies from county officials for their negligence but no compensation.

"Did the county and other agencies fail to deliver something?" Achadjian asked rhetorically. "I seem to agree with that."

As a small-business man, the owner of gas stations and an auto repair shop among other ventures, Achadjian is uncomfortable that the county isn't standing by its work.

"In my repair shop, if I do a brake job and you let it sit for six months and drive it and the brakes fail, you can come after me," Achadjian said. "We should help [the Kvalstads], but the state gave us the right to just walk away, and it's not fair."

Even though the county isn't liable for the bad inspection of the Kvalstads' home, Achadjian pushed a measure to at least refund the $1,684 in building inspection fees associated with the home, but the board voted it down.

"I don't think this is the only problem the county has [with construction defects], so maybe they're worried about opening up a can of worms," he said.

Achadjian's stand on behalf of the Kvalstads is reminiscent of one his predecessor, Ruth Brackett, had taken three years earlier on behalf of Ken and Mary Barrette, who live in a Nipomo home with serious construction defects.

The Barrettes bought their Pomeroy Road home in 1988. It was six years old. In 1995, when they tried to do some remodeling work, they discovered that the home had major structural problems.

"Numerous defects in workmanship and methods coupled with an apparent disregard for the approved plans and specifications have resulted in a substandard structure," concluded the site observation and destructive testing report, done by Reiss' company.

With the county immune, and the original contractor no longer liable because 10 years had passed, the Barrettes, who have two daughters, ages 8 and 11, haven't been able to get any compensation.

And unlike the Kvalstads, the Barrettes can't afford to get the work done, largely because Ken Barrette, himself a contractor, is now confined to a wheelchair because of multiple sclerosis.

So they are forced to just live in a house that could be extremely dangerous in a major earthquake, a living condition made all the more dangerous by Ken Barrette's limited mobility.

"How is it that no one is responsible for this?" Barrette wrote in a recent appeal to Gov. Gray Davis for help. "We need some type of assurances that the building inspectors and builders did their job, and allowing total immunity is not one of the ways!"

The stories of the Barrettes and Kvalstads are just two among dozens around the county, which vary widely in their severity and the degree to which they've held liable those responsible.

One home near Paso Robles is literally sliding down a hill, the victim of both a bad foundation and location. It is a total loss that has depleted the owners' life savings and, at this point, they've found no satisfaction from the builder.

In another stark case, Barry and Sandra Erlich–he, a teacher; she, a nurse–spent years in court seeking compensation from contractor John Menezes for the new ocean-view home in Shell Beach they bought in late 1990 that "leaked from every conceivable location," the court found.

After spending months with the contractor unsuccessfully trying to stop the myriad leaks, the Erlichs brought in another contractor. "In addition to confirming defects in the roof, exterior stucco, windows, and waterproofing, the inspection revealed serious errors in the construction of the home's structural components," the court found.

None of the 20 shear or load-bearing walls specified in the plans were properly installed. Three turrets on the roof were collapsing because of improper construction. Three decks were in danger of collapse. The foundation for the main beam, which needed to support a load of 12,000 pounds, was so bad it could only support 2,000 pounds, causing the beam to settle and crack surrounding concrete.

"Well, there were so many of these problems that it would almost be easier to list what wasn't wrong with the house," the Erlichs' expert witness testified.

A jury awarded the Erlichs more than $400,000, including $150,000 for emotional distress and physical pain and suffering. The emotional distress award was challenged all the way to the California Supreme Court, which struck it down, ruling contractors aren't liable for emotional distress.

It would only get worse from there. Both the contractor and an insurance company connected to the case declared bankruptcy. And when the Erlichs' attorney missed a hearing examining whether the insurance policy was invalid because of fraud on the contractor's part, it was all over.

"We never got a dime," said Sandra Erlich. "All we ever wanted was our house fixed. The only reason we even asked for emotional damages was to pay for the lawyer and expert witnesses. But we got nothing....It leaves us out a couple hundred thousand dollars."

But Menezes is still working as a contractor with clean license, still building new houses.

It was in such a litigious climate that the Kvalstads pursued compensation from the contractor who built their house, Richard Jones, and others involved in its construction and financing, including his mother, ex-wife, foreman, and subcontractors.

Diane Kvalstad said she felt betrayed by Jones, whom she had trusted completely and whose work and reputation she even initially defended to the contractors who found the structural problems.

"A big reason we bought the house was Rick Jones," Diane Kvalstad said. "He presented this as a very loved project."

But as she became convinced of the house's structural problems, she would place that same unquestioning faith in her new contractors and engineer Bob Vessely.

"These guys are the best," she said. "I trust them completely."

Without seeking a second opinion on the bleak assessment of the home's structural integrity, she ordered the work to begin immediately, a decision that raised questions by both Jones and county officials.

"The first thing I would have done is hired another engineer for a second opinion," said chief building inspector Barney McCay.

While he has utmost respect for both Coyes and Vessely, saying they are each among the best in their fields locally, McCay said they are also known as extremely conservative in their approaches to seismic stability.

"Things like this can get blown out of proportion, and I would be real curious to have an objective engineer look at this before the work was done," said McCay, who doubts the house would really collapse in an earthquake or strong wind.

Coyes is troubled by that statement from the top building official. "We just do things to code, and the code is the code," he said. "The codes are established based on previous earthquakes. If you're a licensed general contractor you build things to code, period.... Everything in the code is meant to protect people like the Kvalstads in an earthquake."

For Jones, the fact that he wasn't given a chance to look at the house until most of the work had been done prevented him from being able to refute the charges in any detail and seemed to him highly suspicious.

"Little things can be overlooked, and I'm not saying the house was perfect. But what they were claiming, the volume, that could not have happened," Jones said. "There's no way I could have gotten that much past the inspector."

Jones said many of the alleged problems simply don't make sense, such as a crucial beam that didn't reach the foundation. To build that, he said it would have meant placing a temporary beam under it, attaching all the connections to the beam, then removing the bottom section and leaving the crucial beam suspended.

Other cases, such as the allegation that there was no shear wall behind the oak-paneled wall in the entryway, he said simply aren't true. To do the paneling, he remembers having to make pencil markings on the plywood wall.

"There were lots of things they alleged, which they said we did, that I know we didn't do," Jones said. "I know we didn't build the house poorly.... It's one of my best homes."

Nonetheless, Jones personally had to pay $20,000 to settle with the Kvalstads, a settlement he said he chose to avoid a court battle he couldn't afford and one that could have dragged on for years. But he said he doesn't believe he's to blame.

"There is definitely a bad guy in this case, but I know it wasn't me. I'm not the bad guy," said Jones, who is still a licensed contractor in good standing. "I don't know who the bad guy is."

McCay agrees that Jones is not a bad guy: "I don't believe the builder overtly did anything to compromise the structure." Despite questioning how unstable the house really is, McCay does say that many of the seismic stability requirements for the house weren't met. And he says much of the blame for that has to fall on a building inspector working during a period of new requirements.

"He was from the old carpenter school, and with the engineering changes maybe he didn't respect it as much as he should have," McCay said of building inspector Harvey Stewart, who could not be reached for comment. "My guess would be he saw how good the workmanship looked and probably rushed through.... He may have made some assumptions."

Building Department officials say inspectors aren't supposed to make assumptions. They are supposed to be diligent in keeping home builders from making mistakes and from being dishonest.

"We see a lot of mistakes made where [builders] can't see what the plan intended," Wermuth said.

While the work of shoddy contractors has many times slid by building inspectors, there are also ways for unscrupulous contractors to get around the demands of building codes and inspectors.

"There is an opportunity for people to do things we don't see," Wermuth said.

For example, inspectors look at the foundation form boards, but don't watch the foundation being poured. And once the framing and plumbing are signed off, contractors could conceivably make improper changes that would be covered up by the drywall before the next inspection.

But even while inspectors should catch most problems, Wermuth said making them and public entities financially liable for problems just isn't realistic.

"If we had liability you'd never get an inspector off a job," Wermuth said. "We're really a spot-check agency.... If you have a person who's doing a lousy job of building, we can't totally make up for that."

So that entails holding contractors accountable for the work they do. And for contractors, it means ensuring their timelines and budgets are realistic and that they know what their workers are doing.

"A guy has to be careful, cover himself well, and ride herd on the subcontractors," saidLeslie Halls, executive director of the San Luis Obispo County Builders Exchange. "And that all goes into the cost, as much as people don't want to hear it."

Reiss’ advice to home buyers: Be wary and get an independent inspection before buying a home.

"There are people out there mass-producing houses doing a really good job, and there are firms out there doing really shoddy work and charging top prices," Reiss said.

Lawyer Bob Gundert, who handles many construction-defect cases, usually defending contractors, agrees: "If you really want to be sure, have it inspected. If you hire a person to look at it and they miss things, then they're on the hook now, too."

Many houses can have minor problems, and seismic standards are designed to afford houses more protection in an earthquake than most will need to resist major damage, let alone keep standing.

"There is no perfect house," Vessely said. "The building code doesn't require they be earthquake-proof, only that they be able to withstand an earthquake and not collapse."

Yet quantifying the problem is next to impossible, because problems like those with the Kvalstads’ home lie hidden behind walls and under houses.

How many homes out there have hidden structural problems that could cause them to collapse in a major earthquake? We'll find out in the next big one. Æ

New Times staff writer Steven T. Jones built this story without any major structural defects.