III. Our Coverage Obligations

All notices of alleged construction defect and complaints under this Limited Warranty must be made by You in writing. Telephone or face-to-face discussions will not protect Your rights under this Limited Warranty (see Section VII, Procedure to Request Us To Perform Under This Limited Warranty).

In the event You allege a construction defect occurs during the Warranty Period, upon receiving written notice from You, We, or a third party designated by Us or acting on Our behalf, will inspect, investigate and/or test (including destructive testing) the alleged defect to determine if a construction defect exists. Upon confirmation of a construction defect, We, or a third party designated by Us or acting on Our behalf, will (1) repair or replace the construction defect, (2) pay to You the actual amount it would cost Us to repair or replace the construction defect. The decision to repair, replace, or to make payment to You is at Ours or Our authorized representative's sole option.

We will have been considered to have breached this Limited Warranty only if We fail to correct a construction defect in accordance with the terms and conditions of this Limited Warranty.

A. Standards by which the presence of a construction defect will be determined

In the event You believe that a flaw or imperfection in the home or the common elements constitutes a construction defect, the following factors will be considered by Us in determining whether the condition constitutes a construction defect. Should either You or We elect to initiate binding arbitration, these factors will be considered by the Arbitrator in rendering a decision:

1. Any performance standards or guidelines or other documents or manuals that contain Our building standards, that were provided to You at or prior to closing on the home, or in the case of the Homeowners Association, prior to transferring title to the common elements. Absent such standards, the Residential Construction Performance Guidelines published by the National Association of Home Builders, in effect at the time of closing on the home, or in the case of the Homeowners Association, at the time of transferring title to the common elements shall apply. Absent a specific standard in the documents identified above, normal and accepted building practices and standards in use in the region of the country in which the home or the common elements are located shall apply;

2. Consideration as to whether the magnitude of the flaw or imperfection:

   • a. materially affects the structural integrity of the home or common elements; or
   • b. has an obvious and material negative impact on the appearance of the home or common elements; or
   • c. jeopardizes the life or safety of the occupants; or
   • d. results in the inability of the home or the applicable common elements to provide the functions that can reasonably be expected in such a home or common element.

3. Consideration as to whether a condition is the result of normal wear and tear (conditions that are normal wear and tear, or are caused by normal wear and tear are not construction defects);

4. Consideration as to whether the condition was caused by, or in any way resulted from, the failure of the Homeowner or Homeowners Association to perform normal or routine maintenance (any condition that is determined to be their maintenance issue, or any condition that results from improper or inadequate Homeowner or Homeowner Association maintenance, is not a construction defect);

5. Consideration as to whether the condition was caused by the Homeowner or Homeowners Association or their representatives, other than Us, after the Homeowner took possession of the home or the common elements (We and You conducted a walkthrough inspection just prior to closing on the home. Damage that was caused by You or Your representatives is not a construction defect, for example, a large, visible scratch on marble tile in the entry foyer that was not noted at the final walkthrough inspection, but was reported after furniture was moved into the home, will not be considered a construction defect);

6. Recognition that any condition resulting directly or indirectly from or made worse by changes, additions, alterations or other actions by the Homeowner or Homeowners Association or Their agents, other than Us, will not be considered a construction defect (this includes changes to the topography, drainage or grade of the property);

7. Any Exclusion contained in this Limited Warranty.