By Marchant H.B. No. 2931
77R3845 AJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to express and implied warranties of a contractor for
1-3 residential construction.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. The purpose of this Act is to protect homeowners
1-6 by requiring a contractor to provide certain express warranties to
1-7 a homeowner before the contractor may disclaim any implied
1-8 warranties, including the implied warranties of habitability,
1-9 fitness, and good and workmanlike construction.
1-10 SECTION 2. Chapter 27, Property Code, is amended by
1-11 redesignating Sections 27.001-27.007, Property Code, as Subchapter
1-12 A, Chapter 27, Property Code, and by adding a heading for
1-13 Subchapter A, Chapter 27, Property Code, to read as follows:
1-14 SUBCHAPTER A. ACTION FOR DAMAGES RESULTING FROM
1-15 CONSTRUCTION DEFECT
1-16 SECTION 3. Section 27.001, Property Code, is amended to read
1-17 as follows:
1-18 Sec. 27.001. DEFINITIONS. In this subchapter [chapter]:
1-19 (1) "Appurtenance" means any structure or recreational
1-20 facility that is appurtenant to a residence but is not a part of
1-21 the dwelling unit.
1-22 (2) "Construction defect" means a matter concerning
1-23 the design, construction, or repair of a new residence, of an
1-24 alteration of or repair or addition to an existing residence, or of
2-1 an appurtenance to a residence, on which a person has a complaint
2-2 against a contractor. The term may include any physical damage to
2-3 the residence, any appurtenance, or the real property on which the
2-4 residence and appurtenance are affixed proximately caused by a
2-5 construction defect.
2-6 (3) "Contractor" means a person contracting with an
2-7 owner for the construction or sale of a new residence constructed
2-8 by that person or of an alteration of or addition to an existing
2-9 residence, repair of a new or existing residence, or construction,
2-10 sale, alteration, addition, or repair of an appurtenance to a new
2-11 or existing residence. The term includes:
2-12 (A) an owner, officer, director, shareholder,
2-13 partner, or employee of the contractor; and
2-14 (B) a risk retention group registered under
2-15 Article 21.54, Insurance Code, that insures all or any part of a
2-16 contractor's liability for the cost to repair a residential
2-17 construction defect.
2-18 (4) "Residence" means a single-family house, duplex,
2-19 triplex, or quadruplex or a unit in a multiunit residential
2-20 structure in which title to the individual units is transferred to
2-21 the owners under a condominium or cooperative system.
2-22 (5) "Structural failure" means actual physical damage
2-23 to the load-bearing portion of a residence caused by a failure of
2-24 the load-bearing portion.
2-25 SECTION 4. Sections 27.002(a) and (b), Property Code, are
2-26 amended to read as follows:
2-27 (a) This subchapter [chapter] applies to:
3-1 (1) any action to recover damages resulting from a
3-2 construction defect, except a claim for personal injury, survival,
3-3 or wrongful death or for damage to goods; and
3-4 (2) any subsequent purchaser of a residence who files
3-5 a claim against a contractor.
3-6 (b) To the extent of conflict between this subchapter
3-7 [chapter] and any other law, including the Deceptive Trade
3-8 Practices-Consumer Protection Act (Subchapter E, Chapter 17,
3-9 Business & Commerce Code), this subchapter [chapter] prevails.
3-10 SECTION 5. Section 27.003, Property Code, is amended by
3-11 amending Subsection (b) and adding Subsection (c) to read as
3-12 follows:
3-13 (b) Except as provided herein, this subchapter [chapter]
3-14 does not limit or bar any other defense or defensive matter or
3-15 other defensive cause of action applicable to an action to recover
3-16 damages resulting from a construction defect.
3-17 (c) This subchapter shall be read in conjunction with
3-18 Subchapter B. Any claim against a contractor under this subchapter
3-19 is also subject to Subchapter B.
3-20 SECTION 6. Section 27.0031, Property Code, is amended to read
3-21 as follows:
3-22 Sec. 27.0031. FRIVOLOUS SUIT; HARASSMENT. A party who files
3-23 a suit under this subchapter [chapter] that is groundless and
3-24 brought in bad faith or for purposes of harassment is liable to the
3-25 defendant for reasonable and necessary attorney's fees and court
3-26 costs.
3-27 SECTION 7. Sections 27.004(c), (d), (h), (i), (m), and (o),
4-1 Property Code, are amended to read as follows:
4-2 (c) If the giving of the notice under Subsections (a) and
4-3 (b) within the period prescribed by those subsections is
4-4 impracticable because of the necessity of filing suit at an earlier
4-5 date to prevent expiration of the statute of limitations or if the
4-6 complaint is asserted as a counterclaim, that notice is not
4-7 required. However, the suit or counterclaim shall specify in
4-8 reasonable detail each construction defect that is the subject of
4-9 the complaint, and the inspection provided for by Subsection (a)
4-10 may be made during the 60-day period following the date of service
4-11 of the suit or counterclaim on the contractor, and the offer
4-12 provided for by Subsection (b) may be made within the 60-day period
4-13 following the date of service. If, while a suit subject to this
4-14 subchapter [chapter] is pending, the statute of limitations for the
4-15 cause of action would have expired and it is determined that the
4-16 provisions of Subsection (a) were not properly followed, the suit
4-17 shall be abated for up to 75 days in order to allow compliance with
4-18 Subsections (a) and (b).
4-19 (d) The court shall abate a suit governed by this subchapter
4-20 [chapter] if Subsection (c) does not apply and the court, after a
4-21 hearing, finds that the contractor is entitled to an abatement
4-22 because the claimant failed to provide the notice or failed to give
4-23 the contractor a reasonable opportunity to inspect the property as
4-24 required by Subsection (a). A suit is automatically abated without
4-25 the order of the court beginning on the 11th day after the date a
4-26 plea in abatement is filed if the plea in abatement:
4-27 (1) is verified and alleges that the person against
5-1 whom the suit is pending did not receive the written notice or was
5-2 not given a reasonable opportunity to inspect the property as
5-3 required by Subsection (a); and
5-4 (2) is not controverted by an affidavit filed by the
5-5 claimant before the 11th day after the date on which the plea in
5-6 abatement is filed.
5-7 (h) Except as provided by Subsection (f), in a suit subject
5-8 to this subchapter [chapter] the claimant may recover only the
5-9 following damages proximately caused by a construction defect:
5-10 (1) the reasonable cost of repairs necessary to cure
5-11 any construction defect, including any reasonable and necessary
5-12 engineering or consulting fees required to evaluate and cure the
5-13 construction defect, that the contractor is responsible for
5-14 repairing under this subchapter [chapter];
5-15 (2) the reasonable expenses of temporary housing
5-16 reasonably necessary during the repair period;
5-17 (3) the reduction in market value, if any, to the
5-18 extent the reduction is due to structural failure; and
5-19 (4) reasonable and necessary attorney's fees.
5-20 (i) The total damages awarded in a suit subject to this
5-21 subchapter [chapter] may not exceed the greater of the claimant's
5-22 purchase price for the residence or the current fair market value
5-23 of the residence without the construction defect.
5-24 (m) Notwithstanding Subsections (a), (b), and (c), a
5-25 contractor who receives written notice of a construction defect
5-26 resulting from work performed by the contractor or an agent,
5-27 employee, or subcontractor of the contractor and creating an
6-1 imminent threat to the health or safety of the inhabitants of the
6-2 residence shall take reasonable steps to cure the defect as soon as
6-3 practicable. If the contractor fails to cure the defect in a
6-4 reasonable time, the owner of the residence may have the defect
6-5 cured and may recover from the contractor the reasonable cost of
6-6 the repairs plus attorney's fees and costs in addition to any other
6-7 damages recoverable under any law not inconsistent with the
6-8 provisions of this subchapter [chapter].
6-9 (o) The inspection and repair provisions of this subchapter
6-10 [chapter] are in addition to any rights of inspection and
6-11 settlement provided by common law or by another statute, including
6-12 Section 17.505, Business & Commerce Code.
6-13 SECTION 8. Section 27.0041(d), Property Code, is amended to
6-14 read as follows:
6-15 (d) Unless each party who has appeared in a suit filed under
6-16 this subchapter [chapter] agrees otherwise, each party shall
6-17 participate in the mediation and contribute equally to the cost of
6-18 the mediation.
6-19 SECTION 9. Section 27.005, Property Code, is amended to read
6-20 as follows:
6-21 Sec. 27.005. LIMITATIONS ON EFFECT OF SUBCHAPTER [CHAPTER].
6-22 This subchapter [chapter] does not create a cause of action or
6-23 derivative liability or extend a limitations period.
6-24 SECTION 10. Section 27.007, Property Code, is amended to read
6-25 as follows:
6-26 Sec. 27.007. DISCLOSURE STATEMENT REQUIRED. (a) A written
6-27 contract subject to this subchapter [chapter] must contain next to
7-1 the signature lines in the contract a notice printed or typed in
7-2 10-point boldface type or the computer equivalent that reads
7-3 substantially similar to the following:
7-4 "This contract is subject to Subchapter A, Chapter 27,
7-5 Property Code. The provisions of that subchapter [chapter] may
7-6 affect your right to recover damages arising from the performance
7-7 of this contract. If you have a complaint concerning a
7-8 construction defect arising from the performance of this contract
7-9 and that defect has not been corrected through normal warranty
7-10 service, you must provide notice regarding the defect to the
7-11 contractor by certified mail, return receipt requested, not later
7-12 than the 60th day before the date you file suit to recover damages
7-13 in a court of law. The notice must refer to Subchapter A, Chapter
7-14 27, Property Code, and must describe the construction defect. If
7-15 requested by the contractor, you must provide the contractor an
7-16 opportunity to inspect and cure the defect as provided by Section
7-17 27.004, Property Code."
7-18 (b) If a contract does not contain the notice required by
7-19 this section, the claimant may recover from the contractor a civil
7-20 penalty of $500 in addition to any other remedy provided by this
7-21 subchapter [chapter].
7-22 SECTION 11. Chapter 27, Property Code, is amended by adding
7-23 Subchapter B to read as follows:
7-24 SUBCHAPTER B. HOMEOWNERS EXPRESS WARRANTY ACT
7-25 Sec. 27.101. SHORT TITLE. This subchapter may be cited as
7-26 the Homeowners Express Warranty Act.
7-27 Sec. 27.102. DEFINITIONS. In this subchapter:
8-1 (1) "Building inspector" means a person:
8-2 (A) appointed or employed by a governmental
8-3 entity or contractor to enforce building standards; and
8-4 (B) if enforcing a building code, certified to
8-5 inspect property for compliance with the building code.
8-6 (2) "Building standards" means:
8-7 (A) the standards contained in:
8-8 (i) the building code, including any
8-9 separate mechanical-plumbing code and electrical code adopted by
8-10 the governmental entity authorized by law to adopt standards in the
8-11 area in which a residence is located at the time construction of
8-12 the residence begins; or
8-13 (ii) the International Residential Code
8-14 for One- and Two-Family Dwellings if no governmental entity has
8-15 adopted a building code that is in effect in the area in which the
8-16 residence is located; and
8-17 (B) any additional performance standards with
8-18 which the contractor agrees to comply.
8-19 (3) "Contractor" means a person contracting for the
8-20 construction or sale of a new residence constructed by that person,
8-21 the construction of an alteration of or addition to an existing
8-22 residence, or the alteration or addition of an appurtenance to a
8-23 new or existing residence. The term includes:
8-24 (A) an owner, officer, director, shareholder,
8-25 partner, or employee of the contractor; and
8-26 (B) a risk retention group registered under
8-27 Article 21.54, Insurance Code, that insures all or any part of a
9-1 contractor's liability for the cost to repair a residential
9-2 construction defect.
9-3 (4) "Homeowner" means the initial purchaser or any
9-4 subsequent purchaser of fee simple title to the residence.
9-5 (5) "Initial purchaser" means a person for whom a
9-6 residence is built or the first person to whom a residence is sold
9-7 following construction of the residence for residential occupancy
9-8 by that person or the person's immediate family.
9-9 (6) "Structure" means the load-bearing portion of a
9-10 residence.
9-11 (7) "Structural defect":
9-12 (A) has the meaning assigned by the express
9-13 written warranty of the contractor; or
9-14 (B) means the actual physical damage to the
9-15 structure of a residence caused by a failure of the structure if no
9-16 definition is provided in the warranty.
9-17 (8) "Residence" has the meaning assigned by Section
9-18 27.001.
9-19 (9) "Warranty commencement date" means:
9-20 (A) the earlier of:
9-21 (i) the date on which legal or equitable
9-22 title to a new residence is conveyed to the initial purchaser of
9-23 the residence; or
9-24 (ii) the date on which a new residence is
9-25 first occupied by the initial purchaser, the immediate family of
9-26 the initial purchaser, or an initial occupant who is not the
9-27 initial purchaser; or
10-1 (B) the date on which an alteration or addition
10-2 to an existing residence or appurtenance is substantially
10-3 completed.
10-4 Sec. 27.103. IMPLIED WARRANTIES ABOLISHED UNDER CERTAIN
10-5 CONDITIONS. (a) The express written warranties required under this
10-6 subchapter replace all implied warranties established by common
10-7 law before September 1, 2001.
10-8 (b) A contractor who provides to a homeowner the express
10-9 written warranties required under this subchapter does not provide
10-10 any implied warranty to the homeowner, even if the contractor does
10-11 not specifically disclaim an implied warranty.
10-12 Sec. 27.104. DISCLAIMER OF IMPLIED WARRANTY EFFECTIVE ONLY
10-13 UNDER CERTAIN CONDITIONS. (a) A contractor may not disclaim an
10-14 implied warranty related to a residence under this subchapter
10-15 unless:
10-16 (1) the minimum warranties required under Section
10-17 27.105 and the right to transfer a warranty as provided by Section
10-18 27.106 are included as provisions in:
10-19 (A) a written contract or attachment to a
10-20 written contract between the contractor and the initial purchaser
10-21 of the residence; or
10-22 (B) a written express warranty agreement or an
10-23 insurance policy; and
10-24 (2) the disclaimer is printed in capital letters in at
10-25 least 10-point bold-faced type on the contract for the sale and
10-26 purchase of the residence and the deed transferring title to the
10-27 residence.
11-1 (b) A disclaimer that complies with Subsection (a) is
11-2 effective to disclaim implied warranties to a subsequent homeowner
11-3 who acquired title to a residence after the initial purchaser
11-4 acquired title.
11-5 Sec. 27.105. EXPRESS WRITTEN WARRANTY REQUIRED. (a) A
11-6 contractor shall provide an express written warranty to an initial
11-7 purchaser in which the contractor warrants, as applicable, that:
11-8 (1) the residence will substantially comply with
11-9 applicable building standards for one year following the warranty
11-10 commencement date;
11-11 (2) a new residence or an alteration or addition that
11-12 affects a plumbing, electrical, heating, or cooling system will
11-13 substantially comply with the building standards applicable to that
11-14 system for two years following the warranty commencement date; and
11-15 (3) a residence or an alteration or addition that
11-16 affects the structure of the residence will be free from structural
11-17 defects for the period beginning on the warranty commencement date
11-18 and ending on the latest date on which a suit could be brought
11-19 under Section 16.008 or 16.009, Civil Practice and Remedies Code,
11-20 as applicable.
11-21 (b) All or part of the warranty required by Subsection (a)
11-22 may be provided by the contractor in the form of an express
11-23 warranty issued by a warranty company if the warranty is backed by
11-24 an insurance policy issued by an insurance company or risk
11-25 retention group authorized by law to issue the policy.
11-26 (c) An express written warranty and any related insurance
11-27 policy must inform the homeowner of the claim procedure for the
12-1 homeowner to report defects to the contractor, warranty company, or
12-2 insurer. The claim procedure must conform to the terms of any
12-3 contract between a homeowner and a contractor and any warranty
12-4 provided to a homeowner by the contractor.
12-5 (d) An express written warranty provided by a contractor
12-6 must include a provision that requires the contractor, warranty
12-7 company, or insurer to make any repair or replacement necessary to
12-8 cure the defect covered by the warranty or pay the homeowner the
12-9 reasonable cost of repair or replacement necessary to cure the
12-10 defect at the contractor's, warranty company's, or insurer's option
12-11 if timely notice is provided to the contractor or to any warranty
12-12 company or insurer as prescribed by the claim procedure provided in
12-13 the express written warranty or the related insurance policy.
12-14 Notice provided by a homeowner as prescribed by Subchapter A is
12-15 sufficient to satisfy the notice requirements of this subsection.
12-16 (e) Repair of a structural defect is limited to:
12-17 (1) the repair of damage to the structure of a
12-18 residence that is necessary to restore the structure's load-bearing
12-19 ability; and
12-20 (2) the repair of any portion of the residence damaged
12-21 by the structural defect.
12-22 (f) An express written warranty and any related insurance
12-23 policy may contain:
12-24 (1) written exclusions that do not waive or restrict
12-25 the requirements of applicable building standards; or
12-26 (2) provisions permitting or requiring binding
12-27 arbitration of any disputed claim.
13-1 Sec. 27.106. TRANSFERABILITY. (a) An express written
13-2 warranty and any related insurance policy are automatically
13-3 transferable, without charge, to any subsequent homeowner who
13-4 acquires title to the residence after the initial purchaser
13-5 acquires title.
13-6 (b) The transfer of title to a residence does not extend the
13-7 duration of an express written warranty or any related insurance
13-8 coverage.
13-9 Sec. 27.107. SUBSTANTIAL COMPLIANCE. (a) A contractor
13-10 complies with this subchapter if the contractor delivers to the
13-11 homeowner an express written warranty that provides coverage
13-12 substantially similar to the coverage required by this subchapter.
13-13 (b) The language used in the express written warranty is not
13-14 required to be similar to the language used in this subchapter if
13-15 the coverage under the warranty is substantially similar to the
13-16 coverage required by this subchapter.
13-17 Sec. 27.108. FAILURE TO PROVIDE REQUIRED WARRANTIES;
13-18 LIQUIDATED DAMAGES. If a contractor fails to comply with Section
13-19 27.105 or 27.106, the contractor is liable to the affected
13-20 homeowner for $500 in liquidated damages.
13-21 Sec. 27.109. FAILURE TO PERFORM UNDER WARRANTY. If a
13-22 contractor or insurer fails to perform under the terms of an
13-23 express written warranty or related insurance policy, the affected
13-24 homeowner may file suit under Subchapter A.
13-25 Sec. 27.110. CONSTRUCTION OF SUBCHAPTER. (a) This
13-26 subchapter shall be read in conjunction with Subchapter A and shall
13-27 be construed liberally so as to give the broadest possible effect
14-1 to the warranties and disclaimers provided by this subchapter.
14-2 (b) If a dispute exists as to whether a specific express
14-3 written warranty complies with this subchapter, the warranty must
14-4 be construed in the manner most likely to result in a determination
14-5 that the warranty complies with the minimum requirements of this
14-6 subchapter.
14-7 (c) A disclaimer shall be construed liberally so as to limit
14-8 the liability of a contractor or insurer to the terms of the
14-9 written warranty and avoid imposing liability outside the terms of
14-10 the written warranty.
14-11 SECTION 12. This Act takes effect September 1, 2001, and
14-12 applies only to a contract for the construction of a new residence
14-13 for an initial purchaser or for alterations or additions to a
14-14 residence under Subchapter B, Chapter 27, Property Code, as added
14-15 by this Act, that is entered into on or after that date.