The Federal Trade Commission said this week that the Ward Corp., a suburban Washington developer under investigation for "a substantial pattern of warranty violations" in its new homes, has agreed to repair the defects and to reimburse owners for work they have already paid for.
Ward and the FTC signed a consent agreement that settles a case growing out of charges the developer failed to honor new-home warranties. The commission said this failure resulted "in costly injury to buyers" of Ward's houses in the Maryland and Northern Virginia suburbs.
"While denying all of the FTC claims, Ward has agreed to establish an innovative arbitration procedure to resolve past and future warranty disputes promptly, efficiently and inexpensively," according to a statement issued by the corporation at its Rockville offices this week. A consent agreement is not an admission of a law violation, the FTC said.
Ward signed the agreement because the cost of continuing legal action to fight the charges would have been "tremendous," said Steven K. Yablonski, one of Wards' attorneys.
The FTC said the "uncorrected defects included excessively sloping, sagging or bouncy floors, leaky basements, faulty installation of windows and excessive cracking of steps and driveways." In addition, "some homeowners allegedly had to wait more than six months for repairs; others had repairs done inadequately, or not at all," according to the commission.
More than 1,000 homes have been built in the Washington area by Ward and its subsidiaries, Ward Development Co. Inc. and Richlynn Development Co. Inc. since 1977. All of the houses purchased between March 1978 and early 1984 are covered by the agreement, the FTC said.
The commission said Ward houses, priced between $75,000 and $120,000, are located in Washington area developments including Rolling Green, Clarksburg; Montgomery Place, Gaithersburg; Montpelier Woods, Laurel; Rockingham, Rockville; Fox Hall North, Silver Spring; Marlton, Upper Marlboro; Prosperity Woods, Annandale; Burkeridge, Burke; Colchester Hunt, Fairfax; Westmore, Falls Church, and Partridge Court, Kenwood Oaks and Winter Forest, all in Springfield.
Under the terms of the agreement, the Ward companies will repair defects or pay owners for warranty problems that cost $500 or more to fix, as well as for problems reported, but never corrected, during the inspections buyers make of homes before purchases are completed, according to the commission.
When a homeowner does not accept Ward's offer to correct problems, he or she can arbitrate the dispute for a $75 fee that will be refunded if the buyer's claim is found to be valid. The company also must give future buyers and those who purchased houses within the last year a chance to use the services of an independent arbitrator to settle disputes over warranty problems, according to the FTC.
The order agreed to by Ward and the FTC will become final after a 60-day period for public comment. After the order is final, it carries the force of law and violations can be punished by fines of up to $10,000, the commission said.
The developer "has no idea" what it will cost to correct defects and reimburse homeowners but "we do not expect it to be a substantial" amount, said Yablonski, the Ward attorney. "A lot of the problems the FTC maintains are there . . . . , we simply didn't find."
When Ward officials looked at allegedly defective houses "we saw one or more instances of bounciness . . . , which is not unusual today," the lawyer said. The floors can be shored up quickly at an "insubstantial" cost, he added.
Ward believes "the case was a misguided attempt to impose costly new regulatory burdens on the housing industry," according to the company announcement. Yablonski claimed the FTC chose his client as a "test case" and added, "We are disappointed they didn't go after a more substantial builder." The Ward Corp. has a less than 1 percent share of the Washington residential housing market, according to the figures of a local housing research group, said Yablonski.
An FTC program focusing on new home construction defects was set up in 1979, and "various builders" were investigated for warranty violations, according to Miriam W. Daniel, an attorney with the FTC's Bureau of Consumer Protection. The Ward case and an earlier consent order signed by the commission and a Los Angeles-based developer which builds in several states grew out of these investigations, she added.
" . . . The commission is saying we want builders to live up to their warranty obligations. It is a violation of the Federal Trade Commission Act not to," Daniel said. She said she could not comment on whether other investigations are still in progress.
An official of the Suburban Maryland Home Builders Association said the organization is "concerned" that the FTC "is now getting involved in local homebuilding warranty issues. It's an unnecessary additional level" of government oversight.
A Northern Virginia Builders Association spokesman claimed that "a lot" of owner complaints are "emotional" and many of the problems "are created by the homeowner."