Not all victims of Chinese Drywall are homeowners.   Oftentimes, a tenant is living at a property with Chinese Drywall, or a property owner is a landlord to an apartment or home with Chinese Drywall.

Take, for example, a news story from the Baton Rouge’s Advocate about a tenant who was forced to move out of their rented home because of Chinese Drywall.   Or, a news story about a Florida landlord to an apartment complex housing low-income elderly people, who were evicted en mass because the complex had imported drywall.

These scenarios present interesting legal questions:

• Can a tenant break a lease because of Chinese Drywall?
• Can a landlord evict a tenant because of Chinese Drywall?
• Is Chinese Drywall a “breach” of the lease?
• Should landlords evict / move tenants when properties have Chinese Drywall to avoid responsibility for future health effects?

While the answer to this question will greatly depend upon the terms and provisions with the lease agreement, here is what that Louisiana Civil Code may have to say about the matter.

The Landlord’s Warranties

The landlord makes a number of warranties to its tenants through the Louisiana Civil Code, and it can be argued that the existence of Chinese Drywall at the leased premises is a breach of these warranties.

La. C.C. art 2696, for example, provides that the “lessor warrants…that the thing is suitable for the purpose for which it was leased and…is free of vices or defects.”   This warranty extends to vices “that arise after the delivery of the thing.”    The following code article (2697) indicates that the warranty encompasses vices or defects not known to the lessor.

The landlord may be liable to the tenant for any damages that result from the landlord’s breach in warranty.   These damages may include the cost for alternative accommodations, moving expenses, and sustained personal injury or health damages.

For landlords who are leasing properties with Chinese Drywall, it is important to consider the statutory warranties made to tenants.  The existence of Chinese Drywall may be a breach of their warranties, and if so, landlords are likely liable to tenants for any ensuing damages.

Statutory Termination of the Lease

In addition to the landlord’s warranties, another area of Landlord/Tenant law implicated by Chinese Drywall regards the statutory termination of leases.

La. C.C. art 2714 provides that if a thing is lost or totally destroyed, without the fault of either party, the lease terminates and neither party owes damages to the other.  In the case of partial destruction or “substantial impair[ment], that is not the fault of the lessor, the tenant may dissolve the lease or reduce their rent.   If the lessor is at fault, the tenant may also seek damages.

What’s The Rub?

Chinese Drywall presents some interesting issues for Louisiana Landlord / Tenant law.   Is the existence of Chinese Drywall a vice or defect that breaches the landlord’s warranty, or a partial destruction or “substantial impairment” to the property?    Are landlords entitled to damages, or just dissolution of the lease?    Should the landlord relocate tenants to mitigate its damages?

As is the case with most Chinese Drywall scenarios, as to landlord/tenant laws, there are more questions than answered here.    Landlords and Tenants with Chinese Drywall should seek the counsel and advice of an attorney.

Wolfe Law Group’s own Scott Wolfe, Jr. provides the leading quote in a recent article from HousingZone.com:   Homeowners Increasing Suing Local Builders.   Scott gave this quote to the publication:

The best and quickest way to get the drywall out is to go after the builder, who ultimately has to live up to his warranty.   If the consumer tinkers with class-action lawsuits that can drag out for months, their warranties start to expire, and their chances of getting something from the builder are slimmer.

If we’ve said it once on this blog, we’ve said it a thousand times (here, here, here, here and here).

While class action suits have their purpose, it presents real challenges to homeowners who are interested in getting the Chinese Drywall out of their property.

The class action suits have their warts, and homeowners may find a better remedy by filing a direct action against their builders, suppliers and insurers.

With every day that passes, however, deadlines are drawing closer.    The one year deadline for insurance claims and torts.  The 3-4 year deadline with claims in redhibition.   And the 1, 2 or 5 year deadlines associated with construction warranty claims.

The worst news about the deadlines being that many, if not most of the statutory periods begin when the drywall was delivered or installed…and not when the homeowner learned of the problem.

All was quiet with regard to individual lawsuits against builders and suppliers, but recent news reports indicate that the remedy is gaining some steam.

The article from HousingZone.com is not alone.  The Times Picayune recently reported that homeowners are more frequently suing builders, and Baton Rouge’s Advocate had the same analysis.

Could an avalanche of Homeowner v. Builder suits be on the horizon?

If you’re interested in learning more about bringing a suit against your builder, or your construction company is interested in bringing suit its suppliers and insurers, contact Wolfe Law Group today.

Baton Rouge’s The Advocate ran a story on June 29th titled “Drywall problems leave many in lurch.”

The story discussed how so many homeowner victims of Chinese Drywall are left in the balance of class action legal battles, failed construction warranty claims and legislative stalemates.

One person interviewed, Darryl Ledet from Praireville, stated that his home was built with Chinese Drywall by Sunrise Homes, and that when he contacted the company about finding defective drywall, “the company sent a letter saying it was not responsible for further repairs because, under Louisiana law, product defects are covered under a one-year warranty.”   Ledet’s warranty, the article states, had expired.

Did Ledet’s warranty expire in one-year?   Is his cause of action against Sunrise Homes hopeless?

Louisiana New Home Warranty Act

Since Ledet’s homes appears to be a new home, the New Home Warranty Act would likely apply.

The Louisiana New Home Warranty Act provides the “exclusive remedies, warranties, and preemptive periods as between builder and owner…and no other provisions of law relative to warranties and redhibitory vices and defects shall apply.”

As such, if a home qualifies as a “new home” for the purposes of the act, and has Chinese Drywall, the homeowner’s remedy against the builder (and its insurer) will likely lie exclusively in the New Home Warranty Act.

According to La. R.S. 9:3144, every builder warrants the following to the owner, as it may apply to Chinese Drywall claims:

(1) That the home will be free from any defects due to defects in materials or workmanship not regulated by building standards for 1 year.

(2)  That the home will be free from major structural defects due to other defects in materials or workmanship not regulated by building standards for 5 years.

1 Year or 5 Years?

One of the first questions to answer with respect to Chinese Drywall damages is whether the applicable warranty period would be 1 year or 5 years.

Since most Chinese Drywall was installed between 2002 and 2008, homeowners first discovering the damage now will have difficulty proceeding against their builder if the 1 year period applies.   If the 5 year period applies, builder liability is more likely.

To determine whether the 1 year or 5 year period applies, we must under the meaning of the term “major structural defects.”  The definitions portion of the act (9:3143) provides as follows:

Major structural defect’ means any actual physical damage to the following designated load-bearing portions of a home caused by failure of the load-bearing portions which affects their load-bearing functions to the extent the home becomes unsafe, unsanitary or is otherwise unlivable:

(a) Foundaiton systems and footings; (b) Beams; (c) Girders; (d) Lintels; (e) Columns; (f) Walls and partitions; (g) Floor systems; (h) Roof framing systems.

In hopes of having the 5 year warranty apply, one could argue that Chinese Drywall damage is a “major structural defect” as contemplated by the Act because it is actual physical damage to the walls, which affects their load-bearing function to the extent the home becomes unsanitary or otherwise unlivable.

Of course, there is some question as to whether damage to sheetrock is actually damage to a “load-bearing portion” of the home.

A similar question came before the Louisiana First Circuit just a few weeks ago in Hutcherson v. Harvey Smith Construction, Inc., 7 So.3d 775 (1 Cir. 2009).

In the Hutcherson, the home had faulty or failed roof flashing causing leaks.  The contractor argued that this was not the failure of any load-bearing portion of the home, and the homeowner argued that the roof as a whole served a load-bearing function, thus qualifying any damage to it as a “major structural defect.”

The court agreed with the homeowner.

HSC’s own expert civil engineer, Dr. Jerry Lynn Householder, testified that roof decking in a house is part of the framing [Pg 7] system and serves a structural function. Dr. Householder further testified that the rotten decking was caused by improper roofing design which allowed water to pool and leak under the shingles. The Hutchersons’ expert roofing consultant, Patrick E. Heil, testified  [*10] that the damage to the Hutchersons’ home was not the result of normal wear and tear on a roof, but rather was the consequence of a faulty roof design or the way the roof was built. The trial court concluded that this type of damage was clearly contemplated by the NHWA in LSA-R.S. 9:3143(5) in which actual physical damage to roof framing systems is specifically enumerated as a major structural defect.

Based on this ruling, homeowners may have an argument that the damage to sheetrock and other building elements by the Chinese Drywall constitutes a ‘major structural defect,’ and therefore, that the 5 year warranty period applies.

Is Chinese Drywall Damage Exempt?

Once a warranty period is established, work is not complete in determining whether the New Home Warranty Act provides homeowners a remedy against their builder.   Another question is whether the damage is specifically exempt from warranty.

La. R.S. 9:3144(B) lists 19 exemptions from the act.    Here are some exemptions that may apply to Chinese Drywall damage:

(B)(4)(f):  Any damage to the extent that it is caused or made worse by Dampness, condensation, or other damage due to the failure of the owner to maintain adequate ventilation or drainage.

(B)(14):  Bodily injury or damage to personal property.

(B)(19):  Mold and mold damage.

Remember, NHWA May Not Apply

Now that we have discussed the New Home Warranty Act to some length, remember that the Act may not apply to every home and every builder/homeowner relationship.

In post-Katrina Louisiana, much work was being performed to renovate damaged homes, and a lot (if not most) of the Chinese Drywall was installed into these projects.

If the Chinese Drywall was installed into an existing facility, the New Home Warranty Act would not likely apply.