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Countryside Construction and Design v. Pisciotta

OAL Dkt. No. CAF-2292-03 (Department of Community Affairs 2003)

CONTRACTORS; NEW HOME WARRANTY—Water infiltration is a performance standard defect covered by the New Home Warranty program, and if such infiltration is to be excused because it results from a change in the water table, it is the contractor’s burden to prove so.

A contractor built a home. The buyer asserted a claim with respect to a water problem in the basement. A hearing was conducted by the Bureau of Homeowner Protection and a decision was issued requiring the builder to repair or replace damaged drywall, insulation, trim, paint, and carpet that was damaged “as a result of consequential damage to real estate of a covered defect” under the New Home Warranty Program. At that hearing, a Department Claim Analyst explained “that water had infiltrated the basement and that the builder had commenced repairs, but was unwilling to complete the repairs. A sump pump had been installed and there was no standing water, and most of the basement was either dry or slightly damp.” The builder had started repairs, but claimed that there was a change in the aquifer. The builder admitted that there had been water infiltration and that in response to a telephone call, he pumped water out to see where the leak was coming from. “He determined that it was not coming from any pipe, and the next step was to determine if the water was infiltrating through the basement walls.” Eventually, it was determined that water was coming from under the basement floor. He “testified that the home had been properly constructed two feet above the seasonal high water table as determined by the engineering firm which had been hired to make this determination.” He argued that “the seasonal high water table changed and water began infiltrating into the basement.” He installed a trough around the edge of the basement floor to collect the water and drain it to the sump pump and then offered to finish construction of the basement at his cost, but the homeowners did not want to pay for that work.

The buyer “testified that the code requires perimeter draining and a sump pump is required. She was not aware of the home being in a high water table area.” The contractor “responded by testifying that [a] drain [was] not required by [the municipality] and the house received a Certificate of Occupancy with the basement completed.”

The rules of the New Home Warranty Program deal with deficiencies in waterproofing, making a provision for construction of sump pits by the builder, but requiring the owner to install appropriately sized sump pumps. The Program excludes accidental loss or damage from “changes which are not reasonably foreseeable in the level of the underground water table.” The contractor sought to rely on that provision, arguing that the house was built at least two feet above the groundwater table that existed when the house was built. It argued that since the approved plans were properly engineered, the infiltration could “only have occurred as a result of the change in the underground water table, [and] [t]hus, such water infiltration into the basement [was] not a covered defect.”

Under the program’s coverage of “major structural defects,” water seepage in a basement is excluded after the first year of coverage. That provision was held by the Administrative Law Judge to make it clear that the owner’s complaint in this matter, i.e. water in the basement, was “a performance standard defect described in [the Warranty Program] and as such [was] warranted for a period of one year from purchase.” While it is true that if the “specific cause of the water infiltration into the basement was a change in the underground water table,” the builder would not be liable, the builder still was required to establish that as a fact. “[S]omething more [than] mere speculation is required.” Here, the builder made no claim to expertise in the field of groundwater and fluctuations in the groundwater table. Consequently, the builder could not sustain its defense and was ordered to repair the basement’s drywall, etc. because the damage to the interior finish of the basement was “a result of consequential damage to real property of a covered defect involving water and infiltration into the basement of the home.”

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