H.B. No. 1395
    1-1                                AN ACT
    1-2  relating to residential construction liability.
    1-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-4        SECTION 1.  Sections 27.001(2) and (3), Property Code, are
    1-5  amended to read as follows:
    1-6              (2)  "Construction defect" means a matter concerning
    1-7  the design, construction, or repair of a new residence, of an
    1-8  alteration of or addition to an existing residence, or of an
    1-9  appurtenance to a residence, on which a person has a complaint
   1-10  against a contractor.  The term "construction defect" may include
   1-11  any physical damage to the residence, <or> any appurtenance, or the
   1-12  real property on which the residence and appurtenance are affixed
   1-13  proximately caused by a construction defect.
   1-14              (3)  "Contractor" means a person contracting with an
   1-15  owner for the construction or sale of a new residence constructed
   1-16  by that person or of an alteration of or addition to an existing
   1-17  residence, repair of a new or existing residence, or construction,
   1-18  sale, alteration, addition, or repair of an appurtenance to a new
   1-19  or existing residence.  The term "contractor" also includes a risk
   1-20  retention group registered under Article 21.54, Insurance Code,
   1-21  that insures all or any part of a contractor's liability for the
   1-22  cost to repair a residential construction defect.
   1-23        SECTION 2.  Section 27.001, Property Code, is amended by
    2-1  adding Subdivision (5) to read as follows:
    2-2              (5)  "Structural failure" means actual physical damage
    2-3  to the load-bearing portion of a residence caused by a failure of
    2-4  the load-bearing portion.
    2-5        SECTION 3.  Section 27.002, Property Code, is amended to read
    2-6  as follows:
    2-7        Sec. 27.002.  Application of Chapter.  (a)  This chapter
    2-8  applies to any action to recover damages resulting from a
    2-9  construction defect, except a claim <an action> for personal
   2-10  injury, survival, or wrongful death or for damage to goods.  To the
   2-11  extent of conflict between this chapter and any other law,
   2-12  including the Deceptive Trade Practices-Consumer Protection Act
   2-13  (Subchapter E, Chapter 17, Business & Commerce Code), this chapter
   2-14  prevails.
   2-15        (b)  In this section:
   2-16              (1)  "Goods" does not include a residence.
   2-17              (2)  "Personal injury" does not include mental anguish.
   2-18        SECTION 4.  Section 27.003, Property Code, is amended to read
   2-19  as follows:
   2-20        Sec. 27.003.  Liability.  (a)  In an action to recover
   2-21  damages resulting from a construction defect, a contractor is not
   2-22  liable for <damages, or> any percentage of damages<,> caused by:
   2-23              (1)  negligence of a person other than the contractor
   2-24  or an agent, employee, or subcontractor of the contractor;
   2-25              (2)  failure of a person other than the contractor or
    3-1  an agent, employee, or subcontractor of the contractor to:
    3-2                    (A)  take reasonable action to mitigate the
    3-3  damages; or
    3-4                    (B)  take reasonable action to maintain the
    3-5  residence;
    3-6              (3)  normal wear, tear, or deterioration; <or>
    3-7              (4)  normal shrinkage due to drying or settlement of
    3-8  construction components within the tolerance of building standards;
    3-9  or
   3-10              (5)  the contractor's reliance on written information
   3-11  relating to the residence, appurtenance, or real property on which
   3-12  the residence and appurtenance are affixed that was obtained from
   3-13  official government records, if the written information was false
   3-14  or inaccurate and the contractor did not know and could not
   3-15  reasonably have known of the falsity or inaccuracy of the
   3-16  information.
   3-17        (b)  Except as provided herein, this chapter does not limit
   3-18  or bar any other defense or defensive matter or other defensive
   3-19  cause of action applicable to an action to recover damages
   3-20  resulting from a construction defect.
   3-21        SECTION 5.  Section 27.004, Property Code, is amended to read
   3-22  as follows:
   3-23        Sec. 27.004.  NOTICE AND OFFER OF SETTLEMENT.    (a)  Before
   3-24  the 60th day preceding the date a claimant seeking from a
   3-25  contractor damages arising from a construction defect files suit,
    4-1  the claimant shall give written notice by certified mail, return
    4-2  receipt requested, to the contractor, at the contractor's last
    4-3  known address, specifying in reasonable detail the construction
    4-4  defects that are the subject of the complaint.  During the 35-day
    4-5  <21-day> period after the date the contractor receives the notice,
    4-6  and on the contractor's written request, the contractor shall be
    4-7  given a reasonable opportunity to inspect and have inspected the
    4-8  property that is the subject of the complaint to determine the
    4-9  nature and cause of the defect and the nature and extent of repairs
   4-10  necessary to remedy the defect.  The contractor may take reasonable
   4-11  steps to document the defect.
   4-12        (b)  Within the 45-day <31-day> period after the date the
   4-13  contractor receives the notice, the contractor may make a written
   4-14  offer of settlement to the claimant.  The offer may include either
   4-15  an agreement by the contractor to repair or to have repaired by an
   4-16  independent contractor at the contractor's expense any construction
   4-17  defect described in the notice and shall describe in reasonable
   4-18  detail the kind of repairs which will be made.  The repairs shall
   4-19  be made within the 45-day period after the date the contractor
   4-20  receives written notice of acceptance of the settlement offer,
   4-21  unless completion is delayed by the claimant or by other events
   4-22  beyond the control of the contractor.  For the purposes of this
   4-23  section, "independent contractor" means a person who is independent
   4-24  of the contractor and did not perform any of the work complained of
   4-25  in the claimant's notice.  The claimant and the contractor may
    5-1  agree in writing to extend the periods described by this
    5-2  subsection.
    5-3        (c)  If the giving of the notice under Subsections (a) and
    5-4  (b) within the period prescribed by those subsections is
    5-5  impracticable because of the necessity of filing suit at an earlier
    5-6  date to prevent expiration of the statute of limitations or if the
    5-7  complaint is asserted as a counterclaim, that notice is not
    5-8  required.  However, the suit or counterclaim shall specify in
    5-9  reasonable detail each construction defect that is the subject of
   5-10  the complaint, and the inspection provided for by Subsection (a)
   5-11  may be made during the 60-day <21-day> period following the date of
   5-12  service of the suit or counterclaim on the contractor, and the
   5-13  offer provided for by Subsection (b) may be made within the 60-day
   5-14  <31-day> period following the date of service.  If, while a suit
   5-15  subject to this chapter is pending, the statute of limitations for
   5-16  the cause of action would have expired and it is determined that
   5-17  the provisions of Subsection (a) were not properly followed, the
   5-18  suit shall be abated for up to 75 days in order to allow compliance
   5-19  with Subsections (a) and<,> (b)<, and (f)>.
   5-20        (d)  If a claimant unreasonably rejects an offer made as
   5-21  provided by this section or does not permit the contractor or
   5-22  independent contractor a reasonable opportunity to repair the
   5-23  defect pursuant to an accepted offer of settlement, the claimant
   5-24  may not recover an amount in excess of the reasonable cost of the
   5-25  repairs which are necessary to cure the construction defect and
    6-1  which are the responsibility of the contractor and may recover only
    6-2  the amount of reasonable and necessary attorney's fees and costs
    6-3  incurred before the offer was rejected or considered rejected.
    6-4        (e)  If <a claimant reasonably rejects an offer,> a
    6-5  contractor fails to make a reasonable <an> offer under this
    6-6  section, or <a contractor> fails to make a reasonable attempt to
    6-7  complete the repairs specified in an accepted offer made under this
    6-8  section, or fails to complete, <repair the defects within the time
    6-9  allowed by this section> in a good and workmanlike manner, the
   6-10  repairs specified in an accepted offer made under this section, the
   6-11  limitations on damages and defenses to liability provided for in
   6-12  this section shall not apply.
   6-13        (f)  Except as provided by Subsection (d), in a suit subject
   6-14  to this chapter the claimant may recover only the following damages
   6-15  proximately caused by a construction defect:
   6-16              (1)  the reasonable cost of repairs necessary to cure
   6-17  any construction defect that the contractor failed to cure;
   6-18              (2)  the reasonable expenses of temporary housing
   6-19  reasonably necessary during the repair period;
   6-20              (3)  the reduction in market value, if any, to the
   6-21  extent the reduction is due to structural failure; and
   6-22              (4)  reasonable and necessary attorney's fees.  <If
   6-23  suit is filed after a contractor makes repairs as provided by this
   6-24  section, the claimant may not be awarded damages arising from the
   6-25  construction defect, attorney's fees, or costs unless the trier of
    7-1  fact finds that the attempt to repair was not made in good faith
    7-2  and did not cure the construction defect described in the notice.>
    7-3        (g)  The total damages awarded in a suit subject to this
    7-4  chapter  may not exceed the claimant's purchase price for the
    7-5  residence.
    7-6        (h) <(g)>  An offer of settlement made under this section
    7-7  that is not accepted before the 25th day after the date the offer
    7-8  is received by the claimant is considered rejected.
    7-9        (i) <(h)>  An affidavit certifying rejection of a settlement
   7-10  offer under this section may be filed with the court.  The trier of
   7-11  fact shall determine the reasonableness of a rejection of an offer
   7-12  of settlement made under  this section <The affidavit may not be
   7-13  offered into evidence or referred to by a party in the presence of
   7-14  the jury on  trial of the case>.
   7-15        (j) <(i)>  A contractor who makes or provides for repairs
   7-16  under this section is entitled to take reasonable steps to document
   7-17  the repair and to have it inspected.
   7-18        (k) <(j)>  Notwithstanding Subsections (a), (b), and (c), a
   7-19  contractor who receives written notice of a construction defect
   7-20  resulting from work performed by the contractor or an agent,
   7-21  employee, or subcontractor of the contractor and creating an
   7-22  imminent threat to the health or safety of the inhabitants of the
   7-23  residence shall take reasonable steps to cure the defect as soon as
   7-24  practicable.  If the contractor fails to cure the defect in a
   7-25  reasonable time, the owner of the residence may have the defect
    8-1  cured and may recover from the contractor the reasonable cost of
    8-2  the repairs plus attorney's fees and costs in addition to any other
    8-3  damages recoverable under any law not inconsistent with the
    8-4  provisions of this chapter.
    8-5        (l) <(k)>  This section does not preclude a contractor from
    8-6  making a monetary settlement offer.
    8-7        (m) <(l)>  The inspection and repair provisions of this
    8-8  chapter are in addition to any rights of inspection and settlement
    8-9  provided by common law or by another statute, including Section
   8-10  17.505, Business & Commerce Code.
   8-11        SECTION 6.  Chapter 27, Property Code, is amended by adding
   8-12  Section 27.006 to read as follows:
   8-13        Sec. 27.006.  CAUSATION.  In an action to recover damages
   8-14  resulting from a construction defect, the claimant must prove that
   8-15  the damages were proximately caused by the construction defect.
   8-16        SECTION 7.  The change in law made by this Act applies to an
   8-17  action for residential construction liability filed on or after the
   8-18  effective date of this Act.  An action filed before the effective
   8-19  date of this Act is governed by the law in effect at the time of
   8-20  filing, and the prior law is continued in effect for that purpose.
   8-21        SECTION 8.  The importance of this legislation and the
   8-22  crowded condition of the calendars in both houses create an
   8-23  emergency and an imperative public necessity that the
   8-24  constitutional rule requiring bills to be read on three several
   8-25  days in each house be suspended, and this rule is hereby suspended,
    9-1  and that this Act take effect and be in force from and after its
    9-2  passage, and it is so enacted.