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.