SRC-DBM C.S.S.B. 506 76(R)    BILL ANALYSIS


Senate Research CenterC.S.S.B. 506
By: Harris
Economic Development
4/28/1999
Committee Report (Substituted)


DIGEST 

Currently, the Residential Construction Liability Act (RCLA) requires
homeowners asserting that their home contains construction defects to
provide notice regarding specific complaints to the builder.  The builder
then has 45 days to inspect the alleged defects and to make an offer to
repair or settle in court.  If the parties proceed with a suit without
repairs, the type of damages recoverable depend on the reasonableness of
the builder's original offer. C.S.S.B. 506 would authorize suits to recover
damages resulting from construction defects and to modify problems in
earlier acts. 

PURPOSE

As proposed, C.S.S.B. 506 authorizes suits to recover damages resulting
from construction defects and provides for recovery of a penalty from
certain contractors. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Sections 27.001(2) and (3), Property Code, to redefine
"construction defect" and "contractor."  Makes conforming changes. 

SECTION 2.  Amends Section 27.002, Property Code, to provide that this
chapter applies to any action to recover damages resulting part from a
construction defect and any subsequent purchaser of a residence who files a
claim against a contractor.  Makes conforming changes. 

SECTION 3. Amends Section 27.003(a), Property Code, to provide that in an
action to recover damages resulting from a construction defect, a
contractor is not liable for the cost of any repairs or any percentage of
damages caused by repairs made to a construction defect at the request of
an assignee of the claimant if an assignee of the claimant fails to provide
the written notice to the contractor required by Section 27.004(a) before
performing repairs.  Makes conforming changes. 

SECTION 4.  Amends Chapter 27, Property Code, by adding Section 27.0031, as
follows: 

Sec.  27.0031.  FRIVOLOUS SUIT; HARASSMENT.  Provides that a party who
files a suit that is groundless or brought  in bad faith, or for the
purposes of harassment, is liable to the defendant for reasonable
attorney's fees and court costs. 

SECTION 5.  Amends Section 27.004, Property Code, by amending Subsections
(a), (b), (d), (f), (h), (i), and (k), and adding Subsection (p), as
follows:  

(a)  Requires a claimant, at the request of the contractor, to provide to
the contractor any evidence that depicts the nature and cause of  the
defect and the nature and extent of repairs necessary to remedy the defect,
if that evidence would be discoverable. 

(b)  Requires an offer to be sent to the claimant at the claimant's last
known address or the claimant's attorney by certified mail, return receipt
requested. 

 (d)  Requires the court to abate a suit governed by this chapter, rather
than section, if Subsection (c) does not apply and after a hearing, the
court finds that the contractor is entitled to an abatement because the
claimant failed to provide, rather than was not provided, the notice or
failed to give the contractor a reasonable opportunity to inspect the
property as required.  Makes a confirming change.   

(f)  Provides that if a claimant unreasonably rejects an offer made, the
claimant may not recover an amount in excess of the reasonable cost of the
offered repairs or the amount of a reasonable monetary settlement offer
made under Subsection (n).  Makes conforming changes. 
   
(h)  Authorizes a claimant, except as provided by Subsection (f), in a suit
subject to this chapter, to recover only certain damages proximately caused
by a construction defect, including the reasonable cost of repairs
necessary to cure any construction defect, including any reasonable and
necessary engineering or consulting fees required to evaluate and cure the
construction defect, that the contractor is responsible for repairing under
this chapter.    

 (i)  Prohibits total damages  awarded in a suit subject to this chapter
from exceeding the greater of  the claimant's purchase price for the
residence or the current fair market value of the residence without the
construction defect.   

 (k)  Makes conforming changes.
 
(p)  Provides that if the contractor provides written notice for damages
arising from a construction defect to a subcontractor, the contractor
retains all rights of contribution from the subcontractor if the contractor
settles the claim with the claimant. 

SECTION 6.  Amends Chapter 27, Property Code, by adding Section 27.0041, as
follows: 

Sec. 27.0041.  MEDIATION.  Authorizes a claimant or contractor to file a
motion to compel mediation in a dispute, if a claimant files suit seeking
damages from a contractor arising from a construction defect in an amount
greater than $7,500.  Requires the motion to be filed no later than the
90th day after the date the suit is filed.  Requires the court to order
parties to mediate a dispute no later than the 30th day after the date a
motion is filed under Subsection (a).   Requires the court to appoint a
mediator, if the parties cannot agree on the appointment of a mediator.
Requires the court to order the parties to begin mediation of a dispute not
later than the 30th day after the date the court enters its order under
Subsection  (b), unless the parties agree otherwise or the court determines
additional time is required.  Authorizes the court to order the parties to
begin mediation of a dispute no later than the 60th day after the date the
court enters its order under Subsection (b), if the court determines that
additional time is required.  Requires each party to participate in the
mediation and contribute equally to the cost of mediation, unless each
party has appeared in the suit filed agrees otherwise. Provides that
Section 154.023, Civil Practice and Remedies Code, and Subchapters C and D,
Chapter 154, Civil Practice and Remedies Code, applies to a mediation under
this section to the extent those laws do not conflict with this section. 

SECTION 7.  Amends Section 27.005, Property Code, to provide that this
chapter does not create a cause of action or derivative liability, rather
than an implied warranty, or extend a limitations period. 

SECTION 8.  Amends Chapter 27, Property Code, by adding Section 27.007, as
follows: 

Sec. 27.007.  DISCLOSURE STATEMENT REQUIRED.  Requires a written contract
subject to this chapter to contain next to the signature lines in the
contract a notice printed or typed in 10-point boldface type or the
computer equivalent that reads in a certain way. Authorizes a claimant to
recover a civil penalty of $500, in addition to any other remedy provided
by this chapter from the contractor, if a contract does not contain the
notice required by this section.    

 SECTION 9.(a)  Effective date: September 1, 1999, except as provided by
Subsection (b) of this section. 

 (b)  Effective date of Section 27.007, Property Code, as added by this
Act: September 1, 2000.   
 (c)  Makes application of this Act prospective.  

SECTION 10.Emergency clause.  

      

SUMMARY OF COMMITTEE CHANGES

Relating Clause.

Amends the relating clause by adding text regarding recovery of a penalty
from certain contractors. 

SECTION 2.

Amends Section 27.002, Property Code, to delete proposed text regarding
damages resulting in whole or in part from a construction defect. 

SECTION 3.

Amends Section 27.003(a), Property Code, to provide that in an action to
recover damages resulting from a construction defect, a contractor is not
liable for the cost of any repairs or any percentage of damages caused by
repairs made to a construction defect at the request of an assignee of the
claimant, rather than the claimant, if an assignee of the claimant, rather
than the claimant, fails to provide the written notice to the contractor
required by Section 27.004(a) before performing repairs.  Makes a
conforming change. 

SECTION 5.

Amends Section 27.004, Property Code, by amending Subsections (a), (b),
(f), and (h); deleting proposed Subsection (g); and adding Subsection (p),
Property Code, as follows: 

(a)  Requires a claimant, at the request of the contractor, to provide to
the contractor, rather than to include with the notice, any evidence that
depicts the nature and cause of  the defect and the nature and extent of
repairs necessary to remedy the defect, if that evidence would be
discoverable. Deletes proposed text regarding in a suit filed under the
chapter. 

(b)  Requires an offer to be sent to the claimant at the claimant's last
known address or the claimant's attorney by certified mail, return receipt
requested. 

(f)  Provides that if a claimant unreasonably rejects an offer made, rather
than if the   claimant rejects a reasonable offer made, the claimant may
not recover an amount in excess of the reasonable cost of the offered
repairs or the amount of a reasonable monetary settlement offer made under
Subsection (n). 

(h)  Authorizes a claimant, except as provided by Subsection (f), in a suit
subject to this chapter, to recover only certain damages proximately caused
by a construction defect, including the reasonable cost of repairs
necessary to cure any construction defect, including any reasonable and
necessary engineering or consulting fees required to evaluate and cure the
construction defect, that the contractor is responsible for repairing under
this chapter. 

(p)  Provides that if the contractor provides written notice for damages
arising from  a construction defect to a subcontractor, the contractor
retains all rights of contribution from the subcontractor if the contractor
settles the claim with the claimant. 

SECTION 7.  

Amends Section 27.005, Property Code, to provide that this chapter does not
create a cause of action or derivative liability, rather than an implied
warranty, or extend a limitations period. 


SECTION 8.

Amends Chapter 27, Property Code, by adding Section 27.007, regarding a
required discloure statement. 

SECTION 9.

Redesignated from proposed SECTION 7.  Effective date: September 1, 1999,
except as provided by Subsection (b) of this section.  Effective date of
Section 27.007, Property Code, as added by this Act: September 1, 2000.
Makes application of this Act prospective. 

SECTION 10.

 Redesignated from proposed SECTION 9.