Homebuilder KB Home and its Florida subsidiaries reached a multi-million dollar settlement with the Florida Attorney General’s Office on Thursday over alleged construction violations.
According to the Attorney General’s Office, KB Home allegedly failed to make certain disclosures to homebuyers regarding the construction of some of its homes and improperly denied warranty coverage to certain homeowners who were otherwise covered.
After a three-year investigation of KB Home for violations of the Florida Deceptive and Unfair Trade Practices Act, the homebuilder will pay at least a $23.5 million settlement.
"KB Home Florida has cooperated with the Attorney General's office to address issues with residential stucco performance, which we consider to be an industry-wide challenge in Florida. We share the Attorney General's interest in improving residential stucco standards in Florida, and we are proud to have implemented comprehensive stucco standards, which we are backing with a new, industry-leading warranty on stucco. KB Home is committed to providing quality homes and we stand behind our product,” KB Home said in a statement.
Under the settlement, KB Home agreed to repair additional homes that are up to 10 years old and meet certain criteria.
KB Home must also provide $6.5 million to the Attorney General’s Office to pay restitution, including out-of-pocket expenses for homeowners who have incurred expenses as a result of construction defects and construction repair work, as well as to pay the costs of investigation and settlement administration.
In addition, the homebuilder will undertake certain changes to its construction and business practices and spend approximately $17 million over the next five years to improve its construction techniques, train its subcontractors and use improved materials in its new construction.
A third-party inspector must review KB Home's new construction in Florida.
According to the complaint filed simultaneously with the stipulated consent judgment, KB HOME and its subsidiaries allegedly violated the Florida Unfair and Deceptive Trade Practices Act by:
- Failing to disclose to certain purchasers in Florida that the homes being constructed violated applicable building codes.
- Failing to disclose to certain purchasers in Florida that the homes being constructed did not conform with the original building plans and specifications.
- Denying certain consumers’ warranty repair requests because they purchased short sales or from banks after foreclosure proceedings, not proper exclusions under the KB HOME warranty.
- Refusing certain consumers’ warranty repair requests due to a lack of maintenance by the homeowner when the structure’s problems were attributable to defective construction.
[UPDATE: Story now includes a response from KB Home.]