Coming unglued over stucco; Damp: Problems with synthetic stucco have led to lawsuits, and some insurance policies now exclude it. Still, many builders say the reviled stucco is a good product if installed correctly.

THE BALTIMORE SUN

It can go undetected for years, doing devastating damage beneath the skin of a home. The first hint of trouble may come as a water stain on a wall or near a window sill. Or, in Gail Sandager's case, when mold grows on a picture.

"I was cleaning one day and [the picture] was all earth tones. And I thought, 'earth tones?' That's not the picture anymore. That's all mold," Sandager said.

So she lifted the picture from the wall, but part of it stuck, taking a piece of the drywall with it. Behind the picture was a large water stain.

"I started to investigate it, and what we found was that the paper backing on the picture was [absorbing] the moisture that was contained in the wall. I hadn't noticed it until [the] poster was full of algae and mold," she said.

What Sandager recently learned was that the Roland Springs townhouse she bought in 1993 had sustained serious damage after water somehow seeped through the home's "synthetic stucco" exterior, got trapped, and eventually rotted the wood interior.

The estimate she got for repairs: $20,000.

But she wasn't the only one with problems. Two of her neighbors who also bought homes built in the final phase of the development by Keystone Homes Inc. in 1989 had damage.

Their only recourse was to do what hundreds of other homeowners in North Carolina, Tennessee and Georgia had been doing for the last five years, take the manufacturers of the synthetic stucco -- known as Exterior Insulation and Finish System (EIFS) -- and the builder to court.

Dryvit Systems Inc. of West Warwick, R.I., and Sto Corp. of Atlanta -- two of the nation's largest manufacturers of EIFS -- along with the now defunct Keystone Homes Inc., were named in the class action suit filed by attorney Gary E. Mason in behalf of the three Roland Springs homeowners.

Mason, a member of the Washington law firm of Cohen, Milstein, Hausfeld & Toll, said the suit he filed Jan. 5 was the first of its kind in Maryland. The suit, filed Jan. 5, does not extend to previous sections of the North Baltimore development constructed by other builders.

But what may really be on trial here is EIFS itself. For the last five years, the system -- used mostly in more expensive homes -- has been under attack as an exterior finish. In a strange way, it is a waterproof system that may work too well.

Builders for years have used EIFS because it is cost-effective, architecturally pleasing and an excellent insulator. In commercial real estate, it has been used widely with little controversy.

The system in question -- called a barrier system -- is generally made of four elements: a foam backing, mesh, an adhesive and a top decorative finish coat. The product is waterproof.

Critics claim, however, if water does get behind the barrier system, through windows or doors, there is no place for it to escape, and the rotting begins.

Who's at fault?

Manufacturers defend their product and claim shoddy workmanship is to blame. Lawyers say the manufacturers never properly instructed workers on how to apply the exterior finish. Others say that the homeowner bears some responsibility, since the system needs periodic checking for cracked caulking and flashing.

"When this problem broke in 1995 in Wilmington, N.C., the immediate reaction from the entire EIFS industry was that this was a very localized problem. And it was the fault of shoddy builders in Wilmington, N.C.," Mason said. "And if nothing else, we have proven over the years that that is a lot of nonsense because this is happening all over the country."

But Joyce Cereto, a paralegal in Dryvit's legal office who has mediated claims, says the company and the product are not at fault.

"Everybody has been engaged in finger-pointing. I come to the table to mediate these cases and I tell you, sir, that the manufacturers of the EIFS are getting screwed, in plain English," Cereto emphatically said.

"We try to make good. We are a good-faith effort company," she added. "We've expended millions of dollars to try to make our product a good product that will endure forever. But if it is not adhered to with special specs and details to follow, pocket guides to follow, application details. If those things are not done correctly, it is not going to work."

And then there are other issues to consider. Could the problem become as significant in the Baltimore metropolitan area as in states further south? What are the disclosure responsibilities for the real estate agent and home inspectors when dealing with an EIFS home? And once disclosed, what might be the effect on property values?

But one thing is for sure -- like some of the affected homes -- the whole issue is a mess.

A history lesson

Synthetic stucco has been in use since the end of World War II. Because it was such a good insulator, it gained favor with contractors during the energy crisis of the 1970s.

And as housing began to boom in the Sun Belt during the 1980s and early 1990s, more builders turned to the inexpensive, attractive system. Homeowners could get that Mediterranean look in a variety of pastel colors.

But in 1995 problems began to surface in New Hanover County in North Carolina, where a Wilmington building inspector began to investigate several homes with severe water damage.

Soon lawsuits were popping up everywhere in North Carolina. Million-dollar homes were suffering from wood rot. The manufacturers -- among them Dryvit, Sto, USG Corp. and Senergy Corp. -- said it was a regional issue and not to worry.

But it was apparent that something was going wrong. Settlements were in the tens of thousands of dollars.

"Measured in terms of dollars, the controversy probably represents the largest consumer problem ever to hit North Carolina," Assistant Attorney General David Kirkland wrote in a report last year.

The problem became so great that the North Carolina attorney general's office banned use of the material, and the North Carolina Real Estate Commission required a written disclosure to potential buyers of EIFS-clad homes.

Similar problems began to arise in Tennessee and Georgia, among other states.

Insurance exclusion

In 1996, Maryland Casualty Co., now a part of the Zurich Financial Services Group, began to exclude EIFS-clad homes from builders' policies.

"Our claim experience with regard to EIFS had turned adverse, and in a significant enough way that we thought the exclusion was necessary at that time," said Al McComas, general council for Zurich Small Construction, who said the company had more than 500 claims related to EIFS. "When we got down to the nitty-gritty, we could see that most of it is related to this type of cladding material."

McComas, who said his company writes policies for 30 percent of small builders nationwide, said claims have not only come from North Carolina, but from South Carolina, Atlanta, Hampton Roads, Va., and as far away as Kansas. But there have been few claims from Maryland.

He wouldn't assess blame but said, "All we know for sure, and I'm willing to say at this point, is that the claim experience with this cladding material is far higher than for any other cladding material that we insure. Whatever the cause may be, we have found that we can no longer insure that exposure."

With lawsuits mounting, two EIFS manufactures decided to change strategy.

Chicago-based U.S. Gypsum abandoned the barrier system and in 1998 developed a "water-management" system where water could escape through channels. Last year, Senergy settled its part of a national class action suit filed in North Carolina, agreeing to pay $20 million to help repair homes that had moisture damage. Meanwhile, the suit continues against other companies in a North Carolina Superior Court.

"The media has done a bang-up job of butchering us," said Dryvit's Cereto. "It's really easy to point to us and say, 'Your system is a failure, it doesn't work.' I'm sorry, but over the years [builders and installers] have lost faith [with] what they care about [and] what they produce and what they build.

"They [builders and installers shortchange] the American public and they walk away. And we stand here and try to defend it and keep going.

"People have been so hysterical, they have actually ripped their homes apart and recladded, and guess what, they are going to have the same problem if those windows still leak."

Sonny Mosier, Maryland regional manager for U.S. Inspect Inc., a national home inspection company in Fairfax, Va., says: "If the installer of the material followed the manufacturer's guidelines and did what he was supposed to do, and was trained to do, and was knowledgeable about the material I would venture a guess [homeowners] would have very few problems."

But Mosier added: "The unfortunate part is that most of the people who put this on originally, up until a year ago, were not trained to install the material. They were construction workers, they were doing the best they could do, but they were not putting the material on right."

Dwight Griffith, a luxury-home builder in the Baltimore area, agreed.

'Never had a problem'

"I've used this product for almost 20 years and have never had a problem," Griffith said.

"But there are definitely subcontractors out there working out of pickup trucks who don't have a clue of what they are doing.

"If a builder doesn't supervise the work, doesn't maintain any product control systems and gets the cheapest sub to do the work, and doesn't specify how they want it installed, then that's all you are going to get. There are many, many builders run their businesses [that] way. Get 'em up. Get them out and worry about it later."

As the controversy continued, the National Association of Home Builders did its own investigations and issued a checklist to alert its members of the potential problems with the system.

The NAHB, while stating it makes no endorsements or recommendations about EIFS systems, told its members that it believes homes with "barrier" EIFS "can develop moisture intrusion problems even when properly constructed according to industry standards."

Within its checklist, it notes that the EIFS industry "does not have standard specifications," and that each manufacturer's system "requires special training." It warns its members to "insist that a trained crew leader be on the job at all times during installation."

New "water managed" or "drainable" systems are being developed and used, but the NAHB has withheld judgment on "whether the drainable systems are less problematic than barrier EIFS."

Howard Saslow, owner of Encore Homes and past president of the Home Builders Association of Maryland, has used EIFS on homes. But with the recent allegations, he's cautious about taking on similar projects.

"There would have to be some hold-harmless clause in the contract that makes the customer aware of the potential problem, and that they can't come back on us as a builder," Saslow said.

"I would also go as far to say that any future work that I would do would be a drainable system. It's scary. You really do have to think twice about doing it. You really do."

No one -- not real estate agents, builders or home inspectors -- can say for sure if the EIFS problem in the Baltimore metropolitan region is as bad as it is elsewhere.

"Whether we've got the same level of problems that they have in North Carolina, I haven't seen a documentation that shows that the level of problems do exist," said Saslow.

"We don't do nearly as many EIFS systems up here as they do down south. So the degree of failures that we've found are not going to be as great. We have not had anywhere near the same percentage of failures as they did down south."

But Mosier said his company inspected 416 homes in the Baltimore/Washington corridor last year where EIFS moisture problems were thought to exist. Of those homes, Mosier said 71 percent had sustained some kind of structural damage.

Mosier also said his company, which conducts moisture inspections at a cost of $150 per wall, said the typical cost to fix structural damage runs at about 1 percent of the home's value. "We are only being brought in when they suspect a problem," he said.

The costs can go higher -- 6 percent to 12 percent of a home's value -- if a homeowner decides to fix and update the whole home so that water intrusion won't be a problem down the road.

And when his inspectors -- Mosier has two who are EIFS certified -- go on a job, they are quick to disclose to a potential buyer that a home is made with EIFS.

Homeowner needs to know

"The homeowner needs to know there are class actions suits out there and there has been a history of problems with the materials," Mosier said. "We are there as much as an educational service as we are there to find problems."

Marc Witman, an associate broker with Long & Foster Real Estate Inc. in Pikesville and president of the Greater Baltimore Board of Realtors, recalled one buyer who backed out of a contract after being informed by a home inspector "in a very sensational manner" that the home was EIFS clad. But, Witman added, he sold the same home to another buyer who had previously lived in an EIFS house and had little concern.

"I knew nothing about it until a home inspector pointed it out to me on a house that I had sold," Witman said. "Now when I am showing a buyer a house, I say, 'You just need to understand this. There has been some issues raised about whether it is inherently a problem.' And I defer to a home inspector or if they want to do their own independent research.

"I feel because I am aware that there have been issues, that I have an obligation to inform my buyers that there could be an issue and they need to find out for themselves what their comfort level is.

"Once the knowledge is there, you absolutely have to pass it along."

So should area homeowners and potential buyers of EIFS homes be wary? Is the Roland Springs lawsuit just the beginning of a larger problem? Both Mason, Gail Sandager's attorney, and Mosier suggest if there is doubt, get the home inspected.

"If you catch it early enough and do some modifications around the window openings and any of the other penetrations coming through the exterior surfaces" the rotting can be stopped, Mosier said.

But for Sandager the solution is not so simple. "Knowing what you know, if you looked at a home built out of this stuff would you buy it? If I could dump the house I would," she said.

Pub Date: 1/31/99

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