When Walt Disney Co. announced it was building a new town here, expectations ran high. Disney, after all, has a reputation for well-built and immaculately maintained theme parks and hotels. Moreover, the company hired the nation's best-known architects to imprint Celebration's town center with flamboyant public buildings. And Disney's Celebration Co. announced it was applying its high standards to prospective home builders, selecting the best in America to build the houses of the new town.

On Nov. 18, 1995, about 5,000 people showed up at Celebration's grand opening, and 1,200 of them participated in four lotteries to determine who would be among the first 350 home buyers. So high was the enthusiasm and so strong the belief in Disney that buyers signed up for their house sight unseen: There were no model homes for the tract or custom-built houses, only floor plans.

But somewhere in the ensuing 3 1/2 years, the story line departed from the script. Today's Celebration residents rave about their community, about their friendly, caring neighbors and their attractive town center. But for many of the residents, the central point of their move to Celebration--their home--has been a source of problems.

Celebration Co.'s manager for public relations, Marilyn Waters, acknowledges that the going has not always been smooth. "We had tremendous problems with one of the home builders," she said last week in a telephone interview. "We don't sell them [building] lots anymore."

Don Jones, a Celebration homeowner and retired minister, put it more bluntly: "Many people have said, 'Buying a home in Celebration was the worst experience of my life.' "

What kinds of problems could trigger such bold statements? Consider the 74 original Celebration town houses, constructed by Town & Country Homes, a national builder based in Chicago. After a year of complaints by homeowners about leaky roofs, walls and windows, the Celebration Co. commissioned an independent inspection of the houses.

The finding, as described in the March 13, 1998, "Townhouse Construction Investigation for the Celebration Company" by the Orlando engineering firm Tilden Lobnitz Cooper Inc.: All 74 roofs should be replaced, to bring the houses up to "minimum acceptable industry standards." The roofs were replaced and Town & Country, winner of some of the most prestigious awards a home builder can win, no longer builds houses at Celebration, but continues to repair defects on completed houses.

The other tract-house firm selected by Celebration was national builder David Weekley Homes of Houston. One buyer of a David Weekley house, Andy LaRosa, had the roof replaced four months after he moved in because of leaks, he said. Then there was "a mushroom the size of a lettuce growing on a windowsill." After he showed a photograph of it to a David Weekley representative, LaRosa said, "They took off the drywall by the window and found that the framing was rotting. They had to replace a swath of wall 2 by 15 feet long along the front of my house."

LaRosa has been in his house two years and still has a list of repairs for the builder.

In April, David York, another David Weekley buyer, put large signs in his windows proclaiming, "David Weekley Lemon House," and "23 Months Since Closing--Fix My House!"

York's to-do list for the builder includes fixing roof leaks--after 24 trips up the ladder to patch the leaks, he said, water still is coming in. Added to the list are fixing cracks in his swimming pool and foundation, and fixing his front door so that it can be securely locked. The builder already has attended to a previous disaster at York's house--the bathroom ceiling collapsed because it was saturated with water from a roof leak.

"I don't have a neighbor who didn't have a problem," said Bruce McMillen, a David Weekley owner who had all his plumbing pipes replaced. "The neighbor on one side took off the brick [veneer] to the foundation, then rebricked the entire house. The second house down rebuilt the second-floor balcony. The neighbor on the left side of me redid all the siding."

How widespread have the problems been? Marilyn Waters said Celebration Co. does not keep track of the number of homeowner complaints.

In interviews with 35 homeowners, however, a picture emerged of frustrated residents who are proud of their town, but also wary of reporters out to " 'dis' Disney" and worried that reports of problems could affect property values. Just listing individual problems does not convey the frustration the homeowners expressed. Most of the 35 interviewed described repairs done incorrectly three or more times, with repair crews frequently creating new problems as they worked.

Not everyone fared badly. New residents who bought $500,000-and-up custom "estate" houses, built by small local firms, reported few problems. And then there were the rumors about Disney-connected residents.

"Disney employees got more satisfaction, and they got things fixed faster," said Rosemary Cordingly, a Celebration homeowner and former Fairfax County resident. "It was not that easy, but they got better treatment."

But those with Disney connections said they had to persevere too.

"I was a Town & Country buyer myself and had my own issues," said Brent Harrington, former Celebration community services manager who has moved to Arizona to open a development there. "It took a year to get them resolved."

Speaking for the Celebration Co., Marilyn Waters said she would be "surprised" if Disney employees had gotten preferential treatment, because "a builder values all their customers."

Disney as Developer, Not Builder

So what happened? In interviews with Celebration executives, homeowners and the builders and their former employees, as well as with private home inspectors and other Florida developers and builders, the problem seems to have been threefold.

First, the buyers may have had blind faith in Disney's magic touch, thinking the developer would be heavily involved in building the houses. Second, the large number of initial sales coincided with the worst labor crunch Central Florida has experienced in years, making it difficult for the builders to assemble consistent building crews. And third, an excellent builder in Chicago or Houston does not automatically become an excellent builder in Central Florida.

Disney is only the land developer at Celebration. It was not building the houses or guaranteeing their quality. Buyers could have learned that from their sales contracts; but the line between builder and developer was fuzzy to many, with Celebration Co.'s Celebration Realty employees preparing all the sales documents in a central sales office, and Celebration Realty collecting the sales commissions. At the contract signing for their house, buyers received a Mickey Mouse pen. And some sales agents even told buyers, "Disney would be overseeing construction," said Paul Simon, a Celebration resident and home buyer.

A central sales office where a developer's representatives sell the houses is not so unusual for Florida. But even some building professionals expected Disney to be more involved with construction.

"Before I started working there, I was under the impression that everything was going to be under Disney's watchful eye," said a former site superintendent who worked at Celebration.

Residents believe Celebration's actual role in the house-building has been much more circumscribed. The company disagrees.

"As a developer, we communicate with the builders regularly," Celebration's Perry Reader said. "When they are not making the grade, we tell them."

Mike Ryan, president of Pinnacle Corp., the parent company of Town & Country Homes, confirmed that was the case. "They [Celebration] were well aware of what's been going on. Behind closed doors we talked about the issues. They work closely with the builders even if the consumer is not aware of it."

Close Scrutiny of Construction Firms

Disney hand-selected the builders of the development's custom and tract houses, based on criteria that included excellent customer service ratings, quality construction and financial soundness, Reader said. Two of the builders who went through the process--David Weekley Homes and Issa Homes, which began building a year later--said they had never been subjected to such scrutiny before.

But to deliver a quality house in a timely fashion, a builder needs a steady and dependable source of materials and workers. This in turn requires good relationships with local suppliers and subcontractors, relationships that are built over time. As one Orlando builder said, "You can't just come in and build."

Especially, he might have added, when the Celebration lotteries netted about 100 immediate sales for Town & Country and about 100 for David Weekley, the two initial tract builders.

Pinnacle's Ryan was remarkably candid in a recent interview. "Whatever market a builder moves into, he needs to move slowly until he feels comfortable. You have to walk before you can run," he said.

"We hit Orlando and started running," he said. "We took on more work than we could accomplish at Celebration. The pace was just tremendous; it would have been better to minimize the amount of sales until we were comfortable with employees and trades and customer expectations. And we should have done a project first outside Celebration."

A Slower Approach

David Weekley Homes did exactly that. The firm started building houses in the Orlando area two years before Celebration opened. When the work began at Celebration, however, Weekley did not fold its first operation. Although the firm moved its more experienced site superintendents to Celebration, it still ended up competing with Town & Country Homes for the same workers, each company raiding the other's crews, former employees of the two builders said.

David Weekley himself recently called the start-up at Celebration difficult. "It's difficult to build 100 houses at once, versus five to eight a month.

"Was everything perfect? No," he said. "There were times we fell down. Did we make mistakes? Yes. Given the circumstances, we did as well as any builder could.

"Customer satisfaction was less than I had hoped for," Weekley continued, "but now we're doing well."

Weekley expressed surprise that some Celebration homeowners said they still had problems that have persisted for as long as two years.

Two more tract-house builders, Issa Homes and Morrison Homes, were invited to build during Celebration's second year. The work of these two firms has gone more smoothly for the same reasons that the first two had problems.

Morrison, a national builder based in Atlanta, has been active in Central Florida for 10 years. "We had a stable of subcontractors and suppliers, and going into Celebration was a fairly easy transition for us," said John Rhymer, a vice president for sales and marketing.

Florida-based Issa brought many of its own subcontractors and job site superintendents when it moved to Celebration from South Florida, Vice President Don Hempel said. Issa also started small, and is the only Celebration builder to sell both estate and tract houses.

Two private home inspectors in the Orlando area, Ron Resch and Hank Goldberg, have worked extensively in Celebration. They concurred that homeowners there have had problems with their houses, largely because of inconsistent and often poor supervision and a very inexperienced work force. With the current housing boom and labor shortage, "if you own a pickup truck and know the difference between a screwdriver and a hammer, you will get a job as a carpenter," Goldberg said.

Both inspectors pointed out that the quality problems at Celebration are not unique in Central Florida these days, given the labor situation. They also said that the quality of the work has generally improved in Celebration houses.

"The number of deficiencies have been much less than one or two years ago," Goldberg said.

And problems with the first houses are slowly getting fixed.

And the Disney connection may turn out to be magic after all. As Orlando home builder Charles Clayton put it, "Disney will make the development work because they don't want egg on their face."

CAPTION: At Celebration's grand opening, 1,200 people participated in lotteries to determine who would be among the first 350 buyers. At left, sign at entrance to Celebration.

CAPTION: An battery-powered cart is not an uncommon sight in the downtown area of Walt Disney Co.'s Celebration.

CAPTION: Celebration's original town houses. All 74 town house roofs had to be replaced after owners complained of leaks.