By Madla S.B. No. 1557 77R7654 JMM-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the licensing of certain residential contractors; 1-3 providing penalties. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 ARTICLE 1. GENERAL PROVISIONS 1-6 SECTION 1.001. PURPOSE. It is the intent of the legislature 1-7 to improve the general welfare and safety of the citizens of this 1-8 state by regulating persons engaged in the vocation of residential 1-9 contracting and protecting the public against incompetent and 1-10 inexperienced contractors and the unlawful and fraudulent acts of 1-11 residential contractors. 1-12 SECTION 1.002. DEFINITIONS. In this Act: 1-13 (1) "Board" means the State Regulatory Board for 1-14 Residential Building Contractors. 1-15 (2) "Person" includes an individual, firm, 1-16 partnership, corporation, association, or other organization, 1-17 combination, or legal entity. 1-18 (3) "Residential contractor" means a person who, for 1-19 compensation, advertises or offers to undertake, offers a bid to 1-20 undertake, or otherwise engages in, the construction, remodeling, 1-21 repair, or improvement of a single-family dwelling or a duplex, 1-22 triplex, or fourplex residential building. The term includes a 1-23 construction manager who performs management and services on a 1-24 construction project for a fee. 2-1 SECTION 1.003. EXEMPTION. This Act does not apply to a 2-2 person who builds or improves a structure on the person's own 2-3 property for the person's own occupancy or use and who does not 2-4 offer the structure for sale or rent before the first anniversary 2-5 of the date of the completion of the building or improvement of the 2-6 structure. 2-7 ARTICLE 2. STATE REGULATORY BOARD 2-8 FOR RESIDENTIAL BUILDING CONTRACTORS 2-9 SECTION 2.001. BOARD. (a) The State Regulatory Board for 2-10 Residential Building Contractors is established. The board is 2-11 composed of nine members appointed by the governor. Board members 2-12 serve staggered six-year terms with the terms of three members 2-13 expiring on February 1 of each odd-numbered year. 2-14 (b) The members of the board are appointed as follows: 2-15 (1) four members must be residential contractors 2-16 licensed under this Act; 2-17 (2) one member must be a licensed engineer who 2-18 practices structural engineering; 2-19 (3) one member must be a registered architect; and 2-20 (4) three members must be representatives of the 2-21 public. 2-22 (c) A person is not eligible for appointment as a public 2-23 member of the board if the person or the person's spouse: 2-24 (1) is registered, certified, or licensed by an 2-25 occupational regulatory agency in the field of construction; 2-26 (2) is employed by or participates in the management 2-27 of a business entity or other organization regulated by the board 3-1 or receiving funds from the board; 3-2 (3) owns or controls, directly or indirectly, more 3-3 than a 10 percent interest in a business entity or other 3-4 organization regulated by the board or receiving funds from the 3-5 board; or 3-6 (4) uses or receives a substantial amount of tangible 3-7 goods, services, or funds from the board, other than compensation 3-8 or reimbursement authorized by law for board membership, 3-9 attendance, or expenses. 3-10 (d) An officer, employee, or paid consultant of a Texas 3-11 trade association in the field of construction may not be a member 3-12 of the board and may not be an employee of the board who is exempt 3-13 from the state's position classification plan or is compensated at 3-14 or above the amount prescribed by the General Appropriations Act 3-15 for step 1, salary group A17, of the position classification salary 3-16 schedule. 3-17 (e) A person who is the spouse of an officer, manager, or 3-18 paid consultant of a Texas trade association in the field of 3-19 construction may not be a member of the board and may not be an 3-20 employee of the board who is exempt from the state's position 3-21 classification plan or is compensated at or above the amount 3-22 prescribed by the General Appropriations Act for step 1, salary 3-23 group A17, of the position classification salary schedule. 3-24 (f) For the purposes of this section, a Texas trade 3-25 association is a nonprofit, cooperative, and voluntarily joined 3-26 association of business or professional competitors in this state 3-27 designed to assist its members and its industry or profession in 4-1 dealing with mutual business or professional problems and in 4-2 promoting their common interest. 4-3 (g) A vacancy on the board shall be filled by appointment by 4-4 the governor of a person with the appropriate qualifications to 4-5 serve for the remainder of the term. 4-6 (h) Appointments to the board shall be made without regard 4-7 to the race, color, disability, sex, religion, age, or national 4-8 origin of the appointee. 4-9 (i) A member of the board may not serve more than one term. 4-10 (j) The State Regulatory Board for Residential Building 4-11 Contractors is subject to Chapter 325, Government Code (Texas 4-12 Sunset Act). Unless continued in existence as provided by that 4-13 chapter, the board is abolished and this Act expires September 1, 4-14 2013. 4-15 SECTION 2.002. GROUNDS FOR REMOVAL. (a) It is a ground for 4-16 removal from the board that a member: 4-17 (1) does not have at the time of appointment the 4-18 qualifications required by Section 2.001 of this Act; 4-19 (2) does not maintain during service on the board the 4-20 qualifications required by Section 2.001 of this Act; 4-21 (3) violates a prohibition established by Section 4-22 2.001 or 2.005 of this Act; 4-23 (4) cannot because of illness or disability discharge 4-24 the member's duties for a substantial part of the term for which 4-25 the member is appointed; or 4-26 (5) is absent from more than half of the regularly 4-27 scheduled board meetings that the member is eligible to attend 5-1 during a calendar year unless the absence is excused by majority 5-2 vote of the board. 5-3 (b) The validity of an action of the board is not affected 5-4 by the fact that it is taken when a ground for removal of a board 5-5 member exists. 5-6 (c) If the executive director has knowledge that a potential 5-7 ground for removal exists, the executive director shall notify the 5-8 presiding officer of the potential ground. The presiding officer 5-9 shall then notify the governor and the attorney general that a 5-10 potential ground for removal exists. If the potential ground for 5-11 removal involves the presiding officer, the executive director 5-12 shall notify the next highest officer of the board, who shall 5-13 notify the governor and the attorney general that a potential 5-14 ground for removal exists. 5-15 SECTION 2.003. OFFICERS; MEETINGS. (a) The board shall 5-16 elect annually from the membership of the board a presiding 5-17 officer, assistant presiding officer, and secretary-treasurer. 5-18 (b) The board shall meet at least annually and at other 5-19 times at the call of the presiding officer. 5-20 SECTION 2.004. BOARD POWERS AND DUTIES. (a) The board 5-21 shall adopt rules consistent with this Act for the administration 5-22 of this Act and for the operation of the board. 5-23 (b) The board shall adopt application, examination, 5-24 licensing, and renewal fees in amounts that are reasonable and 5-25 necessary to provide sufficient revenue to cover the costs of 5-26 administering this Act. The fees set by the board may be adjusted 5-27 so that the total fees collected are sufficient to meet the 6-1 expenses of administering this Act. 6-2 (c) The board may appoint an executive director and other 6-3 personnel as necessary for the administration of this Act. 6-4 SECTION 2.005. CONFLICT OF INTEREST. A person may not serve 6-5 as a member of the board or act as the general counsel to the board 6-6 if the person is required to register as a lobbyist under Chapter 6-7 305, Government Code, because of the person's activities for 6-8 compensation on behalf of a profession related to the operation of 6-9 the board. 6-10 SECTION 2.006. PERSONNEL POLICIES. (a) The executive 6-11 director or the executive director's designee shall develop an 6-12 intra-agency career ladder program that addresses opportunities for 6-13 mobility and advancement for employees within the board. The 6-14 program shall require intra-agency posting of all positions 6-15 concurrently with any public posting. 6-16 (b) The executive director or the executive director's 6-17 designee shall develop a system of annual performance evaluations 6-18 that are based on documented employee performance. All merit pay 6-19 for board employees must be based on the system established under 6-20 this subsection. 6-21 (c) The board shall develop and implement policies that 6-22 clearly separate the policymaking responsibilities of the board and 6-23 the management responsibilities of the executive director and the 6-24 staff of the board. 6-25 SECTION 2.007. PUBLIC INTEREST INFORMATION. (a) The board 6-26 shall prepare information of public interest describing the 6-27 functions of the board and the procedures by which complaints are 7-1 filed with and resolved by the board. The board shall make the 7-2 information available to the public and appropriate state agencies. 7-3 (b) The board by rule shall establish methods by which 7-4 consumers and service recipients are notified of the name, mailing 7-5 address, and telephone number of the board for the purpose of 7-6 directing complaints to the board. The board may provide for that 7-7 notification: 7-8 (1) on each registration form, application, or written 7-9 contract for services of a person regulated under this Act; 7-10 (2) on a sign prominently displayed in the place of 7-11 business of each person regulated under this Act; and 7-12 (3) in a bill for service provided by a person 7-13 regulated under this Act. 7-14 (c) The board shall develop materials and programs to 7-15 educate the public concerning the licensing requirements imposed 7-16 under this Act, the need of the public to conduct business only 7-17 with a licensed residential building contractor, and the methods 7-18 for reporting unlicensed contracting activity. 7-19 SECTION 2.008. COMPLAINTS. (a) The board shall keep 7-20 information about each complaint filed with the board. The 7-21 information must include: 7-22 (1) the date the complaint is received; 7-23 (2) the name of the complainant; 7-24 (3) the subject matter of the complaint; 7-25 (4) a record of all persons contacted in relation to 7-26 the complaint; 7-27 (5) a summary of the results of the review or 8-1 investigation of the complaint; and 8-2 (6) for complaints for which the board did not take 8-3 action, an explanation of the reason the complaint was closed 8-4 without action. 8-5 (b) The board shall keep a file about each written complaint 8-6 filed with the board that the board has authority to resolve. The 8-7 board shall provide to the person filing the complaint and the 8-8 persons or entities complained about the board's policies and 8-9 procedures pertaining to complaint investigation and resolution. 8-10 The board, at least quarterly and until final disposition of the 8-11 complaint, shall notify the person filing the complaint and the 8-12 persons or entities complained about of the status of the complaint 8-13 unless the notice would jeopardize an undercover investigation. 8-14 SECTION 2.009. EQUAL EMPLOYMENT OPPORTUNITY. (a) The 8-15 executive director or the executive director's designee shall 8-16 prepare and maintain a written policy statement to assure 8-17 implementation of a program of equal employment opportunity under 8-18 which all personnel transactions are made without regard to race, 8-19 color, disability, sex, religion, age, or national origin. The 8-20 policy statement must include: 8-21 (1) personnel policies, including policies relating to 8-22 recruitment, evaluation, selection, appointment, training, and 8-23 promotion of personnel that are in compliance with the requirements 8-24 of Chapter 21, Labor Code; 8-25 (2) a comprehensive analysis of the board workforce 8-26 that meets federal and state guidelines; 8-27 (3) procedures by which a determination can be made 9-1 about the extent of underuse in the board workforce of all persons 9-2 for whom federal or state guidelines encourage a more equitable 9-3 balance; and 9-4 (4) reasonable methods to appropriately address those 9-5 areas of underuse. 9-6 (b) A policy statement prepared under Subsection (a) of this 9-7 section must cover an annual period, be updated annually and 9-8 reviewed by the Commission on Human Rights for compliance with 9-9 Subsection (a)(1) of this section, and be filed with the governor. 9-10 (c) The governor's office shall deliver a biennial report to 9-11 the legislature based on the information received under Subsection 9-12 (b) of this section. The report may be made separately or as a 9-13 part of other biennial reports made to the legislature. 9-14 SECTION 2.010. STANDARDS OF CONDUCT. The executive director 9-15 or the executive director's designee shall provide to members of 9-16 the board and to board employees, as often as necessary, 9-17 information regarding their qualification for office or employment 9-18 under this Act and their responsibilities under applicable laws 9-19 relating to standards of conduct for state officers or employees. 9-20 SECTION 2.011. PUBLIC ACCESS. (a) The board shall develop 9-21 and implement policies that provide the public with a reasonable 9-22 opportunity to appear before the board and to speak on any issue 9-23 under the jurisdiction of the board. 9-24 (b) The executive director shall prepare and maintain a 9-25 written plan that describes how a person who does not speak English 9-26 can be provided reasonable access to the board's programs and 9-27 services. 10-1 SECTION 2.012. BOARD MEMBER TRAINING. (a) Before a member 10-2 of the board may assume the member's duties and before the member 10-3 may be confirmed by the senate, the member must complete at least 10-4 one course of the training program established under this section. 10-5 (b) A training program established under this section shall 10-6 provide information to the member regarding: 10-7 (1) the enabling legislation that created the board to 10-8 which the member is appointed to serve; 10-9 (2) the programs operated by the board; 10-10 (3) the role and functions of the board; 10-11 (4) the rules of the board, with an emphasis on the 10-12 rules that relate to disciplinary and investigatory authority; 10-13 (5) the current budget for the board; 10-14 (6) the results of the most recent formal audit of the 10-15 board; 10-16 (7) the requirements of the: 10-17 (A) open meetings law, Chapter 551, Government 10-18 Code; 10-19 (B) open records law, Chapter 552, Government 10-20 Code; and 10-21 (C) administrative procedures law, Chapter 2001, 10-22 Government Code; 10-23 (8) the requirements of the conflict of interest laws 10-24 and other laws relating to public officials; and 10-25 (9) any applicable ethics policies adopted by the 10-26 board or the Texas Ethics Commission. 10-27 ARTICLE 3. LICENSE REQUIREMENTS 11-1 SECTION 3.001. LICENSE REQUIRED. (a) A person may not act 11-2 as a residential contractor in this state unless the person holds a 11-3 license issued under this Act. A partnership, corporation, or 11-4 other entity conducting business as a residential contractor must, 11-5 if the owner is not a license holder, employ an individual who 11-6 holds a license under this Act. 11-7 (b) An application for a permit in a jurisdiction where a 11-8 permit is required for the construction of a residence must include 11-9 the license number of the residential contractor. 11-10 (c) A political subdivision of the state may not require a 11-11 license for a residential contractor who is subject to the 11-12 requirements of this Act. This subsection does not apply to a 11-13 general business registration required by a political subdivision 11-14 for a person to conduct business in that political subdivision. 11-15 SECTION 3.002. LICENSE QUALIFICATIONS. (a) A person may 11-16 apply for a license under this Act by filing an application on a 11-17 form prescribed by the board. The application must be accompanied 11-18 by the application fee and examination fee. 11-19 (b) In determining the qualifications of an applicant, the 11-20 board shall consider the applicant's experience, ability, 11-21 character, financial condition, ability and willingness to protect 11-22 the public health and safety, and other pertinent information 11-23 required by the board. The board shall adopt an examination to 11-24 evaluate the qualifications considered under this subsection. 11-25 (c) The board shall issue a license to an applicant who 11-26 passes the examination under Subsection (b) of this section, pays 11-27 the license fee, and submits proof of financial ability as provided 12-1 by board rule. 12-2 (d) An applicant for a license whose application is rejected 12-3 by the board may reapply under this section on payment of the fees 12-4 required for an initial application. An applicant who fails the 12-5 examination under Subsection (b) of this section on three occasions 12-6 may not reapply before the first anniversary of the date of the 12-7 third failure. 12-8 (e) A license issued under this section expires on the 12-9 second anniversary of its date of issuance. 12-10 (f) The board shall maintain a record of each applicant for 12-11 a license under this section and the results of the applicant's 12-12 examination. A certified copy of the record under this subsection 12-13 may be furnished to an applicant on request on payment of a fee 12-14 adopted by the board that reasonably reflects the costs of 12-15 furnishing the record. 12-16 SECTION 3.003. LICENSE RENEWAL. (a) A person who is 12-17 otherwise eligible to renew a license may renew an unexpired 12-18 license by paying the required renewal fee to the board before the 12-19 expiration date of the license and submission of a renewal 12-20 application that includes a current audited financial statement 12-21 prepared on a form prescribed by the board, a bank reference, a 12-22 current credit report, and proof that the continuing education 12-23 requirements of the board have been satisfied. A person whose 12-24 license has expired may not engage in activities that require a 12-25 license until the license has been renewed under the provisions of 12-26 this section. 12-27 (b) If the person's license has been expired for 90 days or 13-1 less, the person may renew the license by paying to the board 1-1/2 13-2 times the required renewal fee. 13-3 (c) If the person's license has been expired for longer than 13-4 90 days but less than one year, the person may renew the license by 13-5 paying to the board two times the required renewal fee. 13-6 (d) If the person's license has been expired for one year or 13-7 longer, the person may not renew the license except as provided by 13-8 Subsection (e) of this section. The person may obtain a new 13-9 license by submitting to reexamination and complying with the 13-10 requirements and procedures for obtaining an original license. 13-11 (e) If the person was licensed in this state, moved to 13-12 another state, and is currently licensed and has been engaged in 13-13 residential contracting in the other state for the two years 13-14 preceding application, the person may renew an expired license 13-15 without reexamination. The person must pay to the board a fee that 13-16 is equal to two times the required renewal fee for the license. 13-17 (f) Not later than the 31st day preceding the expiration of 13-18 a person's license, the board shall send written notice of the 13-19 impending license expiration to the person at the person's last 13-20 known address according to the records of the board. 13-21 (g) The board by rule may adopt a system under which 13-22 licenses expire on various dates during the year. For the period 13-23 in which the license expiration date is changed, license fees shall 13-24 be prorated on a monthly basis so that each license holder pays 13-25 only that portion of the license fee that is allocable to the 13-26 number of months during which the license is valid. On renewal of 13-27 the license on the new expiration date, the total license renewal 14-1 fee is payable. 14-2 SECTION 3.004. EXAMINATION RESULTS. (a) Not later than the 14-3 30th day after the date on which a licensing examination is 14-4 administered under this Act, the board shall notify each examinee 14-5 of the results of the examination. However, if an examination is 14-6 graded or reviewed by a national testing service, the board shall 14-7 notify examinees of the results of the examination not later than 14-8 the 14th day after the date on which the board receives the results 14-9 from the testing service. If the notice of examination results 14-10 graded or reviewed by a national testing service will not be 14-11 received by the examiner before the 90th day after the examination 14-12 date, the board shall notify the examinee of the reason for the 14-13 delay before that date. The board may require a testing service to 14-14 notify examinees of the results of an examination. 14-15 (b) If requested in writing by a person who fails a 14-16 licensing examination administered under this Act, the board shall 14-17 furnish the person with an analysis of the person's performance on 14-18 the examination. 14-19 SECTION 3.005. DISCIPLINARY PROCEEDINGS. (a) The board 14-20 shall revoke, suspend, or refuse to renew a license, place on 14-21 probation a person whose license has been suspended, or reprimand a 14-22 license holder for a violation of this Act or a rule adopted under 14-23 this Act. If a license suspension is probated, the board may 14-24 require the license holder to: 14-25 (1) report regularly to the board on matters that are 14-26 the basis of the probation; 14-27 (2) limit practice to the areas prescribed by the 15-1 board; or 15-2 (3) continue or review professional education until 15-3 the license holder attains a degree of skill satisfactory to the 15-4 board in those areas that are the basis of the probation. 15-5 (b) If the board proposes to suspend, revoke, or refuse to 15-6 renew a person's license, the person is entitled to a hearing 15-7 conducted by the State Office of Administrative Hearings. 15-8 Proceedings for a disciplinary action are governed by the 15-9 administrative procedures law, Chapter 2001, Government Code. 15-10 Rules of practice adopted by the board under Section 2001.004, 15-11 Government Code, applicable to the proceedings for a disciplinary 15-12 action, may not conflict with rules adopted by the State Office of 15-13 Administrative Hearings. 15-14 (c) In addition to a disciplinary proceeding initiated for a 15-15 violation of this Act or a rule adopted under this Act, the board 15-16 may revoke, suspend, or refuse to renew a license, place on 15-17 probation a person whose license has been suspended, or reprimand a 15-18 license holder who: 15-19 (1) abandons the construction of a residence under a 15-20 contract without a legal excuse; 15-21 (2) wilfully or deliberately disregards or violates an 15-22 applicable building code of this state or a political subdivision 15-23 of this state; 15-24 (3) commits fraud or engages in deceit, gross 15-25 negligence, incompetency, or misconduct in the practice of 15-26 contracting; or 15-27 (4) diverts funds received for the completion of a 16-1 specific building project. 16-2 (d) In the case of a conflict between the board and a 16-3 license holder concerning the violation of this Act or a rule 16-4 adopted under this Act, the license holder may continue to work on 16-5 a project under construction if the license holder posts a bond in 16-6 an amount equal to 125 percent of the total amount, as determined 16-7 by the board, needed to satisfy the alleged violation. 16-8 SECTION 3.006. RESTRICTIONS ON RULES AFFECTING ADVERTISING; 16-9 ADVERTISING REQUIREMENTS. (a) The board may not adopt rules 16-10 restricting competitive bidding or advertising by a license holder 16-11 except to prohibit false, misleading, or deceptive practices. 16-12 (b) In its rules to prohibit false, misleading, or deceptive 16-13 practices, the board may not include a rule that: 16-14 (1) restricts the use of any medium for advertising; 16-15 (2) restricts the use of a license holder's personal 16-16 appearance or voice in an advertisement; 16-17 (3) relates to the size or duration of an 16-18 advertisement by the license holder; or 16-19 (4) restricts the license holder's advertisement under 16-20 a trade name. 16-21 (c) The license number of a residential contractor must 16-22 appear in any advertising by that contractor. Advertising in any 16-23 manner by an unlicensed residential contractor is prohibited, 16-24 including alphabetical or classified directory listings. 16-25 SECTION 3.007. CONTINUING EDUCATION. (a) The board shall 16-26 recognize, prepare, or administer a continuing education program 16-27 for its license holders. Participation in the continuing education 17-1 program by license holders is mandatory. 17-2 (b) The board shall require a license holder to provide 17-3 proof that the license holder has completed 15 hours of continuing 17-4 education during the two-year period preceding the date of the 17-5 application for renewal before the board may renew the license. 17-6 SECTION 3.008. LIMITATION ON RIGHT TO SUE. A residential 17-7 contractor who does not hold a license under this Act may not bring 17-8 an action to enforce the provisions of a contract for residential 17-9 building or residential specialty contracting that the contractor 17-10 entered into without holding a license required by this Act. 17-11 ARTICLE 4. INJUNCTION; PENALTIES 17-12 SECTION 4.001. INJUNCTION; CIVIL PENALTY. At the request of 17-13 the board, the attorney general shall bring an action in the name 17-14 of the state for an injunction or to collect a civil penalty for a 17-15 violation of this Act. 17-16 SECTION 4.002. CRIMINAL PENALTY. (a) A person commits an 17-17 offense if the person undertakes or attempts to undertake the 17-18 construction, remodeling, repair, or improvement of a building in 17-19 violation of this Act or knowingly presents to the board false 17-20 information to obtain a license under this Act. 17-21 (b) An offense under this section is a Class A misdemeanor. 17-22 ARTICLE 5. TRANSITION AND EFFECTIVE DATE 17-23 SECTION 5.001. TRANSITION. (a) In making the initial 17-24 appointments to the State Regulatory Board for Residential Building 17-25 Contractors, the governor shall appoint: 17-26 (1) two persons eligible to be licensed under this Act 17-27 as residential contractors and one public member to serve terms 18-1 expiring February 1, 2003; 18-2 (2) one person eligible to be licensed under this Act 18-3 as a residential contractor, one licensed engineer member, and one 18-4 public member to serve terms expiring February 1, 2005; and 18-5 (3) one person eligible to be licensed under this Act 18-6 as a residential contractor, one registered architect member, and 18-7 one public member to serve terms expiring February 1, 2007. 18-8 (b) The board shall issue a temporary license to a 18-9 residential contractor that the board determines to be a reputable 18-10 contractor on submission of proof that the contractor has completed 18-11 five residential construction projects in the two-year period 18-12 preceding the date of application for a temporary license and 18-13 submission of three notarized client references and one reference 18-14 from a financial institution that includes a current credit report 18-15 for the applicant. A temporary license is valid for one year from 18-16 the date of issuance. The holder of a temporary license may apply 18-17 for a license under this Act in the same manner that a person 18-18 applies for a renewal license. This subsection expires September 18-19 1, 2003. 18-20 (c) The board shall adopt rules under this Act not later 18-21 than December 31, 2001. 18-22 SECTION 5.002. EFFECTIVE DATE. (a) Except as provided by 18-23 Subsection (b) of this section, this Act takes effect September 1, 18-24 2001. 18-25 (b) Sections 3.001(a) and 4.002 of this Act take effect 18-26 March 1, 2002.