By Van de Putte S.B. No. 754
77R2769 AJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to consumer protection for and remedies available to a
1-3 homebuyer whose home does not comply with certain warranties;
1-4 providing an administrative penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 27, Property Code, is amended by
1-7 redesignating Sections 27.001-27.007, Property Code, as Subchapter
1-8 A, Chapter 27, Property Code, and by adding a heading for
1-9 Subchapter A, Chapter 27, Property Code, to read as follows:
1-10 SUBCHAPTER A. ACTION FOR DAMAGES RESULTING FROM
1-11 CONSTRUCTION DEFECT
1-12 SECTION 2. Section 27.001, Property Code, is amended to
1-13 read as follows:
1-14 Sec. 27.001. DEFINITIONS. In this subchapter [chapter]:
1-15 (1) "Appurtenance" means any structure or recreational
1-16 facility that is appurtenant to a residence but is not a part of
1-17 the dwelling unit.
1-18 (2) "Construction defect" means a matter concerning
1-19 the design, construction, or repair of a new residence, of an
1-20 alteration of or repair or addition to an existing residence, or of
1-21 an appurtenance to a residence, on which a person has a complaint
1-22 against a contractor. The term may include any physical damage to
1-23 the residence, any appurtenance, or the real property on which the
1-24 residence and appurtenance are affixed proximately caused by a
2-1 construction defect.
2-2 (3) "Contractor" means a person contracting with an
2-3 owner for the construction or sale of a new residence constructed
2-4 by that person or of an alteration of or addition to an existing
2-5 residence, repair of a new or existing residence, or construction,
2-6 sale, alteration, addition, or repair of an appurtenance to a new
2-7 or existing residence. The term includes:
2-8 (A) an owner, officer, director, shareholder,
2-9 partner, or employee of the contractor; and
2-10 (B) a risk retention group registered under
2-11 Article 21.54, Insurance Code, that insures all or any part of a
2-12 contractor's liability for the cost to repair a residential
2-13 construction defect.
2-14 (4) "Residence" means a single-family house, duplex,
2-15 triplex, or quadruplex or a unit in a multiunit residential
2-16 structure in which title to the individual units is transferred to
2-17 the owners under a condominium or cooperative system.
2-18 (5) "Structural failure" means actual physical damage
2-19 to the load-bearing portion of a residence caused by a failure of
2-20 the load-bearing portion.
2-21 SECTION 3. Chapter 27, Property Code, is amended by adding
2-22 Subchapter B to read as follows:
2-23 SUBCHAPTER B. TEXAS HOMEBUYER PROTECTION ACT
2-24 Sec. 27.101. SHORT TITLE. This subchapter may be cited as
2-25 the Texas Homebuyer Protection Act.
2-26 Sec. 27.102. DEFINITIONS. In this subchapter:
2-27 (1) "Commission" means the Texas Real Estate
3-1 Commission.
3-2 (2) "Contractor" means a person who, for compensation,
3-3 engages in the construction, remodeling, repair, modification, or
3-4 improvement of a building or a portion of a building used primarily
3-5 for residential purposes.
3-6 (3) "Defect" means a condition that prevents a home
3-7 from conforming to a contractor's warranty, including the implied
3-8 warranty that the home will conform to each applicable building
3-9 code.
3-10 (4) "Executive director" means the executive director
3-11 of the Texas Real Estate Commission.
3-12 (5) "Home" means a single-family house, duplex,
3-13 triplex, or quadruplex or a unit in a multiunit structure used for
3-14 residential purposes that is:
3-15 (A) owned by one or more adult persons; and
3-16 (B) used or intended to be used as a dwelling by
3-17 one of the owners.
3-18 (6) "Homebuyer" means a person who:
3-19 (A) purchased a home at retail from a contractor
3-20 and is entitled to enforce the terms of a contractor's warranty
3-21 with respect to the home;
3-22 (B) is a lessor or lessee, other than a
3-23 sublessee, who purchased or leased the home from a contractor; or
3-24 (C) is a transferee or assignee of a person
3-25 described by Paragraph (A) or (B) if the transferee or assignee is
3-26 a resident of this state and entitled to enforce the terms of a
3-27 contractor's warranty.
4-1 (7) "Serious safety hazard" means a life-threatening
4-2 malfunction or nonconformity that substantially impedes a person's
4-3 ability to live in or use a home or that creates a substantial risk
4-4 of fire or explosion.
4-5 (8) "Warranty" means an express or implied warranty.
4-6 Sec. 27.103. APPLICABILITY OF CERTAIN OTHER LAW OR CONTRACT
4-7 PROVISIONS. (a) This subchapter supersedes any other law or
4-8 contract provision that conflicts with this subchapter.
4-9 (b) The remedies provided by this subchapter supersede
4-10 remedies available under Subchapter A.
4-11 (c) Except as provided by this section, this subchapter does
4-12 not limit the rights or remedies otherwise available to an owner
4-13 under any other law.
4-14 (d) A contract provision that excludes or modifies the
4-15 remedies provided by this subchapter is prohibited and is void as
4-16 against public policy unless the exclusion or modification is
4-17 included in a settlement agreement between a homebuyer and a
4-18 contractor.
4-19 Sec. 27.104. COMPLAINT. A homebuyer may seek a remedy
4-20 provided by this subchapter by:
4-21 (1) providing to the contractor written notice
4-22 identifying each defect in the home that is covered by the
4-23 contractor's warranty; and
4-24 (2) filing a complaint with the commission that
4-25 includes a copy of the notice provided to the contractor.
4-26 Sec. 27.105. HEARING. (a) The executive director may set a
4-27 hearing on any allegation in a complaint that is not privately
5-1 resolved between the homebuyer and the contractor.
5-2 (b) The contested case provisions of Chapter 2001,
5-3 Government Code, apply to a hearing conducted under this
5-4 subchapter.
5-5 Sec. 27.106. TIME FOR FILING COMPLAINT. A homebuyer must
5-6 file a complaint under this subchapter before the six-month
5-7 anniversary of the earlier of:
5-8 (1) the date the express warranty period expires; or
5-9 (2) the second anniversary of the closing date.
5-10 Sec. 27.107. AFFIRMATIVE DEFENSE. In a hearing before the
5-11 executive director under this subchapter, a contractor may assert
5-12 as an affirmative defense to an allegation of a defect made in a
5-13 complaint filed under this subchapter that the defect is the result
5-14 of abuse, neglect, or unauthorized modifications or alterations of
5-15 the home.
5-16 Sec. 27.108. REPAIR REQUIRED. (a) If a defect exists, the
5-17 contractor shall make the repairs necessary to conform the home to
5-18 the contractor's warranties if:
5-19 (1) the homebuyer or the homebuyer's designated agent
5-20 reported the defect to the contractor or the contractor's agent
5-21 before the expiration of the applicable warranty period; or
5-22 (2) a breach of an implied warranty on the home is
5-23 established under Subsection (b).
5-24 (b) There is a rebuttable presumption that a breach of an
5-25 implied warranty on a home exists if the home does not comply with:
5-26 (1) a building code applicable to the home;
5-27 (2) the latest edition, published before the
6-1 construction of the home, of:
6-2 (A) the International Building Code for One- and
6-3 Two-Family Dwellings;
6-4 (B) the uniform plumbing code;
6-5 (C) the uniform mechanical code;
6-6 (D) the uniform electrical code; or
6-7 (E) any other uniform standard generally
6-8 recognized in the residential construction industry; or
6-9 (3) structural engineering standards or practices
6-10 intended to prevent structural damage or a decrease in the market
6-11 value of the home resulting from the failure of the foundation or
6-12 other load-bearing portions of the home, including standards or
6-13 practices used to ensure that a foundation is structurally
6-14 sufficient without artificial moisture controls or other
6-15 extraordinary maintenance by the homeowner.
6-16 Sec. 27.109. RETURN OR REPLACEMENT REQUIRED. (a) If, after
6-17 a reasonable number of attempts to cure a defect, the contractor is
6-18 unable to cure a defect that creates a serious safety hazard or
6-19 substantially impairs the use or market value of the home, the
6-20 contractor shall at the homebuyer's option:
6-21 (1) replace the home with a comparable home in the
6-22 same neighborhood; or
6-23 (2) accept return of the home from the homebuyer and
6-24 refund to the homebuyer the full purchase price and any closing
6-25 costs and moving costs.
6-26 (b) For purposes of this section, there is a rebuttable
6-27 presumption that the contractor has made a reasonable number of
7-1 attempts to cure a defect if:
7-2 (1) the defect continues to exist after three or more
7-3 attempts to repair the defect have been made by the contractor or
7-4 the contractor's agent and:
7-5 (A) two of the repair attempts were made during
7-6 the 12-month period following the closing date; and
7-7 (B) the third repair attempt was made during the
7-8 12-month period following the date of the second repair attempt;
7-9 (2) the defect creates a serious safety hazard that
7-10 continues to exist after two or more attempts to repair the defect
7-11 have been made by the contractor or the contractor's agent and:
7-12 (A) at least one repair attempt was made during
7-13 the 12-month period following the closing date; and
7-14 (B) a second repair attempt was made during the
7-15 12-month period following the first repair attempt; or
7-16 (3) the defect continues to exist and:
7-17 (A) the home has required repairs for a
7-18 cumulative total of at least 30 days during the 24-month period
7-19 following the closing date; and
7-20 (B) at least two repair attempts were made
7-21 during the 12-month period following the closing date.
7-22 (c) A 12-month, 24-month, or 30-day period described by
7-23 Subsection (b) is extended by the amount of time during which
7-24 repair services are not available to a homebuyer because of a war,
7-25 invasion, strike, or a fire, flood, or another natural disaster.
7-26 (d) The executive director may not order a remedy under this
7-27 section unless the contractor has been provided at least 30
8-1 calendar days to cure the defect that is subject to the remedy
8-2 provided by this section.
8-3 Sec. 27.110. REIMBURSEMENT OF EXPENSES. (a) If a contractor
8-4 is ordered to replace a home or refund the purchase price under
8-5 Section 27.109, the contractor shall reimburse the homebuyer for:
8-6 (1) reasonable incidental costs resulting from the
8-7 loss of the use of the home because of the defect; and
8-8 (2) lost wages resulting from time required for
8-9 appointments with the contractor or the contractor's representative
8-10 that are necessary because of the defect.
8-11 (b) As necessary to promote the public interest, the
8-12 commission by rule:
8-13 (1) shall define the incidental costs that are
8-14 eligible for reimbursement under Subsection (a) and specify other
8-15 requirements necessary to determine an eligible cost; and
8-16 (2) may set a maximum amount that is eligible for
8-17 reimbursement, either by type of eligible cost or by a total for
8-18 all costs.
8-19 (c) Refunds shall be made to the homebuyer and any
8-20 lienholder, as applicable.
8-21 Sec. 27.111. OTHER REMEDIES NOT PRECLUDED. This subchapter
8-22 does not prevent a homebuyer from obtaining a remedy available to
8-23 the homebuyer under a new home warranty that provides remedies in
8-24 addition to those provided by this subchapter.
8-25 Sec. 27.112. RIGHT TO FILE ACTION. (a) Except as provided
8-26 by this section, a homebuyer may not seek the remedies provided by
8-27 this subchapter in a civil action unless the homebuyer files a
9-1 complaint against the contractor under this subchapter and exhausts
9-2 the administrative proceedings provided by this subchapter. A court
9-3 shall dismiss an action filed in violation of this section.
9-4 (b) If the hearing examiner does not issue a proposal for
9-5 decision and make a recommendation to the executive director for a
9-6 final order on or before the 150th day after the date a complaint
9-7 is filed under this subchapter, the executive director shall
9-8 provide written notice, by certified mail, to the complainant and
9-9 the contractor.
9-10 (c) The notice must inform the recipient of:
9-11 (1) the date the period for issuing a final order
9-12 under this subchapter expires; and
9-13 (2) the complainant's right to file an action under
9-14 this section.
9-15 (d) After receiving a notice of the right to file an action
9-16 under Subsection (b), a complainant may file an action against a
9-17 contractor named in the complaint. The executive director's
9-18 failure to issue a notice of the right to file an action does not
9-19 affect a complainant's right to bring an action under this section.
9-20 Sec. 27.113. JUDICIAL REVIEW. A final order of the executive
9-21 director under this subchapter:
9-22 (1) is the final action of the commission under this
9-23 subchapter; and
9-24 (2) is subject to review only by judicial review as
9-25 provided by Chapter 2001, Government Code, to the extent that
9-26 chapter is not inconsistent with this subchapter.
9-27 Sec. 27.114. INITIATION OR REMOVAL OF ACTION. (a) Except as
10-1 otherwise provided by this subchapter, an appeal initiated under
10-2 this subchapter may be removed to the Third Court of Appeals
10-3 District if any party to the action files a notice of removal with
10-4 the district court before the trial in the district court begins.
10-5 (b) An appeal initiated in or removed to the Third Court of
10-6 Appeals District:
10-7 (1) must be initiated under Chapter 2001, Government
10-8 Code, as if initiated in a Travis County district court; and
10-9 (2) is governed from the time of filing by the Texas
10-10 Rules of Appellate Procedure.
10-11 (c) If evidence outside the commission's record is to be
10-12 admitted in an appeal under Chapter 2001, Government Code, or
10-13 otherwise, the action:
10-14 (1) must be initiated in a Travis County district
10-15 court; or
10-16 (2) if initiated in the Third Court of Appeals
10-17 District, is subject to remand to a Travis County district court
10-18 for proceedings in accordance with instructions from the court of
10-19 appeals.
10-20 (d) Citation must be served on the executive director and
10-21 each party of record before the commission. For an appeal initiated
10-22 in the Third Court of Appeals District, the court shall cause
10-23 citation to be issued.
10-24 Sec. 27.115. DILIGENCE REQUIRED. (a) An appellant must
10-25 pursue an appeal with reasonable diligence. If an appellant fails
10-26 to prosecute an appeal in the six-month period after the appeal is
10-27 filed, the court shall presume that the appeal has been abandoned
11-1 and dismiss the appeal if a motion for dismissal is submitted by
11-2 the attorney general or another party.
11-3 (b) An appeal may not be dismissed under this section if the
11-4 appellant, after receiving notice and an opportunity to be heard,
11-5 demonstrates good cause for a delay.
11-6 Sec. 28.116. DISCLOSURE REQUIRED. (a) A contractor that is
11-7 ordered to refund the purchase price of or replace a home under
11-8 this subchapter shall provide to the first retail purchaser of the
11-9 home after the home was repurchased or replaced by the contractor a
11-10 disclosure statement stating that the home was repurchased or
11-11 replaced by the contractor under this subchapter.
11-12 (b) The disclosure statement must include the toll-free
11-13 telephone number established by the committee under Section 27.118
11-14 of this subchapter.
11-15 (c) Before a home repurchased or replaced under this
11-16 subchapter may be sold again, the deed that transfers title to the
11-17 home must be marked with a clear statement that indicates that the
11-18 home was repurchased or replaced under this subchapter.
11-19 Sec. 27.117. RESTORATION OF WARRANTY REQUIRED. A contractor
11-20 who sells a home after repurchasing or replacing the home under
11-21 this subchapter must:
11-22 (1) restore the home in a manner that conforms with
11-23 applicable building codes; and
11-24 (2) issue an express warranty for the home.
11-25 Sec. 27.118. TOLL-FREE TELEPHONE NUMBER. The committee shall
11-26 establish a toll-free telephone number for providing information to
11-27 persons who request information about a defect that was the basis
12-1 for ordering a remedy under this subchapter. The committee shall
12-2 maintain an effective method of providing information to persons
12-3 who make requests.
12-4 Sec. 27.119. ANNUAL REPORT. (a) The commission shall
12-5 publish and make available to the public an annual report relating
12-6 to homes ordered repurchased or replaced by a contractor under this
12-7 subchapter.
12-8 (b) The report must:
12-9 (1) list the number of homes by subdivision name, if
12-10 any;
12-11 (2) identify the contractor; and
12-12 (3) include a brief description of each defect that
12-13 was the subject of a remedy provided by this subchapter.
12-14 (c) The commission may charge a reasonable fee to recover
12-15 the cost of the report.
12-16 Sec. 27.120. ADMINISTRATIVE PENALTY. (a) The commission may
12-17 impose an administrative penalty on a person who violates this
12-18 subchapter or a rule or order adopted under this subchapter.
12-19 (b) The imposition of a penalty is governed by Section 19A,
12-20 The Real Estate License Act (Article 6573a, Vernon's Texas Civil
12-21 Statutes).
12-22 Sec. 27.121. RULES. The commission, in consultation with
12-23 the Texas Real Estate Inspector Committee, shall adopt rules
12-24 necessary for the enforcement and administration of this
12-25 subchapter.
12-26 SECTION 4. (a) This Act takes effect September 1, 2001.
12-27 (b) This Act applies only to the sale of a new home for
13-1 which the closing date is on or after September 1, 2001. A sale of
13-2 a new home for which the closing date was before September 1, 2001,
13-3 is governed by the law in effect at the time of the sale, and that
13-4 law is continued in effect for that purpose.