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Lennar Drywall Problems Confirmed in 400 Homes

The home building company Lennar Corp. has identified 400 homes it built in Florida as having been constructed with defective Chinese drywall, and nearly $40 million in cash reserve has been set aside to cover the cost of gutting and rebuilding homes with the drywall problems.

The Miami-based company alerted investors in a U.S. Securities and Exchange Commission filing that 2.1 percent of the homes it has built in Florida contain Chinese wallboard. The drywall has plagued home owners in 21 states with sulfuric fumes, has corroded electrical equipment and appliances, and is suspected of causing breathing difficulties and other health problems.

Some experts believe that defective Chinese drywall may have been used to construct nearly 300,000 homes across the country. The drywall was imported to the U.S. from 2004 to 2007 during a shortage of domestic wallboard caused by the housing boom and rebuilding following several hurricanes that destroyed thousands of homes in the southeastern United States.

Lennar says that it has $39.8 million in warranty reserves to help assist with the rebuilding of affected homes. It has already spent $5.4 million of that money moving families out of affected homes, tearing the defective drywall out of some homes and replacing it, then moving the families back in.

While 400 Florida homes have been identified by Lennar as having the drywall problems, the company indicated in the filing that there could be more homes that it built using the Chinese drywall that have not yet been discovered. In addition, the figure does not include any homes built by Lennar with defective drywall outside of Florida.

There are currently 41 Florida state Chinese drywall lawsuits and two federal class action lawsuits pending against Lennar over the defective building material. The company hopes that the state lawsuits can be resolved through a Florida state law that allows a builder to repair problems as a means of settlement. Lennar has an additional $20.7 million in insurance coverage for damages.

The U.S. Consumer Product Safety Commission (CPSC) issued a “status report” to U.S. senators last week reporting that it has received 608 incident reports concerning Chinese drywall from at least 21 different states and Washington D.C. The CPSC has confirmed that at least 5,503,694 sheets of Chinese drywall were imported into the country, and expects that it will find more as investigations continue.

In addition to the potential health concerns and property damage caused by the defective drywall, the CPSC has expressed concerns about potential Chinese drywall fire hazards, as the corrosive gases emitted could damage electrical wiring in smoke detectors, gas lines and appliances.

Last month all federal Chinese drywall litigation was centralized in the Eastern District of Louisiana for pretrial proceedings as part of a Multidistrict Litigation, or MDL.

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