Centex Homes settles lawsuit: Defects linked to expansive soils

By Steve Raabe
Denver Post Business Writer

Centex Homes has agreed to settle a major class-action lawsuit filed by homeowners claiming damage from expansive soils.

Terms of the settlement call for as many as 1,500 Colorado homeowners to receive repairs in homes that cracked and heaved when underlying soil expanded and pushed upward.

The settlement is the latest in a series of legal proceedings in which homebuilders and developers have agreed to pay millions of dollars to fix damaged homes.

Owners of more than 15,000 metro Denver homes have been involved in expansive-soil lawsuits during the 1990s, as development has moved into southern and southwestern suburbs where the harmful soils are prevalent.

An attorney for Centex said the builder can’t estimate how much the repairs will cost, but the Dallas-based firm has paid $3.3 million to a settlement trust account that will fund repairs.

The final tally could be more or less than $3.3 million, officials said.

Attorneys for both the homeowners and Centex said they were pleased with the settlement because it applies only to homes that sustained damage.

That type of settlement is better, they said, than some previous cases in which homeowners collected money from homebuilders regardless of the degree of damage to their homes, because the homeowners were part of a large class of defendants.

“The settlement follows (our) philosophy of dealing with the repairs needed in a home, instead of just blanket relief,” said Scott Sullan , the homeowners’ attorney.

John W. Madden III, an attorney for Centex, said the builder “is happy to reach a settlement that deals with the real needs of homeowners.”

The agreement calls for Centex to pay the first $2,500 for damaged basements. Then, homeowners must make co-payments of 20 to 40 percent for costs above $2,500.

The settlement applies only to damaged basements – not other areas of the home that may be covered by insurance or warranties – in Highlands Ranch homes sold by Centex between Nov. 13, 1988, and Nov. 12, 1996; or Centex anywhere else in Colorado sold from April 20, 1991, to Nov. 12, 1996.

Work can include repair or replacement of concrete slab basement floors, or construction of higher-cost wood floors that are suspended 18 inches above the ground.

Expansive soils cause at least $26 million in damage each year in Colorado , according to estimates by the Colorado Geological Survey. Nationwide, costs are about $4 billion annually.

Much of Colorado’s Front Range sits atop expansive soils. Until the 1960s, the problem was little known because much of central Denver is built on sandy soils that don’t swell.

But urban growth has pushed development to outlying areas where soils and bedrock contain an expanding clay mineral known as montmorillinite, often misidentified as bentonite.

When suburban homeowners begin irrigating their formerly arid property, the underlying soils absorb the water and expand.

In rare, severe cases, swelling soils can increase in mass by up to 50 percent. Even in soils that swell 5 percent or less – a more common ratio in Denver suburbs - the expansion can exert pressure of 20,000 pounds per square foot, causing floors and walls to crack, buckle and heave.

Earlier this year, an arbitrator ordered Denver homebuilder Writer Corp. to pay a total of $1.14 million to two Highlands Ranch couples with damaged homes.

Other settlements include Richmond Homes agreeing to pay an unspecified amount to defendants owning 12,300 homes in Douglas and Boulder counties; Ryland Homes paying up to $2.1 million to 254 Highlands Ranch homeowners; and Falcon Home settling for $2.57 million with a group of 305 residents in Highlands Ranch.

In a landmark case that went to trial instead of settlement, former Highlands Ranch developer Mission Viejo Co. was found negligent for building homes on expansive soils without installing safeguards.

The homeowners and Mission Viejo subsequently reached an undisclosed settlement before a second phase of the trial to establish damage amounts.