Nestor Rivera's new driveway is cracking.
Neighbor Teko Ametitovi's kitchen sink leaks.
Another HearthStone Homes buyer, Matt Borcher, keeps finding gaps in his vinyl siding.
And all three, in their homes less than a year, are troubled by swampy spots in their yards due to water runoff.
The problems at their Turnbridge subdivision south of Cunningham Lake seem fixable, at least for now. Their bigger worry, the homeowners say, is uncertainty over who is responsible for fixing residential malfunctions now — and later.
“This is supposedly all one package, where HearthStone is responsible for any problems we had,” said Rivera, a retired California radio personality who recently moved to Omaha. “Where do we complain?”
Rivera and his northwest Omaha neighbors are not alone in their quandary. More than 8,000 people have been notified that they could be affected by the debt and bankruptcy case of the 40-year-old HearthStone Homes, once the busiest homebuilder in the metropolitan area.
Since HearthStone filed in late February for Chapter 11 reorganization, its offices have closed. No one is left to answer calls. A court-appointed trustee, based in Colorado, is liquidating HearthStone assets to pay creditors. But that process takes time, and warranty holders like Rivera are lower in the payoff hierarchy.
While many questions linger, among the most common is Rivera's: What happens to warranties that were supposed to cover flaws on his $189,000 house?
Various layers complicate the warranty situation, said Trustee Randel Lewis. The good news, he said, is that recourse exists for people who bought their home less than a year ago.
He offered other guidance:
In the case of homes less than a year old and in need of repair, generally the buyer has a direct claim against the cement-layer, siding installer or other subcontractor that performed that work and was paid for it.
“If somebody bought their home six months ago and cracks are in the driveway, they have a right to demand that the company that did the actual work fix it,” Lewis said.
That can be easier said than done, Lewis said. If a subcontractor balks, the homeowner can challenge that matter separate from the bankruptcy proceedings.
Additionally, the homeowner could file a claim with the bankruptcy court, said trustee attorney Robert Bothe of the Omaha McGrath North Mullin & Kratz law firm. The deadline to do so is June 19.
Owners of older HearthStone Homes covered structurally by a separate 10-year warranty also were invited, via letters from the court, to file a claim by that date with the bankruptcy court — even if they're not sure what they're owed. It's a way to reserve possible payback for future problems.
But to those older customers, Lewis said: “I wouldn't be holding my breath.”
That's because HearthStone's debts outweigh its assets. At least $24 million is owed, mostly to Wells Fargo Bank and other “secured” creditors who are among the first in line for proceeds from liquidation.
In a different high-profile bankruptcy of an Omaha homebuilder, Benchmark Homes, records show that about 8 percent of the $41.8 million in asserted claims were paid. Benchmark filed for Chapter 7 bankruptcy in 2006 and the case was closed last month.
It could be a year, Lewis predicted, before any money from sales of HearthStone assets is distributed.
Already sold to Lincoln-based Legacy Homes is the HearthStone showroom. Pending also is the sale of 40 HearthStone Homes under construction when the bankruptcy case was filed.
Until those 40 houses are sold, Lewis said, neighbors with a concern over a potential hazard involving one of the homes can email the trustee's counsel at email@example.com. That also is the email address to use if a problem exists at the 600 HearthStone lots yet to be sold.
The fall of HearthStone Homes prompted changes in the local homebuilding industry, including the startup of a few new construction companies headed by former HearthStone managers.
Legacy Homes also is setting up an Omaha operation. Though its owners want to model their operation after HearthStone, they have said they won't take on the responsibility of HearthStone warranties.
Mike Gitt of Gitt Construction, meanwhile, thinks he can capitalize on the market created by the bankrupt firm. For a fee, he said, his construction company will offer a warranty package to recent homebuyers. In some cases, Gitt said, he may be simply be the middleman arranging for a subcontractor to honor an already-existing warranty.
“A lot of these homeowners don't know who to call,” he said.
Such is the case with Rivera.
The California native and his wife moved into their 2,000-square-foot house last October.
Rivera called months ago about the cracking driveway and was told by HearthStone's warranty department to call back when the weather was warmer. Spring came, but HearthStone folded.
Rivera — and neighbors Ametitovi and Borcher — were unaware they should call the subcontractor for repairs.
“I have no idea who that is,” Rivera said. “It was all part of the package.”
Rivera has contacted a lawyer. For the most part, he still loves his house: wood floors, granite counters, finished basement.
It's close to his grandkids, and in the kind of diverse neighborhood he appreciates.
“It's just frustrating,” Rivera said.
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