Early estimates in response to dozens of lawsuits have determined that defective Chinese drywall is present in at least two percent of the 20,000 single-family houses developed in Florida between 2006 and 2007 by Miami-based homebuilder Lennar Corp.

The number of defective residences may grow even higher as Lennar's research has just  begun to determine how many other homes the Miami company built in earlier years in Florida that contain Chinese drywall, which causes metal corrosion, foul smells, and physical irritation to some individuals.  

Lennar initiated the research for Chinese drywall in response to 43 lawsuits from homeowners that have been filed against the homebuilder in state and federal courts.  

"The company is currently unable to reasonably estimate its future exposure relating to defective Chinese drywall," according to Lennar's second quarter filing with the Securities and Exchange Commission. "However, the company is continuing its investigation of homes it delivered during the relevant time period in order to determine whether there are additional homes, not yet inspected, with defective Chinese drywall and resulting damage."

Based on the initial findings, Lennar has set aside nearly $40 million to repair about 400 single-family houses in Florida with the defective drywall but is prepared to increase that amount based on future findings, according to the SEC filing.

Florida is estimated to have about one-third of the 100,000 single-family homes constructed nationwide with defective Chinese drywall, according to CondoVultures.com.

This estimate does not include defective Chinese drywall that may have been used to build out some of the high-rise condo towers that were developed throughout the state during the boom years of 2003 to 2007.

At least one high-end  condo tower in Greater Miami is known to have defective Chinese drywall present and several other new skyscrapers are suspected of also having the defect present, said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC.

"Lennar is setting aside an average of $100,000 per house for Chinese drywall remediation," Zalewski said. "If we use that average  as a benchmark, the estimated remediation costs for a 400-unit condo tower in Greater Miami and South Florida is probably going to be at least $40 million if not more. Don't forget, every residence with defective Chinese drywall must be gutted and aired out before the interior can be rebuilt."  

In Lennar's case, the cost of rebuilding is being advanced by the Miami homebuilder while warranty issues are pursued with supplier and contractors, according to the SEC filing.

"The company has a $20.7 million receivable for covered damages under its insurance coverage relative to the cost it expects to incur in remedying the homes confirmed to have defective Chinese drywall and resulting damage," according to Lennar's SEC filing. "The company is seeking reimbursement from its subcontractors, insurers and others for costs the company expects to incur to investigate and repair defective Chinese drywall and resulting damage."

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