Misty and Luis Arias say the problems with their house began on Christmas Eve in 1998. Misty had been out all day, preparing tamales.
"It's very messy, so I came home to take a shower and get ready," she said. "That's when we came home to discover my daughter's room. The ceiling, literally in the middle, had just cracked."
A pipe in the ceiling above their daughter's bedroom had burst, raining down gallons of water and ruining furniture, carpet and clothes in their then-new home in North Salinas. Repairs cost nearly $4,000. Since then, the family says the home has experienced seven major leaks, the most recent in June when a pipe burst inside a bathroom wall.
The Arias' home on Cortina Way house is their first. They bought it in 1997 for around $140,000 with plans to stick around for about four years, build equity and move to a bigger house with their young family. Now, instead, they're part of a class-action homeowner lawsuit.
Though not all are alleged to have defects, more than 1,300 Salinas homes are involved in the suit against Award Homes Inc., one of Northern California's largest home developers, and the company's subcontractors. At the center of the lawsuit, which was initially filed on behalf of 220 families, are allegations of defective plumbing, mostly involving the special "on-demand" hot water systems required in new Salinas homes.
Since 2001, three lawsuits have been filed against the company alleging breach of contract, breach of warranty, misrepresentation, non-disclosure and negligence. The most recent was filed in late October in Monterey County Court. A personal injury suit has also been filed by the homeowners on behalf of nearly 50 children who live in the Falcon Meadows and Bella Vista developments in Salinas and who, according to the lawsuit, have become sick from mold contamination resulting from design and construction defects.
Award Homes' lawyer calls the claims overblown and says litigation is inherent to the construction industry. A series of countersuits has been filed between Award Homes and its subcontractors, with each entity disavowing responsibility for structural and plumbing problems.
"It's funny," Misty Arias said. "The model home we have is called American Dream and this has been a nightmare."
Between 1991 and 2002, 1,815 permits for homes in Salinas were issued to Award Homes. Those developments include Parkridge Homes, Falcon Meadows in East Salinas, and the Bella Vista tracts between Creekbridge Park and Boronda Road. The company, which enjoys a good reputation within the industry, also has a stake in Soledad's Miravista developments, as well as Cabernet Valley in the same South County city.
The company's chief financial officer, Peter Au, refused to comment about the homes' construction process or the total number of homes the company has built locally or statewide. He referred all questions to the company's in-house attorney, Frank P. Niccoleti, who declined to answer detailed questions but said the product speaks for itself.
The Santa Clara-based company was formed in 1976 by Wayne Valley and Stephen Schott as Citation Builders/Award Homes, Inc. Schott became the sole owner in 1986 when Valley died. Ten years later, Schott partnered with Ken Hoffman and bought the Oakland Athletics baseball franchise. Last year, Schott donated $4 million to Santa Clara University, his alma mater, to help finance a $7.5 million baseball stadium. He is a member of the California Building Industry Hall of Fame.
Monterey Peninsula developer Nader Agha, who has worked with Award in the Salinas Valley, said he was surprised to hear about the lawsuits.
"They have done an excellent job in Soledad and Salinas," Agha said. "I've never heard of any complaints there."
Agha suggested that suits are being filed now because developers are generally liable for construction problems for up to 10 years after construction.
Richard Timan, the Watsonville personal injury lawyer who represents the families, said the statute of limitations has no bearing on the suits.
"What drives this is we've got 100 houses with exploding pipes and mold," Timan said. "One hundred of the 220 homes have leaks. There's nearly a 50 percent failure rate."
"During the last four years, plaintiffs suffered extensive damage to their homes as a direct result of defective copper piping and defective design of the homes' plumbing systems," the families contend in court papers. "After experiencing numerous incidents of failures of copper piping in the homes' plumbing systems, plaintiffs learned from neighbors in Falcon Meadows and Bella Vista tracts that they had suffered from similar damage and conditions."
The plumbing problems, lawyers for both sides say, begin with Salinas plumbing codes.
In February 1991, the Salinas City Council adopted water conservation measures that require hot water recirculation systems in all new homes. Those systems keep hot water circulating in pipes between the water heater and the faucets. Instead of waiting for tap water to turn warm, wasting cold water in the process, residents get hot water almost instantly.
Niccoleti said Award has not had to install such systems in any of its homes outside Salinas.
Timan says the systems installed by Award featured copper pipes that wore out quickly because of the constantly circulating water. That led to pinhole leaks and, eventually, to burst pipes, he said.
Arias said estimates for total repair of their home's plumbing system have run as high as $130,000, nearly as much as the original price of the home.
Not all of Award's Salinas developments were constructed with copper pipes that weren't properly prepared and installed, Timan said. The company's Parkridge Homes developments were constructed with soft plastic plumbing that can withstand the pressure of the circulating water.
The city's chief building inspector, Mike Stone, said he was aware of the problem but wasn't sure about a solution.
"This does happen occasionally, but it doesn't happen all the time," said Mike Stone, inspections service manager for the Salinas Permits Center. "There are subdivisions that have had these problems and they weren't able to figure out why."
Stone said the failures can stem from the quality of the copper pipes, improper installation, water issues or electrical grounding. He said copper pipes had to be replaced in about 800 homes at Standard Pacific Homes subdivision in Williams Ranch.
Litigation actually can compound the problem, Stone said.
"Nobody wants to get blamed for it and as a result, it's hard to pinpoint where the problem comes from."
"No product home is absolutely perfect," said Niccoleti, Award Homes' attorney. Referring to the lawsuit, he said, "The idea is to fix the problems, not create new ones."
Niccoleti said the company has sent plumbers and other workers when requested, contrary to allegations from some homeowners. He said in some cases, the homeowners had hired outside plumbers without notifying the company.
In any event, Niccoleti said the subcontractors, not Award, should be liable for the plumbing problems.
"It's their work that's in question," he said.
On Aug. 13, Timan filed a personal injury suit against Award and 23 of its plumbing, window, framing, drywall, plastering, roofing, painting and air conditioning subcontractors. Filed on behalf of 48 children, the suit alleges that since 2002, the youngsters suffered "from mold contamination in the homes in which they reside because of defects in the window systems, roofing systems, stucco, shower and bath surrounds, (air conditioning) systems and other failures to contain and control the entry of moisture into the subject homes." That suit also names manufacturers, suppliers and tradesmen who performed the actual work.
Niccoleti said he could not comment on the medical claims because Award Homes, Inc. had not yet investigated the medical records.
A recent report by the National Academy of Sciences Institute of Medicine says there is evidence that dampness and mold may cause respiratory illness but there is not enough proof to come to a definite conclusion.
Niccoleti said the class action lawsuit is the first of its type against Award.
"Every builder in California faces the same problem," he said. "Real estate attorneys went after condo builders first and now that that has lessened, those attorneys are after home developers. We can't stop attorneys from drumming up people into these types of lawsuits, but hopefully SB 800 will help curtail this."
He was referring to a bill signed by former Gov. Gray Davis in 2002 that requires a one-year express warranty covering building components, a 10-year statute of limitations for legal action against home builders, and mandatory repair and inspection procedures before a suit can be filed. The bill applies to homes built after January 2003, so it doesn't apply to the Ariases or other plaintiffs in Timan's suits.
But Misty Arias said she and her husband were nervous about initiating a lawsuit in the first place. For all the trouble it has caused, including threats from neighbors concerned that land value in the neighborhood would decrease and twice being dropped from their home insurance policy, she said all her family wants is to get the plumbing fixed.
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