By Harris                                              S.B. No. 506
         76R6045 PAM-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to suits to recover damages resulting from construction
 1-3     defects.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Sections 27.001(2) and (3), Property Code, are
 1-6     amended to read as follows:
 1-7                 (2)  "Construction defect" means a matter concerning
 1-8     the design, construction, or repair of a new residence, of an
 1-9     alteration of or repair or addition to an existing residence, or of
1-10     an appurtenance to a residence, on which a person has a complaint
1-11     against a contractor.  The term ["construction defect"] may include
1-12     any physical damage to the residence, any appurtenance, or the real
1-13     property on which the residence and appurtenance are affixed
1-14     proximately caused by a construction defect.
1-15                 (3)  "Contractor" means a person contracting with an
1-16     owner for the construction or sale of a new residence constructed
1-17     by that person or of an alteration of or addition to an existing
1-18     residence, repair of a new or existing residence, or construction,
1-19     sale, alteration, addition, or repair of an appurtenance to a new
1-20     or existing residence.  The term ["contractor" also] includes:
1-21                       (A)  an owner, officer, director, shareholder,
1-22     partner, or employee of the contractor; and
1-23                       (B)  a risk retention group registered under
1-24     Article 21.54, Insurance Code, that insures all or any part of a
 2-1     contractor's liability for the cost to repair a residential
 2-2     construction defect.
 2-3           SECTION 2.  Section 27.002, Property Code, is amended to read
 2-4     as follows:
 2-5           Sec. 27.002.  APPLICATION OF CHAPTER.  (a)  This chapter
 2-6     applies to:
 2-7                 (1)  any action to recover damages resulting in whole
 2-8     or in part from a construction defect, except a claim for personal
 2-9     injury, survival, or wrongful death or for damage to goods; and
2-10                 (2)  any subsequent purchaser of a residence who files
2-11     a claim against a contractor.
2-12           (b)  To the extent of conflict between this chapter and any
2-13     other law, including the Deceptive Trade Practices-Consumer
2-14     Protection Act (Subchapter E, Chapter 17, Business & Commerce
2-15     Code), this chapter prevails.
2-16           (c) [(b)]  In this section:
2-17                 (1)  "Goods" does not include a residence.
2-18                 (2)  "Personal injury" does not include mental anguish.
2-19           SECTION 3.  Section 27.003(a), Property Code, is amended to
2-20     read as follows:
2-21           (a)  In an action to recover damages resulting from a
2-22     construction defect:
2-23                 (1)[,]  a contractor is not liable for any percentage
2-24     of damages caused by:
2-25                       (A) [(1)]  negligence of a person other than the
2-26     contractor or an agent, employee, or subcontractor of the
2-27     contractor;
 3-1                       (B) [(2)]  failure of a person other than the
 3-2     contractor or an agent, employee, or subcontractor of the
 3-3     contractor to:
 3-4                             (i) [(A)]  take reasonable action to
 3-5     mitigate the damages; or
 3-6                             (ii) [(B)]  take reasonable action to
 3-7     maintain the residence;
 3-8                       (C) [(3)]  normal wear, tear, or deterioration;
 3-9                       (D) [(4)]  normal shrinkage due to drying or
3-10     settlement of construction components within the tolerance of
3-11     building standards; or
3-12                       (E) [(5)]  the contractor's reliance on written
3-13     information relating to the residence, appurtenance, or real
3-14     property on which the residence and appurtenance are affixed that
3-15     was obtained from official government records, if the written
3-16     information was false or inaccurate and the contractor did not know
3-17     and could not reasonably have known of the falsity or inaccuracy of
3-18     the information; or
3-19                 (2)  if the claimant, an assignee of the claimant, or a
3-20     person subrogated to the rights of a claimant fails to provide the
3-21     written notice to the contractor required by Section 27.004(a), the
3-22     contractor is not liable for the cost of any repairs or any
3-23     percentage of damages caused by repairs made to a construction
3-24     defect at the request of the claimant, an assignee of the claimant,
3-25     or a person subrogated to the rights of a claimant by a person
3-26     other than the contractor or an agent, employee, or subcontractor
3-27     of the contractor.
 4-1           SECTION 4.  Chapter 27, Property Code, is amended by adding
 4-2     Section 27.0031 to read as follows:
 4-3           Sec. 27.0031.  FRIVOLOUS SUIT; HARASSMENT.  A party who files
 4-4     a suit under this chapter that is groundless or brought in bad
 4-5     faith or for the purposes of harassment is liable to the defendant
 4-6     for reasonable and necessary attorney's fees and court costs.
 4-7           SECTION 5.  Sections 27.004(a), (d), (f), (g), (i), and (k),
 4-8     Property Code, are amended to read as follows:
 4-9           (a)  Before the 60th day preceding the date a claimant
4-10     seeking from a contractor damages arising from a construction
4-11     defect files suit, the claimant shall give written notice by
4-12     certified mail, return receipt requested, to the contractor, at the
4-13     contractor's last known address, specifying in reasonable detail
4-14     the construction defects that are the subject of the complaint.
4-15     The claimant shall include with the notice any evidence that
4-16     depicts the nature and cause of the defect and the nature and
4-17     extent of repairs necessary to remedy the defect, including expert
4-18     reports, photographs, and videotapes, if that evidence would be
4-19     discoverable under Rule 192, Texas Rules of Civil Procedure, in a
4-20     suit filed under this chapter.  During the 35-day period after the
4-21     date the contractor receives the notice, and on the contractor's
4-22     written request, the contractor shall be given a reasonable
4-23     opportunity to inspect and have inspected the property that is the
4-24     subject of the complaint to determine the nature and cause of the
4-25     defect and the nature and extent of repairs necessary to remedy the
4-26     defect.  The contractor may take reasonable steps to document the
4-27     defect.
 5-1           (d)  The court shall abate a suit governed by this chapter
 5-2     [section] if Subsection (c) does not apply and the court, after a
 5-3     hearing, finds that the contractor is entitled to an abatement
 5-4     because the claimant failed to provide the notice or failed to give
 5-5     the contractor a reasonable opportunity to inspect the property
 5-6     [was not provided] as required by Subsection (a).  A suit is
 5-7     automatically abated without the order of the court beginning on
 5-8     the 11th  day after the date a plea in abatement is filed if the
 5-9     plea in abatement:
5-10                 (1)  is verified and alleges that the person against
5-11     whom the suit is pending did not receive the written notice or was
5-12     not given a reasonable opportunity to inspect the property as
5-13     required by Subsection (a); and
5-14                 (2)  is not controverted by an affidavit filed by the
5-15     claimant before the 11th day after the date on which the plea in
5-16     abatement is filed.
5-17           (f)  If a claimant [unreasonably] rejects a reasonable [an]
5-18     offer made as provided by this section or does not permit the
5-19     contractor or independent contractor a reasonable opportunity to
5-20     repair the defect pursuant to an accepted offer of settlement, the
5-21     claimant:
5-22                 (1)  may not recover an amount in excess of:
5-23                       (A)  the reasonable cost of the offered repairs
5-24     which are necessary to cure the construction defect and which are
5-25     the responsibility of the contractor; or
5-26                       (B)  the amount of a reasonable monetary
5-27     settlement offer made under Subsection (n); and
 6-1                 (2)  may recover only the amount of reasonable and
 6-2     necessary attorney's fees and costs incurred before the offer was
 6-3     rejected or considered rejected.
 6-4           (g)  If a contractor fails to make a reasonable offer under
 6-5     this section, or fails to make a reasonable attempt to complete the
 6-6     repairs specified in an accepted offer made under this section, or
 6-7     fails to complete, in a good and workmanlike manner, the repairs
 6-8     specified in an accepted offer made under this section, the
 6-9     limitations on damages prescribed by Subsection (i) and defenses to
6-10     liability prescribed by Subsection (f) do [provided for in this
6-11     section shall] not apply.
6-12           (i)  The total damages awarded in a suit subject to this
6-13     chapter may not exceed the greater of the claimant's purchase price
6-14     for the residence or the current fair market value of the residence
6-15     without the construction defect.
6-16           (k)  An affidavit certifying rejection of a settlement offer
6-17     under this section may be filed with the court.  The trier of fact
6-18     shall determine the reasonableness of [a rejection of] an offer of
6-19     settlement made under this section.
6-20           SECTION 6.  Chapter 27, Property Code, is amended by adding
6-21     Section 27.0041 to read as follows:
6-22           Sec. 27.0041.  MEDIATION.  (a)  If a claimant files suit
6-23     seeking from a contractor damages arising from a construction
6-24     defect in an amount greater than $7,500, the claimant or contractor
6-25     may file a motion to compel mediation of the dispute.  The motion
6-26     must be filed not later than the 90th day after the date the suit
6-27     is filed.
 7-1           (b)  Not later than the 30th day after the date a motion is
 7-2     filed under Subsection (a), the court shall order the parties to
 7-3     mediate the dispute. If the parties cannot agree on the appointment
 7-4     of a mediator, the court shall appoint the mediator.
 7-5           (c)  The court shall order the parties to begin mediation of
 7-6     the dispute not later than the 30th day after the date the court
 7-7     enters its order under Subsection (b) unless the parties agree
 7-8     otherwise or the court determines additional time is required.  If
 7-9     the court determines that additional time is required, the court
7-10     may order the parties to begin mediation of the dispute not later
7-11     than the 60th day after the date the court enters its order under
7-12     Subsection (b).
7-13           (d)  Unless each party who has appeared in the suit filed
7-14     under this chapter agrees otherwise, each party shall participate
7-15     in the mediation and contribute equally to the cost of the
7-16     mediation.
7-17           (e)  Section 154.023, Civil Practice and Remedies Code, and
7-18     Subchapters C and D, Chapter 154, Civil Practice and Remedies Code,
7-19     apply to a mediation under this section to the extent those laws do
7-20     not conflict with this section.
7-21           SECTION 7.  (a)  This Act takes effect September 1, 1999.
7-22           (b)  The changes in law made by this Act apply only to a
7-23     contract for services subject to Chapter 27, Property Code, as
7-24     amended by this Act, that is entered into on or after the effective
7-25     date of this Act.  A contract for services subject to Chapter 27,
7-26     Property Code, that was entered into before the effective date of
7-27     this Act is governed by the law in effect when the contract was
 8-1     entered into, and the former law is continued in effect for that
 8-2     purpose.
 8-3           SECTION 8.  The importance of this legislation and the
 8-4     crowded condition of the calendars in both houses create an
 8-5     emergency and an imperative public necessity that the
 8-6     constitutional rule requiring bills to be read on three several
 8-7     days in each house be suspended, and this rule is hereby suspended.