by Walt Keaveny, MS, PE, PG, Risk Manager, 2-10 Home Buyers Warranty
What is the leading cause of residential structural failures? Did you guess expansive soils? Sof t organic soils? Improper drainage? How about inadequate engineering design? Low-strength concrete? Poor framing practices? Nope, none of those. What may surprise you is that the leading cause of structural failures is avoidable. Warnings to avoid this significant construction liability are found in project specifications, common codes, and industry standards. What then is this real hazard that is misunderstood and overlooked? Improperly compacted structural fill material.
2-10 Home Buyers Warranty (2-10 HBW) is the national leader in new home structural warranties, who has nearly 40 years of forensic analytics and investigations that concludes fill material is the leading cause of residential structural failures. These failures can occur anywhere that existing or new fill material is used to support a foundation. Since 80% of all structural failures are due to soil movement beneath the foundation, proper use of structural fill is every bit as critical as determining building location, selecting trade partners, and a sellable home design.
Structural fill material must be of sufficient quality and density, or else it can consolidate, causing excessive settlement. This may result in damage to foundations, framing, and interior finishes. Structural distress resulting from improper fill is likely to begin soon after construction is completed. Due to common over-irrigation of the new landscaping and concentrated roof drainage, the fill quickly consolidates under the new foundation load and it is saturated and further weakened. Less than a one foot thickness of improper fill may cause serious distress. The damage caused by fill is typically more severe and costly to repair than other causes of structural failures. This is because the entire foundation is commonly underlain by fill. The average cost to investigate and repair a qualifying fill claim is about $50,000. This does not include the cost of the home builder’s reputation for quality construction practices.
To avoid structural failures caused by fill material, builders should confirm that prospective land to be developed with “existing” fill was properly compacted and tested. Developers typically sell land “as-is”, leaving the home builder liable for any existing fill. “New” structural fill to be placed by the home builder should be properly compacted and tested to verify the density. This is an industry standard practice, and a requirement of the local, state, and International Building Codes (IBC), the building department, plans and specifications, geotechnical engineer, and Department of Housing and Urban Development (HUD).
HUD’s requirements are specified in their Data Sheet 79G Land Development with Controlled Earthwork which states, “For any development in which buildings are to be placed on graded areas, all earthwork shall be designed, engineered, and constructed in such a manner that there will be no adverse differential movement which may cause damage to the structure…” HUD further specifies that, “Field density tests shall be made by the Soils Engineer…” Structural fill material should be placed in relatively thin lifts at, or near, optimum moisture content. Just the right amount of moisture lubricates the fill which allows it to achieve optimum density. Optimum moisture and density for a particular fill are determined using a Proctor test in a soils laboratory. Each lif t should be properly compacted. It is important to note that the weight of the bull dozer or front-end loader used to place the fill is typically not sufficient to compact the fill. Dozers and loaders spread their weight over wide tracks, or tires, to avoid getting stuck, and are not designed to impart sufficient compactive effort like a true soil compactor. Density testing, conducted by a representative of the geotechnical engineer, should be used to confirm and document if proper compaction has been achieved to protect the home builder’s liability.
Home builders can rely on the expertise of a geotechnical engineer, as needed, in order to identify existing undocumented fill, specif y proper cut and fill methods, specify fill quality and compaction criteria, identify onsite and offsite fill sources, and test for proper fill density. The engineer can also assist the home builder to avoid other common problems associated with improperly compacted fill, such as slope failures, retaining wall failures, and drainage problems.
In summary, diligent practices regarding structural fill material include:
- Check prospective land for existing undocumented fill
- Check fill quality and use proper fill placement methods
- Use the proper equipment for fill compaction
- Test and document fill density
- Utilize a geotechnical engineer as needed
Structural failures caused by fill material are avoidable. Proper fill placement will help protect a home builder’s liability and hard-earned reputation.
Your Association is Working for You to Save Your Business Money
The Tax Reform Act of 2017 made meaningful change to the Federal tax code that has helped stimulate our country’s economy. It also created some confusion and unknowns. But your Home Builders Association and other associations have been working hard with the IRS to get you some answers and create the best outcome for your businesses.
IRS to Waive 2018 Withholding Penalties for Most Filers
The Internal Revenue Service has announced that it is waiving the tax penalty for many home builders and other small businesses that pay estimated quarterly taxes but whose 2018 federal income tax withholding and/or estimated tax payments fell short of their total tax liability for the year.
Treasury Issues Final Rule on Pass Through Entities
The Treasury Department has issued final regulations for the 20% pass through entity deduction under the Tax Cuts and Jobs Act of 2017. The final regulations concern the deduction for qualified business income under Section 199A of the Internal Revenue Code. This includes individuals, partnerships, S corporations, trusts, and estates engaged in domestic trades or businesses.
(the following content sourced from the National Association of REALTORS)
IRS Provides Clear Test on How 20% Deduction Applies to Rental Income, Exchanges
The IRS has issued final rules on the 20 percent business income deduction that was part of the 2017 Tax Reform Act. The new rule confirms that the deduction applies to your business income, as a real estate agent or broker, if you operate as a sole proprietor or owner of a partnership, S corporation, or limited liability company. It applies even if your income exceeds a threshold set in the law of $157,500 for single filers and $315,000 for joint filers. In addition, the new rule provides guidance on two other provisions: 1) whether any real estate rental income is eligible for the deduction, and 2) how the deduction applies to properties exchanged under Section 1031.
Eligibility of rental income
Rental property income also can qualify for the new deduction, as long as you can show that your rental operation is part of a trade or business. The IRS has released proposed guidelines that include a bright-line test for showing that rental income rises to the level of a trade or business. Under that safe harbor, you can claim the deduction if your rental activities-which include maintaining and repairing property, collecting rent, paying expenses, and conducting other typical landlord activities-total at least 250 hours a year. If your activity totals less than that, you can still try to take the deduction, but you will have to be prepared to show the IRS that your activity is part of a trade or business.
Eligibility of 1031 like-kind exchanges
Under earlier proposed regulations, if your income was above threshold levels set in the tax law–$157,500 for single filers, $315,000, for joint filers–and you had exchanged one property for another to defer taxes under Sec. 1031, the amount of the new deduction might be reduced because of the swap. NAR and other trade groups reached out to the IRS to change this treatment, and the IRS has made the change. Under the final rules, you can use the unadjusted basis of the depreciable portion of the property to claim at least a partial deduction.
U.S. house prices rose in November, up 0.4 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI). The previously reported 0.3 percent increase in October was revised to reflect a 0.4 percent increase.
The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. From November 2017 to November 2018, house prices were up 5.8 percent.
For the nine census divisions, seasonally adjusted monthly price changes from October 2018 to November 2018 ranged from -0.8 percent in the Pacific division to +1.1 percent in the South Atlantic division, although the South Atlantic division saw a -0.3 percent drop from September to October. South Carolina is in the South Atlantic division.
The 12-month changes were all positive, ranging from +4.5 percent in the West South Central division to +7.4 percent in the Mountain division.
Did you know?
HBA members save substantial money just by being members of the association? In the first three quarters of 2018, HBA of Greenville members received rebates totaling $28,851 from the HBA Rebates program. These rebates are on materials builders are already buying for the homes that they build.
Don’t miss your opportunity to save on materials you are already buying. Visit HBASCrebates.com to find out how.
At their meeting in November, Greenville County’s Planning Commission approved a new procedure for review and approval of Final Development Plans.
Beginning immediately, Final Development Plans will be reviewed and approved by Greenville County staff. The review is for consistency with the Preliminary Development Plan. If the Final Development Plan differs significantly from the Preliminary Development Plan, the project could be required to be resubmitted to the Planning Commission. In addition, if the developer disagrees with an action taken by county staff, the developer may appeal the decision to the Planning Commission.
Planning staff will provide the Planning Commission with a report each month of Final Development Plans that have been reviewed and approved.
This change will save about 45 days in the development approval process and is the result of your HBA continuing to work with Greenville county to speed up the development review process.