Dive Brief:
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National homebuilder D.R. Horton was fined $16.3 million in U.S. Bankruptcy Court last month for mismanaging the funds of and cutting services at the 355-unit Majorica Isles condo development in Miami, according to The Wall Street Journal.
- The project broke ground in 2006 and, six years later, its homeowners association filed for bankruptcy. D.R. Horton established and ran the HOA while the project got off the ground, but didn’t effectively manage the payments, the court found, and existing and prospective tenants were thus led to underestimate costs.
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D.R. Horton handed over HOA management to residents in January 2011 after building half as many units there as originally planned. Punitive damages of $12.5 million were awarded to the association, which are expected to be used for finances.
Dive Insight:
D.R. Horton was the country’s largest homebuilder last year, posting revenues of more than $10 million, according to data from Builder. The company’s scale is part of the reason for the hefty fine handed down following the suit, which U.S. Bankruptcy Judge A. Jay Cristol said evidenced "a modern-day story of David and Goliath," the South Florida Business Journal reported.
Earlier this year, D.R. Horton was ordered to pay $9.6 million in defects repairs at a 240-unit condo development in Jacksonville, FL. Residents there had made claims over a four-year period of shoddy construction resulting in leaked roofs, faulty windows and doors and cracked stucco.
KB Home, the sixth-largest U.S. homebuilder, settled for $23.5 million in Florida courts earlier this year after allegations that it knowingly sold properties with building violations and that it didn’t build some of the homes to client specifications. The company said it had already paid $71 million to fix damage from water penetration due to construction defects in the homes as a result of the violations. As part of the settlement, the builder must also repair a portion of the homes included in the lawsuit.
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