Avalon Modular Homebuilder States He Followed Borough’s Directions

AVALON – A modular home builder who is one of two builders at the center of a new home warranty issue said his “reputation has been tarnished” and he has “been put out of business” because of the “story that came out by the borough.”
In speaking with the Herald Sept. 25, Edward Smith, owner of Artisan Fine Homes, LLC, of Avalon, said his “company has been hurt beyond repair” because the story “didn’t include the builder’s side. The borough is responsible for this; it’s been a detriment to my business.”
Smith contacted the Herald to present his story in a situation some call a “debacle” which became public in early August.
In June, the state Department of Community Affairs (DCA) levied sanctions against Avalon’s construction officer because 12 homes built by Artisan were not enrolled in the state-approved new home warranty program before certificates of occupancy (CO) were issued.
The DCA’s sanctions included a $600 fine against Construction Officer John Tracy for issuing COs for the dozen homes, and ordered him to re-take and successfully complete the state Construction Officer course.
The borough hired special counsel on Tracy’s behalf to fight the sanctions at an Aug. 8 meeting after hearing a statement by James Waldron, assistant business administrator, on the background of the events leading up to the sanctions.
As of Sept. 26, the DCA said Tracy’s hearing had not been scheduled because he is still under investigation.
Artisan License Suspended
Artisan Fine Homes failed to provide warranties to 17 homes in total; and agreed to provide the requisite warranties based on “estimated contract prices” because “builder records and contracts were destroyed due to Superstorm Sandy” per an Aug. 22, 2017 settlement agreement with the DCA. (Five homes were issued COs by Tracy’s predecessor, Sal DeSimone.)
The new home warranty premiums were calculated at a cost of $38,280, based on a formula that includes a percentage of the total contract price. The DCA agreed to waive late fees in exchange for Smith agreeing to provide the approved warranties and adhere to the payment plan of $1,497.91 monthly for 23 consecutive months beginning Sept. 30, 2017.
Smith had not made a payment since June 30, 2018, according to the DCA, so his license to operate in New Jersey was revoked Sept. 5.
The approved warranties were provided for the homes, whose COs were issued 2008-2012.
“At this point, it’s not financially feasible for me to make any payment,” Smith said, noting he is working in “sales for another company to provide a family livelihood.” He would not rule out payments in the future to have his license reinstated.
This is the second time Artisan Fine Homes’ license was suspended in regard to home warranty issues in Avalon.
In 2014, the builder registration for Artisan was suspended because it failed to provide proof of application and failed to supply the warranties on two additional homes.
According to the Order of Suspension, the firm “defaulted on his new home builder’s obligation” by not providing the warranties.
At that time, his license was suspended for about two months before he provided the warranties and paid a reduced penalty of $3,486.43.
According to Lisa Ryan, DCA spokesperson, “DCA’s Bureau of Homeowner Protection does not revoke new homebuilders’ registrations unless there is a determination made by a judicial authority, with competent jurisdiction, directing the revocation of the new homebuilder’s registration.”
Sought Borough Direction
Smith said he has built more than 150 modular homes in Avalon, Stone Harbor, and Maryland since starting his business in 2001, working exclusively in the boroughs since 2006.
He obtained the state-approved warranty prior to 2009 because he claims he was unaware of the factory warranty.
“The factory included the price of the warranty in the number they gave me, so it wasn’t called out,” Smith said. “They gave me a package with warranties for things like the windows, which I just put into a folder and gave to the homeowner. I didn’t even realize there was a factory warranty.”
One day, he said he looked at the information and saw the factory warranty issued by the same company from whom he bought the state-approved package.
“They had the same appearance,” Smith said. “I approached Sal DeSimone in person with both warranties and asked if the factory warranty would suffice. He said yes. That’s when I started using it solely.”
Smith said at the time, he “didn’t look at the two policies hard enough to see what it covered, or didn’t.” He depended on DeSimone’s direction.
Efforts to reach DeSimone were unsuccessful.
Smith explained the factory warranty covered everything in the structure as delivered from the manufacturer. “It didn’t cover the foundation, decks, and porches we put onsite,” he explained.
“I had many meetings with Mr. Waldron, Mr. DeSimone and Mr. Tracy about what was permitted or not,” Smith said. “I followed their leads; they told me what I had to do. If I had questions about any of the rules, I went to them to get guidance on how it affected me. They are the ones who enforce the rules. They are there to watch out for the homeowner.”
Followed Borough’s Lead
Smith said he also “followed the borough’s lead” when he tried to use the 2-10 systems and appliance warranty plan. At least two homeowners have said Smith tried to pass off the 2-10 plan as the state-approved plan.
“I found the 2-10 plan when I was researching plans and went to the borough (Waldron and Tracy) and asked if I could use the plan since it covered appliances and they weren’t covered under the state plan,” Smith said. “I followed Waldron’s and Tracy’s lead, which unfortunately led to this situation.”
Be Familiar with Rules
Prior to applying for a new homebuilders’ registration, DCA spokesperson Ryan said, “An applicant should familiarize him or herself with the regulations governing new home warranties and builders’ registrations, which are found in the New Jersey Administrative Code. It is the responsibility of the new homebuilder to read and understand these regulations, which include a chapter on Warranty Coverage and Standards. The regulations are readily available on the DCA website.”
Also, the DCA spokesperson pointed out that the New Jersey Administrative Code states “No certificate of occupancy should be issued for any new home built by a builder except after a builder files with a municipal construction official proof that the new home has been enrolled in either the state New Home Warranty Security Plan or a private plan approved by DCA. A construction official should be aware that a five-year manufacturer’s warranty is not an approved warranty plan.”
Homeowners Not Notified
In late 2012, according to a timeline Waldron prepared for borough council, the DCA notified the borough that the “10-year modular factory warranty did not meet state requirements and should not be accepted.”
When Tracy contacted the DCA about what action he should take with respect to homeowners who were sitting with non-compliant warranties, Waldron said the DCA “instructed Tracy that he was not to notify homeowners with incorrect warranties.” Homeowners would be dealt with on an individual basis as those homeowners became aware they did not have the correct warranty.
Smith said he “didn’t think that was kosher, but that was between the borough and the state.”
The fact that the borough did not notify homeowners has raised the ire of residents affected by the warranty issue who have addressed at least three borough work sessions/meetings.
When contacted about notifying homeowners, the DCA spokesperson said, “Please note the language of the letter reads,  ‘…neither the Bureau nor the Borough of Avalon would be required (emphasis added) to conduct an investigation into the matter or notify Artisan Fine Homes’ customers that they may be entitled to a 10-year limited new home warranty.  It was decided that we would deal with homeowners on a case-by-case basis as they arose.’
“Although it was decided not to require an investigation or notification at that time, the borough had the option of being proactive with regard to this issue,” the spokesperson said.
“The Borough was not given a directive by DCA to not act. We would like to make clear that there is a distinction between not being required to act and being directed not to act.”
Letter Called Deceptive
Smith said he was “unaware of what was going on in the background between the borough and state” when he was first notified that he didn’t have the correct state warranties.
In July 2016, Smith said Waldron and Tracy asked him to circulate a letter to his homeowners explaining the warranty issue and asking them to sign the letter agreeing to accept the factory warranty in lieu of the state-approved program and to “accept a personal guarantee by Artisan Fine Homes to cover any and all others outside of the manufacturer’s warranty.” He indicated in the letter “this would satisfy the state.”
Smith said Waldron “strongly persuaded me to send the letter out” and Tracy “told him to send the letter” which he drafted himself and reviewed with them.
Upon learning of the letter, the DCA sent Smith a letter ordering him to “cease and desist” the dissemination of all materials which they called “deceptive and misleading.” They also said the claim that the state agreed with the exchange was “false.”
Smith said seven to nine homeowners signed the agreement before he was stopped.
Homeowner Claims Untrue
Lastly, Smith said claims by homeowner Mary Ann DeLellis about being unable to reach the builder or get another builder to repair her leaking roof were untrue.
DeLellis appeared at the Aug. 22 Avalon Borough Council’s work session expressing frustration with her inability to get help to repair the leak.
Smith said that over a year ago, he had three contractors check out the problem before one figured out what was causing it and repaired it. He also said he spoke with the homeowner because “they (DeLellis) wanted to be there when the contractors appeared.”
DeLellis was unavailable for comment.
No Contact with Brother
Smith also said he has “zero correlation” with his brother Chris, owner of Avalon Development Group, LLC, the other modular builder involved with the Avalon warranty issue.
Smith said his brother worked for him for a period of time, but “didn’t do things” the way he (Ed) requested. His brother left the company and eventually started his own.
Four Avalon Development Group homeowners still do not have the correct warranties. Its license was suspended Jan. 9 because it failed to get proper warranties for 14 homes in Avalon and two in Ocean City and did not pay a reduced fine of $124,766.14.
Smith said he has no contact with his brother.
The New Jersey phone number listed on the Avalon Development Group website is no longer in service. Efforts to reach Chris Smith at the Maryland number listed on the website were unsuccessful, as were attempts to reach his reported attorney.
A Scarlet Letter
Smith said his family has owned property on the island since 1966 when he summered in Avalon as a youngster.
“I’ve lived on the island for 54 years,” he said. “I chose to make my livelihood here.
“I’ve been put out of business not because of shoddy work, but because of this warranty issue,” he continued. “It’s my integrity, my business’ and family’s integrity that have been damaged. My livelihood depends on my reputation.
“I thought I did my due diligence checking with the borough,” he continued. “I could have slid the warranty under the door, but I didn’t. I was told it was fine. I’m not backing away from this but will take measures to defend my personal name and company name. I am looking into avenues to go after the borough.”
Smith said he had “four or five homes close to contract this year that went away.
“My name has been dragged through the mud,” he added. “My reputation has been tarnished. I feel like I’m wearing a scarlet letter.”
Artisan Warranties Valid
According to the DCA, the new home warranties provided by Artisan Fine Homes, LLC will remain valid for the entire term of the warranty and are backed by the warranty guarantor, which in most cases is either the State of New Jersey New Home Warranty Program or the alternate private new home warranty program, Residential Warranty Corporation.
“If a homeowner has a new home warranty and would like to file a claim, he or she should follow the instructions in the new home warranty booklet concerning the filing of a warranty claim,” said Ryan.
“In accordance with the warranty agreement, if a builder defaults on a warranty claim, the warranty guarantor acts in place of the builder.
“If the homeowner files a claim against the warranty, it shall be deemed an election of remedy and shall bar the homeowner from all other remedies for that claim,” she added.
“However, the owner has the right to elect other remedies such as suing the new homebuilder in a court of competent jurisdiction. It is important to note that the homeowner may not file a claim and sue the builder for the same new home warranty claims.”
To contact Karen Knight, email kknight@cmcherald.com.