Broken Homes: How Award-Winning, Dream 'Green' Houses Turned Into Nightmares

How did an award-winning company build such flawed energy-efficient houses?
How did an award-winning company build such flawed energy-efficient houses? Augusto Zambonato
At first, Mark Peters did not understand why his new energy-efficient house was so hot.

In October 2016, Peters and his wife, Elizabeth, closed on the 3,500-square-foot, nearly finished luxury house on the northwest outskirts of Phoenix. It had four bedrooms, a light-filled great room with 16-foot ceilings, a covered patio, and charging portals for electric cars. The earth-toned exterior and desert landscaping mirrored the hues of the rocky hill rising to the west of the house, which cost just south of $700,000.

Best of all, it was Zero Energy Ready, meaning that it was “so energy-efficient that it can offset all or most annual energy consumption with renewable energy,” according to the U.S. Department of Energy. The promise of a minimal carbon footprint had drawn Peters, who grew up in Phoenix and wanted to move back, to the house in the first place.

He began searching for a house in 2016 by Googling “green builders,” which led him to a company called Mandalay Homes. It had won awards from the Department of Energy for constructing cutting-edge, sustainable homes, and it claimed to build “some of the most energy-efficient houses in Arizona.” The couple, who live in Texas, planned to rent out their new house for two years before moving in.

But as they began coming to Phoenix a few days at a time in summer 2017 to set up their new, energy-efficient home, something clearly was wrong.

“It would take two or three days for the house almost to become habitable during the summer,” Peters said. A day or two ahead of their arrival in Phoenix, he would remotely set the Nest thermostat to the mid-70s. But when they reached the house, the great room still felt like a sauna, and other rooms needed days to cool off, he said.

Eventually, the couple gave up readying the house. They left the stock table and chairs and a lamp in the small dining alcove. Over months, the cozy space evolved into an informal war room, with building plans sprawled across the table and growing stacks of paper records as Peters vowed to fix his house and get answers.

The 55-year-old pilot began by requesting repairs and demanding answers from Mandalay. He called and wrote customer service, eventually sending more than 140 emails with various complaints, chief among them the house’s dysfunctional air conditioning. In response, Mandalay deflected to heating, ventilation, and air conditioning (HVAC) sub-contractor REEis, whose technicians came to the house at least four times. The great room just needed a booster fan, they’d say, or the house needed a third air conditioning unit. But Peters also independently hired a home inspector, and he rejected REEis’s quick fixes after a few technicians let him in on a little secret.

This house is all screwed up, they said. The way it was built rendered it physically incapable of fully cooling down, they told Peters. One showed him where two eight-inch air conditioning ducts were being squeezed into a five-inch hole. That explained why, when he turned on the air conditioning, the two small vents emptying into the great room expelled air with all the strength of a breath fogging up a mirror.

Peters also knocked on the doors of neighboring homes. He soon discovered his was not the only Mandalay house with problems.

But it wasn’t until Peters and a few of those neighbors finally obtained some of the official plans for their houses, including city-stamped plans via public records requests, that together, they began to realize the scale of their issues.

“I started going through the plans, going, ‘This must be wrong, this isn’t my house,’” Peters said. “Except it is my house, and the plans do not match. Not even close, when it comes to the HVAC and a few other things.”

Slipping Through the Cracks

Vision Hills is a spread of nine homes on the outskirts of Phoenix, slightly south of Loop 101 and two miles west of Interstate 17. Residents have spotted coyotes darting along the small hill on its western edge, and the development has a quiet, expansive feel as the land slopes down under the open sky.

The development is among dozens across Arizona that Mandalay Homes has worked on since its CEO, David D. Everson, started the company in 1999. In the early years, Mandalay marketed affordable, spacious homes “designed for luxury.” After the 2008 recession, it ventured into building energy-efficient homes through a federally funded neighborhood rehabilitation project with the city of Phoenix. By 2015, it had transitioned to building only “green” homes. Over the years, it acquired a good reputation.

But some of its recent projects have been less than solid, homeowners say.

Since the first Vision Hills houses were finished in 2015, three of the nine homeowners, spearheaded by Peters, have presented Mandalay with a volley of complaints: dysfunctional air conditioning systems, termites, ceilings leaking water, and drafty doors which let in bugs. They escalated their complaints to the state’s Registrar of Contractors, which issues licenses to contractors and resolves disputes over construction projects, and to the Arizona Attorney General’s Office.

They’re not the only unsatisfied customers.

Two miles west, in Glendale, at least one other Mandalay homeowner is dealing with more-severe problems. The ground is compacting beneath one side of the home, so that the utility lines slowly are being tugged away from the side. Three of the bedrooms also have air conditioning problems, according to a complaint filed with the Registrar of Contractors.
click to enlarge Mandalay marketed its houses at Vision Hills as luxury, energy-efficient homes. - ELIZABETH WHITMAN
Mandalay marketed its houses at Vision Hills as luxury, energy-efficient homes.
Elizabeth Whitman

Where there are houses, there are defects. Cracking foundations, bad ductwork, and drainage problems are part of the construction landscape, although just because something is common doesn’t make it right, experts say.

What initially confused, then frustrated, and now infuriates these Mandalay homeowners is how their houses passed a raft of inspections and certifications — not just by local code-enforcing authorities like the city of Phoenix, but also by third-party inspectors — to receive the DOE’s energy-efficiency stamp of approval. They are particularly irate because Mandalay marketed the houses as energy-saving abodes, and their anger contains a uniquely moral edge.

They chose these pricier, “green” houses believing they were doing the right thing for the planet. Mandalay lured buyers by appealing to their consciences, then refused to take responsibility when the homes failed to fulfill their promise, they claim. Mandalay and its subcontractor REEis seemed hellbent on not finding a permanent fix for their houses’ various problems, homeowners said. They are equally disgusted with authorities like the city of Phoenix and the Registrar of Contractors, whom they see as all too willing to let Mandalay get away with it.

Since the 1970s, leaders in Arizona have upheld a steady influx of businesses and people as essential to the state’s economy. Over the decades, the Arizona Legislature and other elected leaders paved the way for developers to build and profit, with limited interference or oversight from the state. They helped the industry buck or skirt environmental and planning restrictions, rolling back regulations, licensing, and oversight.

Arizona’s “build, baby, build” mentality has grown even more pronounced under Governor Doug Ducey, first elected in 2014. He is fond of proclaiming, “Arizona is open for business,” and the former ice cream executive has solidified a reputation for actively working to deregulate and de-license industries and professions across the state.

In 2015, Ducey began appointing directors to state agencies. He made Jeff Fleetham the head of the Registrar of Contractors. According to a legal blog post at the time, Fleetham launched his tenure at the regulatory agency by emphasizing that contractors are “among the people that the ROC serves and protects.”

‘The Very Best in Innovation’

Tony Grahame was surprised to hear that Mandalay had built such problematic houses.

For 14 years, he directed Yavapai College’s Residential Building Technology Program, and he knew Arizona’s energy-efficient building scene well.

“From my knowledge, they build a very quality house,” Grahame said of Mandalay.

But, he added, he left Arizona in 2010 (he now teaches a similar program at Pensacola State College in Florida). Recently, friends still in the industry in Arizona have been telling him of their struggles to find skilled labor.

“The training is really bad, [and] it’s getting worse and worse,” Grahame said. “That doesn’t mean anybody should be off the hook. If you say you’re delivering something, then that’s damn sure what you should be delivering.”

Grahame departed Arizona around the time that Mandalay was emerging from the mid-2000s housing crash and subsequent recession. Those crises took their toll on Mandalay and other real estate companies under the David D. Everson umbrella. Mandalay Homes took out more than $1.5 million in loans and was sued in 2010 for failing to pay back $311,000, court records show. Veneto, an Everson-founded building company, was sued in 2009 for failing to repay more than $1 million of a $3.3 million loan. Eventually, the companies and Everson, their guarantor, settled with the lenders. Court records don’t indicate whether workmanship issues were a factor.

Around that time, the city of Phoenix tapped the company to be one of five reconstruction partners to rehabilitate neighborhoods that were devastated by the recession. Starting in 2010, backed by $115 million in federal funds, Phoenix bought foreclosed properties and partially developed, abandoned subdivisions, then rebuilt them for affordable housing.

For $11.5 million, Mandalay helped rehabilitate about 100 single-family houses, city records from 2016 show. The builder replaced appliances with Energy Star units, beefed up insulation under the roof, replaced thermostats and hot water heaters, and added low-flow toilets. For another $3.3 million, the company built 14 new energy-efficient homes in a development called Gordon Estates in south Phoenix. Mandalay completed those houses in 2013, garnering a shoutout on National Public Radio for its role in reviving “zombie” subdivisions.

The next year, one homeowner at Gordon Estates began filing a series of complaints with the ROC, public records show. The owner’s allegations, filed over the next two years, included “water underneath the foundation of the house,” the “smell of mildew in the living room and office closet after recent monsoon rain storm,” and a bad breaker. The ROC called the complaints unsubstantiated and dismissed them.

Meanwhile, those homes propelled Mandalay to become one of the most prolific builders of energy-efficient homes not just in Arizona, but in the United States.

After the recession, the Department of Energy began unveiling incentives at the national level to encourage builders to construct energy-efficient homes. In 2013, it launched the Housing Innovation Awards, which it gives to “forward-thinking builders” in recognition of “the very best in innovation on the path to zero energy ready homes.” The grand winner that year in the Affordable Builders category was Mandalay Homes, for the 14 houses it built at Gordon Estates.

Since 2018, five Mandalay homeowners have formally complained to the state Registrar of Contractors about air-conditioning problems in their new, energy-efficient homes.

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It has collected Housing Innovation Awards every single year since then. In 2015, 2016, and 2017, Mandalay elbowed out everyone else for the distinction of building “Most Homes in a Year.” Of the nearly 3,000 DOE-certified Zero Energy Ready homes that were built across the country through 2018, 695 were in Arizona. Only California, more than five times as populous as Arizona, had more, with 816 homes, according to data from the DOE.

No one built more quickly than Mandalay.

By June 2015, it promised that “all Mandalay homes ... are built Zero Energy Ready.” The DOE declared Mandalay the first builder to construct 600 such houses; to date, it has built 724. The DOE doesn’t certify all these houses directly; it outsources that work to a third-party inspector.

From the Registrar of Contractors’ website, hardly any homeowners would seem dissatisfied with Mandalay’s DOE-certified energy-efficient houses. Just two complaints appear to have been filed against Mandalay Communities or its affiliate MHI Residential. Everson is the qualifying party for both. One case is open — the house that has utility lines detaching — and the other, in Prescott, was settled after the Registrar of Contractors required Mandalay to fix problems, including large bubbles that bloomed in two toilets when the washing machine emptied.

But the Registrar’s website doesn’t tell the full story, because the agency doesn’t list informal or dismissed complaints. It also scrubs any complaints more than two years old.

The Registrar’s full list of grievances involving Everson’s companies is actually 35 complaints long, public records obtained by Phoenix New Times show. Thirty-one of those complaints were filed in 2015 or later, the year Ducey appointed Fleetham and the year Mandalay began promising that all of its new houses would be Zero Energy Ready. All but four of the complaints pointed to physical problems with houses.

Nineteen of those complaints were formally filed by homeowners in Glendale, Prescott, Phoenix, Chino Valley, and Laveen, with three owners filing multiple times. Twelve others were submitted through an informal process reserved for resolving disputes between homeowner and builder, in which homeowners are typically the official complainant. Here, in 11 of the 12 cases, it was MHI Residential that complained, but given how the system works, those disputes would have stemmed from homeowner complaints.

A few of the homeowners’ allegations were minor or cosmetic, like faded paint, an exterior light that didn’t work, or “imperfections on the granite countertop finish.” Others were more serious: drainage problems that tipped water toward the foundation. Faulty breakers. Recurring drywall cracks, even after repairs. A corner of a driveway that was sinking. Since 2018, five homeowners have formally complained about HVAC problems.

Overall, the Registrar of Contractors concluded that six of the homeowners’ formal complaints were unsubstantiated. It dismissed three that fell outside the agency’s two-year jurisdiction, and closed one for “denial of access.” Six were either resolved between builder and homeowner, or the agency issued a directive requiring Mandalay to fix the house. Two are still pending, and one was closed by the complainant — that was Mark Peters, after he lost faith in the agency.

Mandalay Communities is also currently embroiled in a legal battle with Vision Hills, the company with which it co-developed the eponymous lot where Peters, Olga Senkovich, and Carl Best have their houses. Mandalay owns a 46 percent stake in Vision Hills, and court documents show that Everson and the other two owners are in a dispute over control of the company.

Gang of Sleuths

In the winter, when Phoenix’s temperatures don’t regularly eclipse 100 degrees, Mark Peters’ house is habitable. One evening in late January, he welcomed Senkovich, Best, and New Times into his home. The homeowners had a story to tell.

Senkovich took a seat in one of the chairs in the dining room, while Best leaned against a wall. Their voices echoed in the empty, adjacent great room as they recounted the problems with their houses.

Senkovich, a biologist, lived a few houses away, near the end of a cul-de-sac. Her house was slightly larger than Peters’, and it was livable but “uncomfortable,” she said. Her family moved in in September 2016. One July, she turned on the air conditioning, and nothing happened. When she requested her plans from the city of Phoenix, she found problems similar to Peters’, including that the air conditioners installed were under capacity by 50 percent.

In a brand-new house, “I don’t expect the air conditioning to be wrong,” Senkovich said. Her house also had water leaks, the latest of which she discovered in February when New Times was visiting. “You buy the house, and you start to fix problems.”

Best, an electrical engineer, lived one street over from Peters with his wife and their children. He estimated that he’d had 30 service visits from REEis as he continued uncovering more and more dysfunctional features in his house, he said. The house was missing seven registers, which dispense hot or cool air. One of the returns, which pulls air back into the heating and cooling system, was too small. The ducting was not to plan. The glass panels on two different sets of sliding doors were too small for their frames. Air and bugs traveled in and out between the cracks.

Yet every time Best confronted Mandalay, a customer service representative would say, “Oh, that’s how it’s supposed to be,” Best said.

The sun had set long ago, and the dim light in the dining nook scarcely illuminated the housing plans and calculations that Peters had collected either through public records requests or sheer persistence. A magnifying glass lay on the table, which Peters often picked up to inspect the tiny letters and numbers on the plans that had led him to conclude the house was deeply flawed.
click to enlarge Carl Best, Olga Senkovich, and Mark Peters. - ELIZABETH WHITMAN
Carl Best, Olga Senkovich, and Mark Peters.
Elizabeth Whitman

Peters is tall and thin and animated. He speaks rapidly, hands gesticulating wildly, and when he moves from one place to another, he bounds. He has a flair for the dramatic and a propensity for telling a roundabout, colorful version of his story. In one of his emails to the Registrar of Contractors, he introduced a list of allegations with a quote from Sir Walter Scott: “O what a tangled web we weave / When first we practise to deceive!”

That evening, the neighbors took solace in their shared misfortune. Peters, Best, and Senkovich explained how over the past year and a half, they had determined the following:

First, their houses did not match the official plans approved by the city of Phoenix for each home’s heating and cooling system. On Peters’ house, calculations for its energy requirements left out crucial elements, like doors.

And second, everyone involved in the building process seemed determined to foist responsibility for the problems onto someone else. Mandalay deferred to subcontractors and third-party inspectors it had hired, who in turn re-deferred to Mandalay or to the city of Phoenix. The Registrar of Contractors deferred to Mandalay or to the city of Phoenix, which had rubber-stamped the plans for their homes and issued permits and certificates of occupancy. The city of Phoenix admitted that the houses should not have passed certain inspections, while also claiming that its inspectors had relied on third-party inspections, paid for by the builder, in issuing certain approvals.

Peters flipped through a packet of calculations known as manual JS&Ds, or justification, sizing, and ducting. They are supposed to measure a home’s energy needs by incorporating everything from the solar load coming through windows and walls to the air lost from opening and closing doors. If builders make accurate calculations, then they can size the house’s heating and cooling system to precisely fit its needs. Mandalay had outsourced those calculations to REEis, which got them wrong, Peters said.

He jabbed a finger at a number on the page of calculations for the second bedroom. “The first thing that caught my eye was, ‘Doors: Zero,’” he said. “Hold it. There’s a door there.” He flipped through the other pages. All of them read, “Doors: (none).” He noticed, too, that the plans had the house oriented incorrectly. They said that the front door faced north, which, on paper, would help lower the energy requirements for cooling the house.

But the front door on Peters’ house doesn’t face north. It faces west.

“They submit all these wonderful plans for awards and accolades, but they never build to the plan,” Best added. “The more we dug, the worse it got.”

“They submit all these wonderful plans for awards and accolades, but they never build to the plan. The more we dug, the worse it got.” — Carl Best, Mandalay homeowner

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Senkovich’s plans called for her house to have nine tons of air conditioning capacity, but she actually had six. Peters’ plans called for eight tons, divided between a three-ton and a five-ton unit. What the house actually had were cheaper two-ton and four-ton units, and their locations had been swapped.

“The duct work is not installed per approved plans,” a home inspector, whom Peters hired independently last fall, wrote in a report on the home. He cited missing returns and registers and “pinched/kinked duct work at both air handlers.” He noted, too, the swapped, undersized units. “The installed equipment does not match the approved plans. The size of the units was decreased by two tons,” he wrote.

And in the attic, where the furnace, air handler, and a lot of ductwork are located, the spray foam insulation that Mandalay touts as keeping its homes so energy-efficient had expanded and crushed the duct. The independent technician also noted that ducts and units in the attic were not sealed. “Air is being lost in the attic,” his report said twice.

“Restrictions can cause backflow pressure,” Best explained. “Squished ducts push air back into the [air handling] unit, which makes the unit work harder. It’s sized to push a certain amount of air, and that’s it.”

Still, according to Mandalay, the houses are so tightly sealed that it installs energy-recovery ventilators in each home to bring in fresh air and expel stale air, according to a DOE profile of one of its Vision Hills houses. It quoted construction manager Geoff Ferrell as saying, “Our owners love that part the most.”

Best despises his home’s lone energy-recovery ventilator, a Venmar K7 ERV. “The K7 ERV is the ideal choice for condominiums, apartments, and other limited space applications,” Venmar literature says. Best’s four-bedroom house is 3,500 square feet, and it was supposed to come with two ERVs, he said.

The homes are not as water-efficient as they ought to be, Best added. In Zero Energy Ready homes, the hot water system is supposed to use less than 10 cups of water — about 24 seconds’ worth of running water, for a bathroom tap — to raise the temperature 10 degrees, the DOE says. But when Best turned on the hot water in his daughter’s bathroom, which is farthest from the water heater in the garage, after flowing for longer than a minute, it still had barely warmed.
click to enlarge The ventilator in Carl Best's 3,500-square-foot house is sized for a condominium. - ELIZABETH WHITMAN
The ventilator in Carl Best's 3,500-square-foot house is sized for a condominium.
Elizabeth Whitman

“Granted, this is a first-world problem,” Peters said of his situation. “In my day job, I burn hundreds of thousands of gallons of jet fuel, and that dumps a huge amount of greenhouse gases in our atmosphere.” Buying an energy-efficient home was his attempt to compensate, a little.

Senkovich spoke up. There was, of course, another thing. “We have problems with termites,” she added, and Peters’ eyes lit up. “I want to show you my ‘apartment complex,’” he said cryptically, bounding out of the dining nook toward the kitchen island.

A thin termite tower stretched down from the underside of the island. Peters extended a tape measure next to it.

“The good news is, it hasn’t gone too much beyond 13.5 inches so far,” he said. “So, I’m thinking they stopped building.”

In late September, a week before his two-year anniversary on the closing of the house, Peters filed a complaint with the Registrar of Contractors. Unlike the complaints Senkovich and Best had filed, his wasn’t dismissed. But after the agency’s visit, Peters closed it himself, convinced that it had taken Mandalay’s side.

‘That Was Missed During the Inspection Process’

On January 4, 2019, Registrar of Contractors investigator Lisa Melton stopped by Peters’ house for a fact-finding visit. Todd Russo, the owner of HVAC subcontractor REEis, and Mandalay’s Geoff Ferrell and Tim Vargas, VP of construction and customer service, were present, as was Peters.

Jeffrey Harris, an attorney for Mandalay, came too.

So did Best and Senkovich.

During that visit, someone from Mandalay or REEis — it’s not clear who, from the audio recording that Melton took, which was obtained via public records request — admitted that Peters’ house had not been built exactly to the city-stamped plan, but insisted this was normal. The city approved standard plans that they were then allowed to modify in the field, they said.

“You do have to make adjustments at times,” one of them told her, and that was why the cooling units had been swapped. That person continued that he was providing Melton with “the updated JS&D [calculation] for what is installed in this home right now, that shows the heating/cooling loads and the heating/cooling capacities.”

“I’m 100 percent confident that this house has the proper amount of cooling and heating,” Russo told Melton. He and Mandalay representatives told Melton that it was normal to tweak approved standard plans to fit houses in specific locations, that Peters’ house had problems because he wasn’t living there, that the house met all DOE performance requirements.

As the Mandalay and REEis representatives continued their side of the story, Melton seemed satisfied. “So, all of the required permits and inspections were obtained?” she asked. “All of this work was inspected by ... city of Phoenix?” Later in the visit, she said, “If you’ve achieved all the necessary inspections and passed all those permits, I don’t have the authority to override that.”
click to enlarge Mark Peters examines the air handler and ductwork in his attic. - ELIZABETH WHITMAN
Mark Peters examines the air handler and ductwork in his attic.
Elizabeth Whitman

In the recording, the more Mandalay and REEis insisted that nothing was wrong with the house and Melton seemed to accept those claims, the more exasperated Peters became. “I have not wasted two years of my life because I like to waste two years of my life,” he burst out at one point. “The house is hot!”

At least one of the Mandalay or REEis representatives regularly talked over Peters and talked down to Melton, at one point explaining to her how the home-energy calculations worked, until she interrupted, “I understand the JS&D.”

When Peters drew out the city-approved JS&D calculations that he’d obtained through a public records request, pointing out how it called for three- and five-ton cooling units, yet units totaling only six tons had been installed, a REEis or Mandalay representative ignored the technical question and focused, instead, on the fact that Peters had the documents in the first place.

“We have a dispute with the city releasing these plans,” the person said, arguing that they belonged to the engineers. “These plans don’t belong to Mandalay. They don’t belong to Mr. Peters. When you buy a home, you don’t own plans.”

A week later, on January 10, Mike Crow, another Registrar of Contractors investigator, called city of Phoenix general inspection supervisor Mike Grubbs, according to records from the Registrar’s investigation of Peters’ home. Grubbs, who had visited Peters’ house in September, confirmed that the HVAC system had not been installed per the plans. He said that Peters’ complaints about the undersized HVAC units, ducts that were too small, and missing registers were valid.

“The inspector at the time did approve the installation, but he did not catch the changes,” Grubbs told Crow, according to a recording of the conversation that Crow took with Grubbs’ permission. “[The inspector] did not compare the plan to the installation. He just looked at the installation elements or components and used his best judgment to state, ‘Okay, it looks like it’s been followed ... to code and looks good to go.’ So that was missed during the inspection process,” Grubbs said, according to the audio recording.

What the Registrar of Contractors might have done with that admission is unknown, because two weeks later, Peters asked to put his complaint on hold, after what he viewed as a “corrupted” visit by the agency. He was convinced that if the Registrar’s investigation proceeded, Melton would find that Mandalay had done no wrong. Such a conclusion from a state agency would be detrimental to his case if he ever went to court, he feared.

“If you’ve achieved all the necessary inspections and passed all those permits, I don’t have the authority to override that.” — Registrar of Contractors Investigator Lisa Melton

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“As legal counsel has advised us ... builders guilty of poor construction will point to an inaccurate ROC Investigation report, wave it in front of a judge and jury, all as part of their efforts to avoid liability and responsibility for their construction defects,” he wrote Melton. Peters explained later that he had sought informal advice from a lawyer.

Melton told him that she couldn’t put a complaint on hold. Peters would have to close it, and if he wanted to reopen it, he had six months to do so. Now, he thinks it’s unlikely that he’ll open it, and that litigation might be his only recourse.

“If the government agencies that are supposed to be watching out for homeowners don’t do their jobs, the VH Homeowners see no choice but to seek legal action against a long list of plaintiffs, to include these same agencies,” he said. He also had hope that the Attorney General’s Office will act on his, Senkovich’s, and Best’s complaints.

The Registrar of Contractors declined New Times’ request to interview Melton, saying that investigators are not available for interviews.

After Melton’s visit, Peters began pressing leaders at the city of Phoenix’s Planning and Development Department for answers, wanting to know why its inspectors had signed off on the house when it departed so much from the approved home-energy calculation documents. The city officials, in turn, kept deferring to third-party inspectors.

“Inspection approvals are based on construction in accordance with adopted codes and the approved set of building plans,” David Urbinato, who is in the city’s planning and development department, told Peters by email in February. “Under the City of Phoenix’s construction ordinance, inspections staff rely on the energy inspection by the builder’s hired [energy-efficiency] rater to verify compliance.”

Urbinato gave similar answers to New Times in March, a few weeks after he visited Peters’ house in late February with Grubbs and city inspectors. “Clearly, what the builder installed didn’t work as they intended,” he said by phone. “And I think they’ve documented … where they reduced the capacity and they changed the ductwork and they still somehow got their third-party verifier to verify that it met efficiency requirements. I can’t speak for why the builder made that call.”

That third-party verifier, in the case of Peters’ house, was Mike Bestenlehner of Gilbert-based Best Energy Rating and Consulting. He certified on paper that the house had an “effective heating, ventilating, and air conditioning system.” He did not reply to a query from New Times, but in an email to Peters, he blamed the city for any code violations.

“We are energy code verification not building code enforcement,” he wrote. “We only review the hvac sizing reports. We have no authority to issue permits or certificates of occupancy. That is the sole responsibility of the city.”

Russo, REEis’ owner, replied to an initial query from New Times with a request for more detail before he commented. After New Times provided that detail, he did not respond again.

Angie Holdsworth, a spokesperson for Phoenix’s Planning and Development Department said that in the future, the city plans to make its inspections more thorough. Asked whether Peters or questions from New Times sparked the new protocol, Holdsworth declined to say who or what, exactly, prompted the change.

“When the discrepancies from the third party were brought to our attention, our staff reviewed what happened and decided at that time, going forward, staff would verify the size of the mechanical unit and the duct work, in addition to reviewing the third party’s paperwork,” she said.

The city has no legal authority to revoke the certificate of occupancy on Peters’ house, “unless there is some significant structural issue that makes it unsafe to occupy the structure,” Holdsworth said. “The city can only enforce existing life safety codes, not particular selling points made by a home building company. The Arizona Department of Real Estate has jurisdiction over those types of matters.”
click to enlarge Mike Grubbs, center, and David Urbinato, right, from the Phoenix Planning and Development Department, in Mark Peters' kitchen on February 22, 2019. - ELIZABETH WHITMAN
Mike Grubbs, center, and David Urbinato, right, from the Phoenix Planning and Development Department, in Mark Peters' kitchen on February 22, 2019.
Elizabeth Whitman

When New Times sent Mandalay a list of questions about problems with the Vision Hills homes, Mandalay sent two responses.

One was a letter from the lawyer, Jeffrey Harris, that described the complaints as “multiple sensational and false claims” by “a small handful of the homeowners in Vision Hills.” He denied all of their allegations.

The other was a letter from marketing manager Jessica Walls. In it, she claimed that the Vision Hills houses had been built to specification and design, and as such, functioned adequately.

Regarding Best’s complaint about the hot water, “to our knowledge … no test per the standard has been performed by the homeowners or any other professional to show that industry standards are not being met,” Walls wrote. “A timing method is invalid as it does not account for water volume expended based on pipe size or fixture restrictions.”

She also cited four inspections by subcontractor REEis at Peters’ house that “found the heating and air conditioning system adequately maintaining the home to the thermostat set temperature.” Three of those inspections were in the summer, and Walls did not state what those temperatures were or how the inspections were conducted.

“The homeowners [sic] statement that the house is uninhabitable due to the heating and air conditioning system is categorically false,” she wrote, referring to Peters. Instead, she described his problems as “temperature imbalances” and cited that the fact that Peters hadn’t ever lived in the home as contributing to those “imbalances.” She added, “Many of the rooms in the home are empty and without window coverings.”

In response to follow-up questions, Mandalay deferred to Harris, the lawyer. In another letter, he acknowledged that at the Registrar’s visit to Peters’ house on January 4, subcontractor REEis had “provided the inspector with the design documents utilized to size and install the [HVAC] system.”

He added, “Almost all of Mandalay’s homes begin as standard plans with options designed and added to them ... When we select and build a home from those master plans, it is often the case that equipment sizing or routing will change.” Local building departments, he said, “do not have a process, nor do they require that updated calculation be provided for review in these cases.”

Mandalay paints Peters as a conspiracy theorist. Indeed, he has no qualms about directly accusing Mandalay, REEis, the city of Phoenix, and the Registrar of Contractors of being grossly incompetent at best and fraudulent at worst. At times, he seems to relish presenting these claims in zealous emails often overwhelmed with detail.

But at least one other homeowner, who has never met or even heard of Peters and lives in a different development, has filed complaints that are eerily similar to Peters’. She doesn’t accuse the company of fraud, but she too is deeply frustrated — with Mandalay, for being so slow to fix major problems, and with the Registrar of Contractors, for doing so little to help.

Put in a Ceiling Fan, They Said

Aletha and Michael, who spoke on the condition that New Times withhold their last name, bought a house from Mandalay in 2017 for more than $400,000, in a development in Glendale. They chose the house because it was one of the few “green” homes they could find, with extra insulation and the capacity to add solar panels to the roof, which they did.

As they were closing on the house, they noticed that the driveway sloped oddly. Within a year of moving in, the gas, electric, and water lines were pulling away from the house as the ground beneath it compacted.

They contacted Mandalay, which either sent out contractors to carry out quick fixes or dismissed their concerns, Aletha said. When the gas main started to tilt, Mandalay told Aletha, “Oh, it’s not that big a deal because underground, it’s flexible,” she said.

“It just seems the ROC is giving Mandalay all this leeway and all this lag time to get things done at their leisure. Why not hold them accountable? They’re licensed, bonded; they have insurance.” — Aletha, Mandalay homeowner

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“I’ve got small children,” Aletha said. “We’re worried this could become a safety issue. We paid a lot of money for that house, and we want to start living in it. I don’t have a backyard for my children to play in.”

She and her husband went to the Registrar of Contractors in a “last-ditch effort hoping that we would get some sort of backup from an authority,” Aletha said.

The same investigator who visited Peters’ house, Lisa Melton, inspected Aletha and Michael’s house in the middle of March, and within two to three weeks was supposed to send a directive to Mandalay with a list of things to fix, according to Aletha. When she emailed Melton to follow up on April 23, Melton replied that she’d have the letter out in a week, Aletha said.

“It just seems they’re giving Mandalay all this leeway and all this lag time to get things done at their leisure,” she added. “Why not hold them accountable? They’re licensed, bonded; they have insurance.”

“We are on month 26 of them not fixing things,” Aletha said.

On May 2, Aletha received the directive. As this article was going to press, Mandalay’s lawyer, Harris, said that Mandalay had finished that work, which “was for cosmetic repairs and the settling of a trench that affected the utility main.”

Aletha was also disappointed that although Mandalay promised that “with available solar options you could virtually eliminate monthly energy costs,” their Arizona Public Service bill still came to $150 a month in the summer — even with solar panels on their roof and Aletha’s judicious use of electricity.

The separating utility mains were the most worrisome problem, but Aletha’s complaint to the Registrar of Contractors also mentioned HVAC problems in three of the bedrooms.

In its May 2 letter, the Registrar determined that the issue was unsubstantiated, even though, according to Aletha, one of the rooms was barely usable.

“In the summer, it’s probably 85 to 90 in there,” Aletha said of the room farthest from the air handler. She intended it to be one of her children’s bedrooms, but was forced to move the child into a different, slightly cooler bedroom closer to the air handler. “The ducting is so long and so far away from the main unit that there’s not enough pressure to get the air to the other side of the house,” Aletha said.

When she went to Mandalay with the problem, it did not blame the house’s HVAC system, she said. Instead, it reduced the heat to simpler causes: The room was hot because it faced west. Put in a ceiling fan, they told her, and keep your air conditioning filters clean.
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Elizabeth Whitman was a staff writer for Phoenix New Times from March 2019 to April 2020.