Hawaii lawmakers are examining alleged defects in an existing state law intended to resolve alleged defects in new home construction cooperatively.

A pending bill to reform the law has largely pitted developers and the construction industry against attorneys representing homeowners in what a recent University of Hawaii research report describes as a sharp rise of home construction liability litigation throughout the state.

The University of Hawaii Economic Research Organization report said at least 17,555 new Hawaii homes over the past 25 years, or 702 homes annually on average, have been subject to construction defect litigation.

UHERO’s report, which was commissioned by the nonprofit Hawaii HomeOwnership Center, also said such litigation has involved nearly 1 in 4 homes built in Hawaii from 2013 to 2023, representing twice as much as there was in the prior 10-year period.

Cases involve high-rise condominiums, townhome complexes and single-family subdivisions with alleged defects ranging from cosmetic issues such as peeling paint, to life and safety concerns such as a structural weakness, according to the report.

To reduce the cost and frequency of this construction defect litigation, the report said policymakers could consider reforms targeting both the state’s unique legal process for home construction defect disputes, as well as underlying factors contributing to disputes.

“However, regulatory reform must confront a difficult tradeoff between preserving the rights of homeowners to seek compensation for poor work, while ensuring developer liability is not so expansive that they are unwilling to construct new housing,” the report said.

That difficult trade-off issue is being heavily contested at the Legislature, where the House of Representatives has held contentious public hearings since January on a home construction defect litigation reform measure, House Bill 420.

Disputed resolution

At an initial public hearing on Jan. 31 held by the House Committee on Housing, 185 pages of written testimony were received.

The vast majority of roughly 150 testifiers supported the bill and represented the development and construction industries, including about 60 members of a union representing carpenters.

Opponents of the bill, mainly a handful of attorneys representing homeowners, said the proposed amendments would harm consumers and protect defective home construction.

Proponents of the legislation claim that the wave of litigation has made Hawaii homes more expensive because it has resulted in costlier materials and insurance premiums for developers.

Bill supporters also said that homes with active litigation become harder to sell because big parts of the mortgage industry won’t issue or invest in mortgages for such properties.

“This is a pro-housing measure,” Mitchell Tynanes, a Hawaii Regional Council of Carpenters official, said at the hearing. “The excessive legal claims against new developments are having far-reaching financial consequences, including increased construction costs … passed down to buyers.”

Debbie Luning, director of government affairs and community relations for Gentry Homes Ltd., told committee members that HB 420 would establish a fairer process to resolve construction defects and reduce what she called unnecessary litigation.

“If there is something that’s wrong, with legitimate construction defects, we’d like to go in there and fix it as soon as possible,” she said. “Unfortunately, our company and a number of other homebuilders have recently been the subject of some class-action lawsuits which prohibit us from taking swift action to correct defects. This harms not only the homeowner, but also the construction industry and the community as a whole.”

Under state law the Hawaii Contractor Repair Act prescribes that construction defect disputes for residential property initially go through repair, compensation and mediation efforts rather than litigation.

UHERO’s report said attorneys could seek to circumvent this quicker and less costly process on grounds that it applies only to individual claims and not multiple homeowners affected as a group by the same claim that can be covered by a class-action complaint.

HB 420, in part, would subject class-action participants to the pre-litigation process.

Existing law also allows lawsuits to be filed if a statute of limitations for initiating litigation would expire before the out-of-court work is over, though the litigation does not proceed until the out-of-court process ends.

Once a lawsuit is filed, however, builders aren’t allowed to try to resolve a complaint directly with a homeowner, including repair work or settlement offers.

Litigation proliferation

UHERO said it identified 57 distinct home construction defect liability lawsuits filed between 2001 and 2024, of which 30 were class-­action cases. Another 21 cases were filed by homeowner associations, and information for the other six was not stated.

One of the biggest cases was filed against Gentry in 2011 and involved 2,135 homes completed or partially completed by July 20, 2001, in the company’s Ewa by Gentry community.

This case involved the quality of hurricane straps embedded in home foundations. Gentry, which has built more than 14,000 homes in Hawaii over 56 years, settled the case in 2017 for $90 million, of which $54 million went to a repair program and $36 million went to attorneys fees and costs.

Another longtime Hawaii homebuilder, Texas-based D.R. Horton, which bought local firm Schuler Homes in 2001, also has been entangled in construction defect litigation in recent years, including a class-action case filed in 2022 on behalf of a plaintiff who bought a new house in 2012 at the company’s La Hiki at Mehana subdivision in Kapolei.

That case alleges in part that the home and thousands of other D.R. Horton homes used Titen HD Screw Anchors, which allegedly are not corrosion-resistant, as part of a high-wind protection system.

Tracy Tonaki, a D.R. Horton Hawaii division vice president, said at a Feb. 12 public hearing held by the House Committee on Consumer Protection and Commerce that lawsuits have inhibited home repair work and stopped construction of many new homes.

Tonaki said the company, which is developing the Ho‘opili community with 11,750 homes on the Ewa plain, in one instance was responding to warranty claims by inspecting homes and addressing any problems with corrective work.

“If there was damage, we were fixing it,” she said. But after class-action litigation was filed, that work had to stop. “We were actually implementing the (Contractor Repair Act), but we were stopped in doing so further.”

Tonaki also said D.R. Horton is not building 800 homes permitted for construction because they would be included in an existing class-action case due to their design.

“It doesn’t make sense for us to start construction, invest in the community, only to turn over homes that are automatically going to get put into a lawsuit,” she said.

Contested direction

Terry Revere, a local attorney who has represented homeowners in construction defect cases, said at the Jan. 31 hearing that attorneys are being unfairly blamed for the cost of housing.

“It’s not true,” he said. “No one’s in favor of lawyers coming after them if they do something wrong. That’s the nature of human existence. But this (proposed) law is ludicrous.”

Revere also said he expects that the bill, if enacted, will be struck down as “blatantly unconstitutional” by courts.

William McKeon, a Maui attorney involved in home construction defect litigation on behalf of homeowners, said at the Feb. 12 hearing that homeowners will be put at a disadvantage if HB 420 becomes law.

“Homeowners can’t compete with the wealth and the resources of large developers,” he said, describing D.R. Horton as a company worth about $40 billion that earned a nearly $5 billion profit in 2024. “Homeowners can’t compete with that.”

Philip Nerney, a local attorney representing condo associations, suggested at the Feb. 12 hearing that lawmakers should instead try to make the alternative dispute resolution process work better instead of passing HB 420.

“This is an anti-consumer bill,” he said.

Keali‘i Lopez, state director of the nonprofit AARP Hawaii representing seniors, said at the same hearing that she recognizes what developers are going through and that the current dispute resolution process doesn’t appear to be working. But Lopez, who once led the state Department of Commerce and Consumer Affairs, said HB 420 is a step in the wrong direction.

“If you have sunk your life savings and more into the purchase of your home, you shouldn’t have to go through the proposed process that’s outlined in (HB) 420,” she said.

The Committee on Housing passed the bill with a 7-0 vote. The Committee on Consumer Protection and Commerce voted to advance the bill with a 5-2 vote.

For a third hearing held Feb. 26 by the House Judiciary and Hawaiian Affairs Committee, 436 pages of written testimony were submitted overwhelmingly from construction industry representatives favoring the bill. The committee voted 9-0 to send the bill to the full House, which voted 48-1 Tuesday to send the bill to the Senate for consideration.