GEC H.B. 1742 75(R)    BILL ANALYSIS


BUSINESS & INDUSTRY
H.B. 1742
By: Bosse
4-2-97
Committee Report (Unamended)



BACKGROUND 
 
In 1989, the Residential Construction Liability Act (RCLA) was passed.
This act was passed in reaction to an imbalance created by the Texas
Deceptive Trade Practices Act which allowed homeowners much latitude in
suing Texas residential builders and remodelers.  RCLA was passes to
remedy this imbalance by  providing "a fair and appropriate balance with
respect to the resolution of construction disputes between a residential
contractor and an owner." 

A recent Fort Worth Court of Appeals decision (Bullivant) pointed out an
unclear section in RCLA which puts a cap on the amount of damages
homeowners may collect. The Bullivant case pointed out an unfair
consequence of the RCLA cap on damages since drafters of RCLA failed to
anticipate litigation involving older homes.  This bill would allow
homeowners of an older home to recover the greater amount of the purchase
price of the home or the current fair market price.   
 
In addition, this bill would ensure that second owners receive the same
benefits and obligations as the first owner, clearly state that
subcontractors and design professionals are included under RCLA, and add a
mediation clause.  Lastly, this bill clears up the test for contract and
owner and provides that the contractor has the advantages of 27.004(f) if
a reasonable offer is rejected by a homeowner.  

PURPOSE

The purpose of this bill is to clarify that RCLA applies to claims
involving older homes, second owners, subcontractors and design
professionals.  It also deals with questions relating to reasonable offers
and provides for mediation. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency or
institution. 

SECTION BY SECTION ANALYSIS

SECTION 1 Amends Section 27.001(3), Property Code, by expanding the
definition     of"contractor" to include both owners and employees of a
contractor and     subcontractors hired by the original contractor.  Also,
the definition is amended to   include administrators of extended
warranties on residences. 
 
SECTION 2 Amends Section 27.002(a), Property Code, to confirm that the
RCLA applies to   second owners of a home. 

SECTION 3 Amends Section 27.003(a), Property Code by omitting "employee,
or subcontractor"   as parties that a contractor is not liable for.  
 



SECTION 4 Amends Section 27.004, Property Code by amending Subsections
(f), (g), (i) and (m)   and by adding Subsection (p). 
 
  (f) Omits "unreasonably" and adds "a reasonable" offer.

  (g) Adds reference to Subsection (f).

  (i) Provides that a homeowner may recover the greater of the purchase
price of the   home or the current fair market value. 

  (m) Omits "employee, or subcontractor".

  (p) Provides rules of mediation on residential construction liability
claims. 
  
SECTION 5 The change in law made by this Act applies only to after the
effective date. 

SECTION 6 Effective Date: September 1, 1997

SECTION 7 Emergency Clause