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Builder misrepresented product
This series was prepared by the Globe Spotlight Team: Editor Walter V. Robinson, reporters Matt Carroll, Sacha Pfeiffer, and Michael Rezendes, and photographer John Tlumacki. This article was written by Pfeiffer.
Third of four parts, 5/1/01
VIENNA, Va. -- For home buyers like Steve and Kristen Maday in search of a different look, it seemed like the perfect answer.
Aesthetically, the "stucco" exterior marketed by Toll Brothers was less formal than brick, more sophisticated than vinyl siding. It was touted as needing less maintenance than wood clapboard, ideal for homeowners busy with jobs and families. Builders sang its praises, calling it durable and versatile.
OTHER PARTS
Synthetic stucco
Behind a brick wall
WBZ-TV reporter Ron Sanders and photographer Tom Rehkamp joined in the Globe investigation. Watch their reports on RealVideo.
PART ONE
The Globe Spotlight Team would like to hear from readers willing to share their experiences -- or thoughts -- about new home construction. The Spotlight telephone number is (617) 929-3208. Confidential messages about new home construction and other issues can also be left at (617) 929-7483. You can email Spotlight at spotlight@globe.com.
Impressed home buyers, including the Madays, bought it in droves.
But a jury found that Toll misrepresented the product. It wasn't really stucco, but a flawed imitation that is now best known for trapping water, often causing underlying wood framing timbers to decay into little more than mulch, and transforming homes into fertile breeding grounds for mold, mushrooms, and miniature snails.
Across the country, the stucco applied by Toll and other developers to thousands of houses -- from Toll homes in Canton, Mass., and suburban Connecticut to the humid South to the temperate West Coast -- is, as many frantic home buyers now know, not stucco at all. And it is responsible for an avalanche of litigation, including several class action lawsuits, alleging fraud, deception, and misrepresentation.
Moreover, when it comes to the all-important outside layers of a home that provide structural integrity and protection from the elements, the Spotlight Team found that the home builder has shortchanged buyers in other ways. The Globe observed Toll subcontractors cutting corners during construction of brick fronts in ways that may shorten the life-span of the brickwork and cause water infiltration.
And more than 700 of the 1,200 homes Toll has built in Massachusetts are not enclosed with plywood products, but with a cardboard-thin covering called Thermo-ply that some building officials oppose. After criticism by building inspectors and homeowners, and evidence that improper installation of Thermo-ply has created structural problems, Toll stopped using the product in Massachusetts.
The faux stucco product is called EIFS, pronounced eefs or eef-iss, an acronym for exterior insulation and finish systems. In the building industry, it is known widely as "synthetic stucco," and Toll and other home builders have often misrepresented it to home buyers as real stucco.
That's what a jury in Fairfax County, Va., found last year, when it ordered Toll Brothers to pay nearly $1.4 million, including $460,000 in punitive damages, to the Madays, whose EIFS-covered home became so waterlogged that a mushroom-like fungus grew above their garage doors.
The same jury -- which heard at trial that Toll knew of the risks of EIFS before the Madays moved into their $522,000 home here in August 1996 -- found that Toll had willfully violated the Virginia Consumer Protection Act, breached its sales contract, and committed fraud by misrepresenting EIFS as stucco.
Toll, which sometimes mounts harsh counterattacks against home buyers who are persistent with their complaints, sought to deflect the charges at trial by repeatedly questioning the Madays' personal morality, among other tactics.
The company's "hardball" defense, Steve Maday said, "was to make us look bad in front of jurors and pass the buck down the line to subcontractors.
"I was definitely naive in thinking that for the amount of money we were spending on the house we would be getting a very good product," said Maday, whose home was recently stripped of EIFS and covered in real stucco.
Toll's mishandling of the EIFS issue is not atypical. After a five-month investigation into the growing problem of defects in home construction nationwide, the Spotlight Team found that in marketing its homes and options like EIFS, Toll has engaged in questionable sales practices, used subpar building materials and shoddy construction techniques, and often disregarded complaints from home buyers with problem-plagued homes.
For example, Toll continued to market EIFS -- and misrepresent it as real stucco -- even after it learned by at least July 1996, according to an internal memo, that EIFS-sided homes are potentially at risk. Despite that knowledge, the Globe found, Toll still applied EIFS to at least seven of what it marketed as "stucco" homes in Newtown Chase, a Toll subdivision in Newtown, Conn.
As part of a settlement, Toll has agreed to strip EIFS off at least six of those homes beginning this week, the Globe has learned, and apply real stucco -- an acknowledgement that the Connecticut houses are vulnerable to serious water damage. The settlement was reached only after the homeowners organized and retained an attorney, a step they resorted to after Toll ignored multiple letters expressing concerns about the material.
Toll "misled us into thinking it was real stucco, and they put it on our homes knowing full well it was going to be a problem," said one of the Connecticut homeowners, who asked not to be identified because of a confidentiality clause in the settlements that prohibits owners from speaking publicly about the case. "It was really not handled correctly." Toll told the Globe it has not used EIFS since 1998.
In the Maday case, it was two years after they bought their home at Hunter Mill Estates before Toll notified them that their house was covered in "synthetic stucco," a term the couple hadn't heard before, and might have moisture penetration problems. Steve Maday later testified that all sales documents referred to the exterior of their home as, simply, "stucco." The Globe has copies of the documents.
The Madays and about 20 of their neighbors eventually sued Toll Brothers, accusing the company of knowingly misrepresenting EIFS as stucco. The Madays, the first of the homeowners to take their case before a jury, were awarded $1.382 million after a trial in which Toll's attorney blamed them for not maintaining the exterior of their home, even though Toll marketed the exterior as virtually maintenance-free. They later settled with Toll; their neighbors entered into separate agreements with the company.
During the trial, Toll's attorney also referred repeatedly to the couple's relationship at the time of the house purchase -- Kristen was pregnant but they hadn't yet married, and Steve's divorce from his wife wasn't yet final -- a tactic that jury foreman Kevin Wilson said "incensed" jurors.
"We weren't going to fall for morality plays like that when we can see the real issue," Wilson said. "The real issue is not morality, it's stucco. And the material on their house was not stucco."
Yet when the Globe questioned Toll about its use of EIFS, the company refused to acknowledge that there is any real difference between stucco and synthetic stucco. In a written reply, Toll said that real stucco "has never been a naturally occurring material" and it described EIFS as an "evolution of stucco."
Like other Toll buyers, the Madays can tick off a host of other problems with their home, some unresolved: a warped front door frame, a sliding door that doesn't work properly, cracks in their bathroom, grading problems, puddles in their yard.
Said Steve Maday: "I feel like they were just trying to put up houses as fast as they could, inexpensively."
"I don't think we would ever buy another Toll house," Kristen Maday added. Yet the Madays said that, despite their problems with Toll, they still "love the location, love the neighborhood, love the floor plan," and have no intention of moving or selling their house.
That view underscores one major reason Toll has not faced more opposition from home buyers. Many of them like the airy designs of their houses, and say they have bonded with neighbors -- sometimes over a common frustration with post-closing problems. And, even where defects exist, their home values have soared.
When the Globe first asked Toll about the EIFS issue, a spokesman denied several times that the company had ever used the product in New England.
Later, the spokesman acknowledged Toll has three homes in Canton with EIFS, as well as those in Connecticut.
In a subsequent written communication from Toll, the company asserted that all three Canton homes had been inspected in 1999 by the Toll subcontractor who had installed the material, and a Toll project manager, "with the homeowners' knowledge and consent."
But one of the Canton homeowners, Ginter Sotrel, said no one from Toll had asked his permission to inspect his home, and that no inspection had occurred.
EIFS originated as a commercial covering, or cladding, in post-World War II Europe, where it was used to resurface buildings pockmarked with damaged masonry. By the late 1960s it had made its way to the United States, eventually gaining considerable popularity in commercial construction. It began to crop up in home building in the mid-1980s.
While real stucco is created by applying a thick mixture of cement, limestone, and sand to steel mesh, EIFS is made through a different process.
Its top coat resembles the gravelly surface of real stucco, but it is applied thinly -- 3/32 of an inch, compared to about two inches of real stucco. The bulk of its thickness is a styrofoam-like insulation board that is lighter and easier to cut than plaster, stone, or wood, allowing it to be shaped more cheaply and easily than other claddings. But it is also more easily damaged than other building exteriors; EIFS is particularly prone to damage when bumped by, for example, lawnmowers.
EIFS's insulation board component is also designed to provide superior energy efficiency by insulating a building from the outside in, rather than the inside out. But this design comes at a price: If moisture seeps behind the board, as often happens when water leaks through at its junction with doors or windows, it's likely to remain there.
Indeed, EIFS's chief legacy to date is untold damage to thousands of homes caused by the product's history of trapping moisture beneath its multiple layers. Often, that moisture saturates underlying building materials, wreaking havoc on a house's structural integrity.
"EIFS is a great product, as long as you don't mind the fact that your walls are going to rot," said attorney Carl W. Thurman, whose Wilmington, N.C., law firm helped secure a $20 million settlement in a 1996 class action suit brought against several synthetic stucco manufacturers.
Damage caused by EIFS has led North Carolina, Georgia, and Chicago to ban the use of "barrier EIFS," as opposed to an updated version of the product called "drainage EIFS," outright. The 2000 International Residential Code, a national building code, prohibits use of the former. And at least one insurance company refuses to cover buildings constructed with any type of EIFS.
Toll Brothers and other builders continued to use barrier EIFS at the same time they faced a barrage of complaints -- and lawsuits -- from customers whose barrier EIFS-damaged homes required extensive, expensive repairs; some EIFS-covered homes have had to be bulldozed because they were so rife with mold that they posed a health hazard to their occupants.
Some of those lawsuits allege that Toll and other developers, including Pulte Home Corp., the nation's largest builder, persisted in using barrier EIFS despite evidence that they have been aware since at least the mid-1990s that the product can cause moisture problems.
Suits have also been filed against several EIFS manufacturers, including Dryvit Systems, Parex Inc., Senergy, STO Corp., WR Bonsal, and United States Gypsum. To resolve its liability, Senergy has created a $20 million national settlement fund and is paying damages on a first-come, first-served basis. Separate settlements have been reached with other manufacturers, and some suits remain unresolved. One company, US Gypsum, has stopped manufacturing EIFS altogether.
EIFS manufacturers blame the product's problems on faulty installation by poorly trained subcontractors and lax oversight by local building inspectors. They maintain that, properly applied, EIFS works as well as, or better than, other commercial claddings.
This finger-pointing angers EIFS opponents, who accuse manufacturers of the product of casting blame everywhere except where it rightly belongs: on the industry itself.
And many builders say it is unrealistic to market a product whose effectiveness hinges on flawless application. "Any system that depends on perfect construction is inherently defective, because there ain't no such thing," said Boston attorney David Rosenthal, who represented the Commonwealth of Massachusetts in several lawsuits it brought against EIFS contractors and manufacturers who used it on public housing.
And even though Toll Brothers has switched to real stucco at its two subdivisions in Illinois, where house prices begin at just under $600,000, the firm has been hit with the same complaints of slipshod construction that have plagued it elsewhere around the country. A private inspection arranged by a homeowner at one of the Illinois developments revealed that the stucco on one new house was applied so poorly that it, too, is water-damaged and must be stripped and re-stuccoed.
Yet when Cliff and Robin Singer notified Toll of apparent moisture penetration -- including black and green patches of mold creeping up the interior walls of their garage -- Toll blamed the problem on humidity caused by a space heater.
"To our deep dismay ... we have invested in a Toll house which is literally rotting away around us," said Cliff Singer, who moved into his $752,000 house at the Estates at Lake Barrington in Barrington, Ill., last August.
Echoing other Toll home buyers, the Singers say they were dazzled by Toll's marketing, "wowed to death" by its model homes, and convinced that the company's size and national stature assured high quality. Yet as problems arose -- from a bouncing living room floor and a too-small bedroom to defective carpeting and a drainage problem that turned their yard this winter into what they called a "septic water ice rink" -- it took repeated efforts to get Toll to respond.
And due to rapid turnover of site supervisors, the Singers found themselves communicating with an ever-changing lineup of Toll personnel, a refrain the Globe heard in many other Toll subdivisions.
Their disappointing experience has led them to believe that what prospective buyers hear from Toll site management and salespeople is "just rhetoric," Cliff Singer said. "What we were told we were getting and what we ended up getting are very different things."
This story ran on page A01 of the Boston Globe on 5/1/2001.
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