A chemical reaction due to pyrrhotite is the suspected culprit behind thousands of homes in Connecticut experiencing foundation deterioration. It is recommended that homes in the area built or modified after 1980 undergo a comprehensive structural inspection before acceptance into any relocation Home Sale program.
CRUMBLING FOUNDATION CLAIM FUND
In 2017, Altair Global issued an advisory regarding foundation failures in Northeastern Connecticut and areas in Southern Massachusetts (a copy of which is attached to this updated Advisory). Since first reported, the issue is now revealed wider spread than initially believed – potentially affecting up to 25% of the homes in Connecticut and at least two counties in Massachusetts (Hanover/Hampshire counties). Although poured foundations1 constructed with aggregate containing pyrrhotite2 will likely eventually exhibit characteristics that include spider web-like cracking, brown stains appearing as rust, and/or a white powder-like substance in and around cracks, it may not be visually evident for up to 25 years after construction. Most importantly, the foundations cannot be repaired but must be replaced at a cost generally estimated between $150,000 and $300,000.
1 This advisory only applies to poured foundations. Concrete block foundations have, so far, not been found to be impacted.
2 Research has shown that concentrations of pyrite as low as 1% to 2% may adversely affect the structural integrity of a foundation. Pyrite reacts aggressively with water and oxygen; thereby, tending to weaken the structure of the concrete, due to substances readily present in the environment. This results in increased incidences of foundation failure.
The Connecticut legislature created the Connecticut Foundations Solutions Indemnity Company, LLC (“CFSIC”) to assist impacted owners whose homes were constructed or had additions added after 1982. The CFSIC will provide financial assistance to current homeowners and, homeowners looking to sell their homes after February 1, 2019, but ONLY if the home has been inspected according to the CFSIC guidelines. It is important to reiterate that the financial assistance is ONLY available to the current individual homeowner and does not extend to relocation management companies. The CFSIC will reimburse qualified homeowners up to $4003 (reimbursements take 45-60 days) for the original inspection and up to one-half the cost ($2,000 maximum) for recommended core sampling.4 While the timeframes for receiving core sampling results are currently running 10-12 weeks, we anticipate, as the expertise and technology improve, times will get shorter. If the core sampling shows any amount of pyrrhotite present, the homeowner should begin the claims process immediately; any subsequent purchase (e.g., under a Home Sale program) should be postponed, pending claims processing and remediation and/or deemed ineligible.
Homeowners’ insurance companies’ positions also seem to be evolving. Initially, they almost universally denied coverage for any consequence of the foundation failures. More recently, some insurers – notably Traveler’s Insurance – have been willing to cover certain claims in exchange for release and hold harmless agreements. We anticipate this progression will continue with insurers covering at least a portion of eligible claims. In any event, a homeowner should notify his/her/their insurer if they believe a home was constructed with a foundation containing pyrrhotite.
HOME SALE PROGRAM RECOMMENDATIONS
Altair Global makes the following recommendations for all homes in Connecticut and Hampshire/Hampden counties in Massachusetts (although the latter are not covered by the CFSIC):
- If the foundation was poured (or added onto) after 1982, conduct up-front visual inspections by a qualified professional engineer on ALL homes upon initiation (the employee should pay for the inspection and submit a claim for reimbursement to the CFSIC – Altair Global may reimburse the balance on processing of the claim);
- If core sampling is recommended, Altair Global’s preferred inspectors will have a representative on stand-by (the employee should pay for the inspection and submit a claim for reimbursement to the CFSIC – Altair Global may reimburse the balance on processing of the claim);
- If pyrrhotite is present, the homeowner should submit a follow-up claim with the CFSIC for repair5, along with a claim under the homeowner’s insurance policy. Altair Global recommends the home be deemed ineligible for company’s Home Sale program until claims have been adjudicated and foundation replaced, if applicable.
3 The estimated cost for a visual engineering report is $800-$1000 – for core sampling, $2,000-$2,500 per sample.
4 Core sampling consists of drilling at least two, 4-inch diameter samples into the concrete foundation. The core sample will be for the entire thickness of the foundation. On completion, the engineer will “plug” the resulting holes; although, any other repairs (e.g., basement finishes) will be the homeowner’s responsibility.
5 CFSIC replacement claims are currently capped at $175,000. The homeowner is responsible for any ancillary repairs (e.g., grading, landscaping, improvements, etc.).
HOME BUYER RECOMMENDATIONS
Buyers moving into Connecticut (or Hanover/Hampshire counties in Massachusetts) should also be cautioned to condition their purchase on core sample testing. Early telltale signs of failure may be hidden behind wall finishings or paint. In at least one case reported by CCACB.org, a buyer found the upper layer of concrete appeared to have been treated with a protective coating (of unknown origin), while the lower level was failing. The ONLY way to be sure whether the poured foundation is impacted is a visual inspection by a professional engineer accompanied by core sampling. Unfortunately, as a practical matter, due to the time lag between testing and results (currently 10-12 weeks), it may not be practical to condition the purchase on testing (homes built in the 1990s or early 2000s may not be displaying signs of failure). Buyers should be made aware and exercise extreme caution, until the extent of the problems are known or request a warranty from the seller.
If you have questions regarding this Altair Global Advisory, please contact Client Services or your Business Development representative.
Altair Global (‘Altair’) has provided this information as a service and convenience for your information only. It is not intended to replace your own legal or financial guidance and/or assistance and you are encouraged to seek the advice of your own tax and legal advisor. Further, the information contained herein is to our knowledge accurate to the extent of the data available to Altair as of the date identified. Altair does not assume responsibility for the accuracy of the contents hereof and is under no obligation to update the material contained herein.