More homeowners have sued builder JTS Communities of Sacramento, Calif., alleging that the square footage of their homes is smaller than the sales brochure indicated -- as many as 168 feet smaller, to be exact. This case, filed as a class action, is the third suit filed against JTS over the difference between the square footage advertised in the company's marketing materials and the actual square footage of buyers' homes.
JTS has acknowledged there were discrepancies of up to 168 square feet involving just under 200 homes built between 1998 and 2004. But the company contends that it has not intentionally misled anyone, that no one has been harmed financially and that all home buyers signed sales contracts stating the square footage advertised in marketing material was an estimate.
According to JTS general counsel Ian Craig, "We acknowledge there's a difference between the plans filed with the building department and the brochure. But the measured square footages of the homes are in many instances up to and exceed the amount of the square footage in the brochures."
"That's not true," said Brandon Gallardo, a plaintiff in the most recently filed suit who bought a La Jolla model from JTS in 2000. He says he's been contacted by 26 families who want to join the lawsuit, and he's reviewed the appraisal for each home. "Every appraisal on record, from a recent refinancing or the original appraisal, says 2,482 square feet, give or take a few feet. They're all within that range, not 2,650," the advertised amount.
As for the cases in which the square footage is below that included in the sales materials, Craig said, "The measure of square footage is an inexact science. There've been great variations in the square footage measurements, and our contract indicates that square footages vary."
Craig said JTS is cooperating with a California Department of Real Estate investigation by providing the department with about 30-40 form sales contracts for several models of JTS homes. When asked if the company has been asked to provide additional materials but has declined to do so, Craig responded, "I'm not sure what the status is regarding what they've asked and what we've provided."
Tom Pool, spokesperson for the Department of Real Estate, wouldn't comment on what information JTS has provided, nor what it has asked JTS to provide, stating the department doesn't comment on ongoing investigations. He added that the department "has no jurisdiction over subdividers of property in terms of marketing. That's a civil issue," he said. "There is an investigation. We're looking into agents and brokers who represented JTS," whom the department does have jurisdiction over.
In late November 2004, the company sent letters to homeowners informing them of the difference in square footage and stating that the discrepancy was the result of the building department's requirement that the plans be revised, "which preserved the layout and design of the home but reduced the square footage," according to the letter.
Gallardo also disputes that claim. "The letter doesn't say which building department asked for changes," he said. "These plans were submitted to the city and county of Sacramento and the county of Elk Grove, and they're asking us to believe that all three jurisdictions asked for the same changes to the same model?"
JTS also stated in the letter that the value of its homes is based on "the design, features and unique quality of the home . and not solely on square footage."
"I wouldn't have bought this home had I known its true square footage," Gallardo said. "When my wife and I bought this home, we were debating over buying this home or another, both with the same square footage. But this was slightly less expensive, so we felt it was a better bang for the buck."
Gallardo claims his damages as a result of JTS's mistake are as much as $150,000. That figure includes the amount he believes he overpaid for the 168 feet -- which translates into a 13x13 or an 11x15.3 room -- he didn't receive, the amount he believes he'll lose in resale, and punitive damages for what he believes is JTS's intentional misrepresentation.
"At this point, we have no smoking gun," Gallardo said of his claims of intentional misrepresentation. "But given that this happened over a course of time and with so many homes involved, I think it'd be ridiculous to believe that nobody at JTS knew."
Rob Ward, an attorney with the Burdman Law Group in Sacramento and San Diego, Calif., who represents two families in arbitration with JTS over the square footage issue, also believes JTS made misrepresentations to his clients. "We believe there was a pattern of malfeasance," says Ward, "that JTS knew there was a difference in square footage and continued to advertise the higher square footage, thinking it could get away with it."
"What we know right now," Ward said, "is that JTS submitted plans created by its own in-house design company to the City of Sacramento, yet claims to not have known the actual square footage of the homes. This, despite the fact that JTS applied for permits for several homes showing the square footage to be 2,482 for the La Jolla model back in 2001," he said. "It doesn't make sense that JTS would apply for permits at this square footage, yet claim to not have known the actual square footage when my clients purchased their homes in 2003."
Craig rejects the claim that JTS made misrepresentations. "First and foremost, there's no false statement. All buyers were advised that square footage was an estimate in their sales contracts, and they were in fact estimates," he said. As for Gallardo's worries about resale, Craig said, "We certainly feel all the homes have all substantially appreciated in value. We don't believe buyers have suffered any damages."
Craig said JTS hasn't settled any claims with any homeowners over the dispute in square footage. The company has met with homeowners who said they intended to sue, according to Craig, but after JTS "showed the homeowner an appraisal of the same plan or even their house that's measured at the same as advertised in the brochure, they were satisfied with it and chose not to pursue litigation."
In addition to filing suit, Gallardo has contacted California legislators, seeking to have the "Gallardo Act" passed into law. The act would adopt an "acceptable margin of error" of 4 percent or less in stated square footage. "The current proverbial position of, 'oops, we're sorry but we said the square footage is just an estimate'" isn't an "acceptable method" for home building, Gallardo said.
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