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By: Ritter, et al. (Senate Sponsor - Fraser) H.B. No. 730
(In the Senate - Received from the House April 29, 2003;
April 30, 2003, read first time and referred to Committee on
Business and Commerce; May 22, 2003, reported adversely, with
favorable Committee Substitute by the following vote: Yeas 7, Nays
2; May 22, 2003, sent to printer.)
COMMITTEE SUBSTITUTE FOR H.B. No. 730 By: Fraser
A BILL TO BE ENTITLED
AN ACT
relating to residential construction, including certain
warranties, building and performance standards, and dispute
resolution; providing an administrative penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. TEXAS RESIDENTIAL CONSTRUCTION COMMISSION;
STATE-SPONSORED INSPECTION AND DISPUTE RESOLUTION; WARRANTIES AND
BUILDING AND PERFORMANCE STANDARDS
SECTION 1.01. The Property Code is amended by adding Title
16 to read as follows:
TITLE 16. TEXAS RESIDENTIAL CONSTRUCTION COMMISSION ACT
SUBTITLE A. GENERAL PROVISIONS
CHAPTER 401. GENERAL PROVISIONS
Sec. 401.001. SHORT TITLE. This title may be cited as the
Texas Residential Construction Commission Act.
Sec. 401.002. GENERAL DEFINITIONS. In this title:
(1) "Applicable building and performance standards"
means:
(A) building and performance standards adopted
under Section 430.001; or
(B) for homes constructed before the adoption of
building and performance standards under Section 430.001, the
building and performance standards under any express warranty
provided in writing by the builder or, if there is no express
warranty, the usual and customary residential construction
practices in effect at the time of the construction.
(2) "Applicable warranty period" means:
(A) a warranty period established under Section
430.001; or
(B) for construction to which the warranty
periods adopted under Section 430.001 do not apply, any other
construction warranty period that applies to the construction.
(3) "Approved architect" means an architect licensed
by this state and approved by the commission to provide services to
the commission in connection with the state-sponsored inspection
and dispute resolution process.
(4) "Approved structural engineer" means a licensed
professional engineer approved by the commission to provide
services to the commission in connection with the state-sponsored
inspection and dispute resolution process.
(5) "Commission" means the Texas Residential
Construction Commission.
(6) "Home" means the real property and improvements
and appurtenances for a single-family house or duplex.
(7) "Homeowner" means a person who owns a home or a
subrogee or assignee of a person who owns a home.
(8) "Limited statutory warranty and building and
performance standards" means the limited statutory warranty and
building and performance standards adopted by the commission under
Section 430.001.
(9) "Nonstructural matter" has the meaning assigned by
the limited statutory warranty and building and performance
standards adopted by the commission under Section 430.001.
(10) "Request" means a request submitted under Section
428.001.
(11) "State inspector" means a person employed by the
commission under Section 427.002.
(12) "State-sponsored inspection and dispute
resolution process" means the process by which the commission
resolves a request.
(13) "Structural" means the load-bearing portion of a
home.
(14) "Structural failure" has the meaning assigned by
the limited statutory warranty and building and performance
standards adopted by the commission under Section 430.001.
(15) "Third-party inspector" means a person appointed
by the commission under Section 428.003.
Sec. 401.003. DEFINITION OF BUILDER. (a) In this title,
"builder" means any business entity or individual who, for a fixed
price, commission, fee, wage, or other compensation, constructs or
supervises or manages the construction of:
(1) a new home;
(2) a material improvement to a home, including the
roof of an existing home; or
(3) an improvement to the interior of an existing home
when the cost of the work exceeds $10,000.
(b) The term includes:
(1) an owner, officer, director, shareholder,
partner, affiliate, or employee of the builder;
(2) a risk retention group governed by Article 21.54,
Insurance Code, that insures all or any part of a builder's
liability for the cost to repair a residential construction defect;
and
(3) a third-party warranty company and its
administrator.
(c) The term does not include any business entity or
individual who has been issued a license by this state or an agency
or political subdivision of this state to practice a trade or
profession related to or affiliated with residential construction
if the work being done by the entity or individual to the home is
solely for the purpose for which the license was issued.
Sec. 401.004. DEFINITION OF CONSTRUCTION DEFECT. (a) In
this title, "construction defect" means:
(1) the failure of the design, construction, or repair
of a home, an alteration of or a repair, addition, or improvement to
an existing home, or an appurtenance to a home to meet the
applicable warranty and building and performance standards during
the applicable warranty period; and
(2) any physical damage to the home, an appurtenance
to the home, or real property on which the home or appurtenance is
affixed that is proximately caused by that failure.
(b) The term does not include a defect that arises or any
damages that arise wholly or partly from:
(1) the negligence of a person other than the builder
or an agent, employee, subcontractor, or supplier of the builder;
(2) failure of a person other than the builder or an
agent, employee, subcontractor, or supplier of the builder to:
(A) take reasonable action to mitigate any
damages that arise from a defect; or
(B) take reasonable action to maintain the home;
(3) normal wear, tear, or deterioration; or
(4) normal shrinkage due to drying or settlement of
construction components within the tolerance of building and
performance standards.
Sec. 401.005. EXEMPTIONS. (a) This title does not apply to
a home that is:
(1) built by the individual who owns the home, alone or
with the assistance of the individual's employees or independent
contractors; and
(2) used by the individual as the individual's primary
residence for at least one year after the completion or substantial
completion of construction of the home.
(b) This title does not apply to a homeowner or to a
homeowner's real estate broker, agent, or property manager who
supervises or arranges for the construction of an improvement to a
home owned by the homeowner.
Sec. 401.006. SUNSET PROVISION. The Texas Residential
Construction Commission is subject to Chapter 325, Government Code
(Texas Sunset Act). Unless continued in existence as provided by
that chapter, the commission is abolished and this title expires
September 1, 2009.
[Chapters 402-405 reserved for expansion]
SUBTITLE B. TEXAS RESIDENTIAL CONSTRUCTION COMMISSION
CHAPTER 406. COMMISSION
Sec. 406.001. TEXAS RESIDENTIAL CONSTRUCTION COMMISSION;
MEMBERSHIP. (a) The Texas Residential Construction Commission
consists of nine members appointed by the governor with the advice
and consent of the senate as follows:
(1) four members must be builders who each hold a
certificate of registration under Chapter 416;
(2) three members must be representatives of the
general public;
(3) one member must be a licensed professional
engineer who practices in the area of residential construction; and
(4) one member must be a licensed architect who
practices in the area of residential construction.
(b) Appointments to the commission shall be made without
regard to the race, color, disability, sex, religion, age, or
national origin of the appointees.
Sec. 406.002. TERMS. (a) Commission members serve
staggered six-year terms, with three members' terms expiring
February 1 of each odd-numbered year. The terms of three of the
builder representatives must expire in different odd-numbered
years. The term of one of the representatives of the general public
must expire in each odd-numbered year.
(b) A member of the commission may not serve more than two
complete terms.
Sec. 406.003. PRESIDING OFFICER. The governor shall
designate a member of the commission as the presiding officer of the
commission to serve in that capacity at the pleasure of the
governor. At a regular meeting in February of each year, the
commission shall elect from its membership a vice presiding officer
and a secretary.
Sec. 406.004. MEMBERSHIP AND EMPLOYEE RESTRICTIONS. (a)
In this section, "Texas trade association" means a cooperative and
voluntarily joined association of business or professional
competitors in this state designed to assist its members and their
industry or profession as a whole in dealing with mutual business or
professional problems, issues, and circumstances and in promoting
the common interest of its members and their industry and
profession as a whole.
(b) A person may not be a member of the commission and may
not be a commission employee employed in a "bona fide executive,
administrative, or professional capacity," as that phrase is used
for purposes of establishing an exemption to the overtime
provisions of the federal Fair Labor Standards Act of 1938 (29
U.S.C. Section 201 et seq.) and its subsequent amendments, if:
(1) the person is an employee or paid consultant of a
Texas trade association in the field of residential construction;
or
(2) the person's spouse is a manager or paid consultant
of a Texas trade association in the field of residential
construction.
(c) A person may not be a member of the commission or act as
the general counsel to the commission if the person is required to
register as a lobbyist under Chapter 305, Government Code, because
of the person's activities for compensation on behalf of a
profession related to the operation of the commission.
(d) A person may not be a commission employee described by
Subsection (b) if the person is an employee or agent in the field of
residential construction. This subsection does not apply to a
person appointed to the commission.
Sec. 406.005. GROUNDS FOR REMOVAL. (a) It is a ground for
removal from the commission that a member:
(1) does not have at the time of taking office the
qualifications required by Section 406.001;
(2) does not maintain during service on the commission
the qualifications required by Section 406.001;
(3) is ineligible for membership under Section
406.004;
(4) cannot because of illness or disability discharge
the member's duties for a substantial part of the member's term; or
(5) is absent from more than half of the regularly
scheduled commission meetings that the member is eligible to attend
during a calendar year without an excuse approved by a majority vote
of the commission.
(b) The validity of an action of the commission is not
affected by the fact that it is taken when a ground for removal of a
commission member exists.
(c) If the executive director has knowledge that a potential
ground for removal exists, the executive director shall notify the
presiding officer of the potential ground. The presiding officer
shall then notify the governor and the attorney general that a
potential ground for removal exists. If the potential ground for
removal involves the presiding officer, the executive director
shall notify the next highest ranking officer of the commission,
who shall notify the governor and the attorney general that a
potential ground for removal exists.
Sec. 406.006. TRAINING. (a) A person who is appointed to
and qualifies for office as a member of the commission may not vote,
deliberate, or be counted as a member in attendance at a meeting of
the commission until the person completes a training program that
complies with this section.
(b) The training program must provide the person with
information regarding:
(1) the legislation that created the commission;
(2) the programs operated by the commission;
(3) the role and functions of the commission;
(4) the rules of the commission, with an emphasis on
the rules that relate to disciplinary and investigatory authority;
(5) the current budget for the commission;
(6) the results of the most recent formal audit of the
commission;
(7) the requirements of:
(A) the open meetings law, Chapter 551,
Government Code;
(B) the public information law, Chapter 552,
Government Code;
(C) the administrative procedure law, Chapter
2001, Government Code; and
(D) other laws relating to public officials,
including conflict-of-interest laws; and
(8) any applicable ethics policies adopted by the
commission or the Texas Ethics Commission.
(c) A person appointed to the commission is entitled to
reimbursement, as provided by the General Appropriations Act, for
the travel expenses incurred in attending the training program
regardless of whether the attendance at the program occurs before
or after the person qualifies for office.
Sec. 406.007. MEETINGS. The commission shall meet at least
quarterly and at other times at the call of the presiding officer.
CHAPTER 407. EXECUTIVE DIRECTOR AND OTHER AGENCY PERSONNEL
Sec. 407.001. EXECUTIVE DIRECTOR. The commission shall
employ an executive director as the executive head of the agency.
Sec. 407.002. OTHER PERSONNEL. The commission may employ
other personnel as necessary for the administration of this title.
Sec. 407.003. DIVISION OF RESPONSIBILITIES. The commission
shall develop and implement policies that clearly separate the
policy-making responsibilities of the commission and the
management responsibilities of the executive director and the staff
of the commission.
Sec. 407.004. QUALIFICATIONS AND STANDARDS OF CONDUCT
INFORMATION. The executive director or the executive director's
designee shall provide to members of the commission and to
commission employees, as often as necessary, information regarding
the requirements for office or employment under this title,
including information regarding a person's responsibilities under
applicable laws relating to standards of conduct for state officers
or employees.
Sec. 407.005. CAREER LADDER PROGRAM; PERFORMANCE
EVALUATION. (a) The executive director or the executive
director's designee shall develop an intra-agency career ladder
program that addresses opportunities for mobility and advancement
for employees within the commission. The program must require
intra-agency posting of all nonentry level positions concurrently
with any public posting.
(b) The executive director or the executive director's
designee shall develop a system of annual performance evaluations
based on measurable job tasks. All merit pay for commission
employees must be based on the system established under this
subsection.
Sec. 407.006. EQUAL EMPLOYMENT OPPORTUNITY POLICY; ANNUAL
REPORT. (a) The executive director or the executive director's
designee shall prepare and maintain a written policy statement that
implements a program of equal employment opportunity to ensure that
all personnel decisions are made without regard to race, color,
disability, sex, religion, age, or national origin.
(b) The policy statement must include:
(1) personnel policies, including policies relating
to recruitment, evaluation, selection, training, and promotion of
personnel, that show the intent of the commission to avoid the
unlawful employment practices described by Chapter 21, Labor Code;
and
(2) an analysis of the extent to which the composition
of the commission's personnel is in accordance with state and
federal law and a description of reasonable methods to achieve
compliance with state and federal law.
(c) The policy statement must:
(1) be updated annually;
(2) be reviewed by the state Commission on Human
Rights for compliance with Subsection (b)(1); and
(3) be filed with the governor's office.
(d) The governor's office shall deliver a biennial report to
the legislature based on the information received under Subsection
(c)(3). The report may be made separately or as a part of other
biennial reports made to the legislature.
Sec. 407.007. INFORMATION AND TRAINING ON STATE EMPLOYEE
INCENTIVE PROGRAM. The executive director or the executive
director's designee shall provide to commission employees
information and training on the benefits and methods of
participation in the state employee incentive program.
CHAPTER 408. POWERS AND DUTIES
Sec. 408.001. RULES. (a) The commission may not adopt a
substantive rule before submitting the proposed rule to the
attorney general for a ruling on the proposed rule's validity.
(b) The commission shall adopt rules as necessary for the
implementation of this title, including rules:
(1) governing the state-sponsored inspection and
dispute resolution process, including building and performance
standards, administrative regulations, and the conduct of hearings
under Subtitle D;
(2) establishing limited statutory warranty and
building and performance standards for residential construction;
(3) approving third-party warranty programs; and
(4) approving third-party inspectors.
Sec. 408.002. FEES. The commission shall adopt fees as
required by this title in amounts that are reasonable and necessary
to provide sufficient revenue to cover the costs of administering
this title.
Sec. 408.003. ACCESSIBILITY. (a) The commission shall
comply with federal and state laws related to program and facility
accessibility.
(b) The executive director shall prepare and maintain a
written plan that describes how a person who does not speak English
can obtain reasonable access to the commission's programs and
services.
Sec. 408.004. ANNUAL REPORT. (a) The commission shall file
annually with the governor and the presiding officer of each house
of the legislature a complete and detailed written report
accounting for all funds received and disbursed by the commission
during the preceding fiscal year.
(b) The report must be in the form and reported in the time
provided by the General Appropriations Act.
CHAPTER 409. PUBLIC INTEREST INFORMATION
AND COMPLAINT PROCEDURES
Sec. 409.001. PUBLIC INTEREST INFORMATION. (a) The
commission shall prepare information of public interest describing
the functions of the commission, the provisions of the limited
statutory warranty and building and performance standards, the
state-sponsored inspection and dispute resolution process, and the
procedures by which complaints or requests are filed with and
resolved by the commission.
(b) The commission shall make the information available to
the public and appropriate state agencies and shall post the
information on the commission's website.
(c) Within 30 days of the receipt by the commission of the
registration required by Section 426.003, the commission shall mail
a copy of the information of public interest described in
Subsection (a) to the owner of the home as described in the
registration.
Sec. 409.002. PUBLIC PARTICIPATION. The commission shall
develop and implement policies that provide the public with a
reasonable opportunity to appear before the commission and to speak
on any issue under the jurisdiction of the commission.
Sec. 409.003. RECORDS OF COMPLAINTS. (a) The commission
shall maintain a file on each written complaint filed with the
commission.
(b) The commission shall provide to the person filing the
complaint and to each person who is a subject of the complaint a
copy of the commission's policies and procedures relating to
complaint investigation and resolution.
(c) The commission, at least quarterly until final
disposition of the complaint, shall notify the person filing the
complaint and each person who is a subject of the complaint of the
status of the investigation.
[Chapters 410-415 reserved for expansion]
SUBTITLE C. BUILDER REGISTRATION
CHAPTER 416. CERTIFICATE OF REGISTRATION
Sec. 416.001. REGISTRATION REQUIRED. A person may not act
as a builder unless the person holds a certificate of registration
under this chapter.
Sec. 416.002. APPLICATION FOR CERTIFICATE. (a) An
applicant for an original or renewal certificate of registration
must submit an application on a form prescribed by the commission.
(b) Each applicant must disclose in the application whether
the applicant has:
(1) entered a plea of guilty or nolo contendere to a
felony charge or a misdemeanor involving moral turpitude; or
(2) been convicted of a felony or a misdemeanor
involving moral turpitude and the time for appeal has elapsed or the
conviction has been affirmed on appeal.
(c) Disclosure under Subsection (b) is required regardless
of whether an order granting the person community supervision
suspended the imposition of the sentence.
(d) The commission may, on receipt of an application,
conduct a criminal background check of the applicant or any person
responsible for the application. The commission may obtain
criminal history record information maintained by the Department of
Public Safety, the Federal Bureau of Investigation, or any other
local, state, or national governmental entity. Unless the
information is a public record at the time the commission obtains
the information under this subsection, the information is
confidential, and the commission may not release or disclose the
information to any person except under a court order or with the
permission of the applicant.
Sec. 416.003. PROVISIONAL REGISTRATION. (a) Pending the
receipt of the results of a criminal background check, the
commission may issue a provisional registration certificate. On
approval of the results of the criminal background check, the
commission shall issue a registration certificate. On receipt of
unfavorable results of the criminal background check, the
commission shall revoke the provisional registration certificate.
(b) This section expires January 1, 2005.
Sec. 416.004. FEES. (a) The commission shall charge and
collect:
(1) a filing fee for an application for an original
certificate of registration that does not exceed $500; and
(2) a fee for renewal of a certificate of registration
that does not exceed $300.
(b) The commission shall establish a fee schedule that takes
into consideration the unit volume or dollar volume of potential
applicants.
Sec. 416.005. GENERAL ELIGIBILITY REQUIREMENTS. A person
may not receive a certificate of registration under this chapter
unless:
(1) the person, at the time of the application:
(A) is at least 18 years of age; and
(B) is a citizen of the United States or a
lawfully admitted alien; and
(2) the commission is satisfied with the person's
honesty, trustworthiness, and integrity based on information
supplied or discovered in connection with the person's application.
Sec. 416.006. ADDITIONAL ELIGIBILITY REQUIREMENTS FOR
BUSINESS ENTITIES. (a) To be eligible for an original or renewal
certificate of registration under this chapter:
(1) a corporation must designate one of its officers
as its agent for the purposes of this chapter;
(2) a limited liability company must designate one of
its managers as its agent for the purposes of this chapter; and
(3) a partnership, limited partnership, or limited
liability partnership must designate one of its managing partners
as its agent for the purposes of this chapter.
(b) A corporation, limited liability company, partnership,
limited partnership, or limited liability partnership is not
eligible to be registered under this chapter and may not act as a
builder unless the entity's designated agent is individually
registered as a builder.
Sec. 416.007. ISSUANCE OF CERTIFICATE. (a) Not later than
the 15th day after the date the commission receives an application
from an applicant who meets the requirements of this chapter, the
commission shall issue a certificate of registration to the
applicant.
(b) The certificate of registration remains in effect for
the period prescribed by the commission if the certificate holder
complies with this chapter and pays the appropriate renewal fees.
Sec. 416.008. DENIAL OF REGISTRATION. (a) If the
commission denies an application for an original certificate of
registration or a renewal application, the commission shall give
written notice to the applicant not later than the 15th day after
the date the commission receives the application.
(b) The applicant may appeal the denial of the application
if, on or before the 30th day after the date the applicant receives
notice under this section, the applicant files a written request
for a hearing before the commission.
(c) The commission shall:
(1) set a time and place for the hearing not later than
the 30th day after the date the commission receives the notice of
the appeal; and
(2) give notice of the hearing to the applicant before
the 15th day before the date of the hearing.
(d) The hearing may be continued from time to time with the
consent of the applicant.
(e) The hearing shall be before a hearings officer appointed
by the commission. After the hearing, the hearings officer shall
enter an appropriate order. The order of the hearings officer under
this subsection is a final decision.
(f) The commission shall adopt procedural rules under which
a decision by a hearings officer under this section is subject to
appeal to the commission.
(g) A hearing under this section is governed by Chapter
2001, Government Code.
Sec. 416.009. EXPIRATION OF CERTIFICATE. (a) The
commission may issue or renew a certificate of registration for a
period that does not exceed 24 months.
(b) The commission by rule may adopt a system under which
certificates of registration expire on several dates during the
year. The commission shall adjust the date for payment of renewal
fees accordingly.
(c) In a year in which the expiration date for a certificate
of registration is changed, the renewal fee payable shall be
prorated on a monthly basis so that the certificate holder pays only
that portion of the fee that is allocable to the number of months
during which the certificate of registration is valid. On renewal
of the certificate of registration on the new expiration date, the
total renewal fee is payable.
Sec. 416.010. OFFICE LOCATION; CHANGE OF ADDRESS. (a) A
builder shall maintain a fixed office location in this state. The
address of the builder's principal place of business must be
designated on the certificate of registration.
(b) Not later than the 30th day after the date a builder
moves from the address designated on the certificate of
registration, the builder shall submit an application, accompanied
by the appropriate fee, for a certificate of registration that
designates the new location of the builder's principal place of
business. The commission shall issue a certificate of registration
that designates the new location if the new location complies with
the requirements of this section.
(c) This section does not require a builder to obtain a
certificate of registration for each sales office.
Sec. 416.011. TEXAS STAR BUILDER DESIGNATION. (a) The
commission shall establish rules and procedures for a program
through which a builder can be designated as a "Texas Star Builder."
A builder's participation in the program is voluntary and is not a
requirement for the issuance of a certificate of registration
required under this chapter.
(b) A builder who participates in this program will be
allowed to represent to the public that the builder is a "Texas Star
Builder" and meets all of the requirements and qualifications that
are set forth by the commission for the program.
(c) If the commission determines that a builder must meet
certain education requirements to participate in the "Texas Star
Builder" program, a builder may satisfy those requirements by
completing education programs offered by a trade association or
other organization whose education programs have been approved by
the commission.
(d) The certification issued by the commission as a "Texas
Star Builder" shall be for the same period of time as the builder's
registration under this chapter.
CHAPTER 417. PROHIBITED PRACTICES; DISCIPLINARY PROCEEDINGS
Sec. 417.001. GROUNDS FOR DISCIPLINARY ACTION. A person is
subject to disciplinary action under this chapter for:
(1) fraud or deceit in obtaining a certificate of
registration;
(2) misappropriation of trust funds in the practice of
residential construction;
(3) naming false consideration in a contract to sell a
new home or in a construction contract;
(4) discriminating on the basis of race, color,
religion, sex, national origin, or ancestry;
(5) publishing a false or misleading advertisement;
(6) failure to honor, within a reasonable time, a
check issued to the commission after the commission has sent by
certified mail a request for payment to the person's last known
business address, according to commission records;
(7) failure to pay an administrative penalty assessed
by the commission under Chapter 418;
(8) nonpayment of a final nonappealable judgment
arising from a construction defect or other transaction between the
person and a homeowner;
(9) failure to register a home as required by Section
426.003;
(10) failure to remit the fee for registration of a
home under Section 426.003; or
(11) failure to reimburse a homeowner the amount
ordered by the commission as provided in Section 428.004(d).
Sec. 417.002. DISCIPLINARY POWERS OF COMMISSION. On a
determination that a ground for disciplinary action under Section
417.001 exists, the commission may:
(1) revoke or suspend a certificate of registration;
(2) probate the suspension of a certificate of
registration; or
(3) formally or informally reprimand a certificate
holder.
Sec. 417.003. HEARING. (a) If the commission proposes to
take a disciplinary action against a person under Section 417.002,
the person is entitled to a hearing before the commission.
(b) The commission shall adopt procedural rules by which all
decisions to take disciplinary action under this chapter are
subject to appeal to the commission.
(c) The commission shall prescribe the time and place of the
hearing.
(d) A hearing under this section is governed by Chapter
2001, Government Code.
Sec. 417.004. APPEAL. (a) A person aggrieved by a ruling,
order, or decision of the commission is entitled to appeal to a
district court in the county in which the administrative hearing
was held.
(b) An appeal under this section is governed by Chapter
2001, Government Code.
CHAPTER 418. ADMINISTRATIVE PENALTY
Sec. 418.001. IMPOSITION OF ADMINISTRATIVE PENALTY. In a
contested case involving disciplinary action, the commission may,
as part of the commission's order, impose an administrative penalty
on a certificate holder who violates this title or a rule adopted or
order issued by the commission under this title.
Sec. 418.002. AMOUNT OF PENALTY. (a) An administrative
penalty imposed under this chapter may not exceed $5,000 for each
violation.
(b) In determining the amount of an administrative penalty,
the hearings officer or commission shall consider:
(1) the seriousness of the violation, including the
nature, circumstances, extent, and gravity of the prohibited acts;
(2) the history of previous violations;
(3) the amount necessary to deter a future violation;
(4) efforts to correct the violation; and
(5) any other matter justice may require.
Sec. 418.003. PAYMENT OF PENALTY. The commission shall
specify in an order imposing an administrative penalty under this
chapter a date on or before the 30th day after the date the order
becomes final and unappealable by which the person against whom the
penalty is imposed must pay the penalty.
Sec. 418.004. ENFORCEMENT OF PENALTY. If a person does not
pay an administrative penalty imposed under this chapter and
enforcement of the penalty is not stayed, the commission may:
(1) refer the matter to the attorney general for
collection of the penalty; or
(2) enforce any part of the order that specifies
disciplinary action to be taken against the certificate holder if
the certificate holder fails to pay the administrative penalty
within the time prescribed.
[Chapters 419-425 reserved for expansion]
SUBTITLE D. STATE-SPONSORED INSPECTION AND DISPUTE RESOLUTION
PROCESS; STATUTORY WARRANTY AND BUILDING AND PERFORMANCE STANDARDS
CHAPTER 426. GENERAL PROVISIONS
Sec. 426.001. APPLICABILITY OF SUBTITLE. (a) This
subtitle applies to a dispute between a builder and a homeowner if:
(1) the dispute arises out of an alleged construction
defect, other than a claim solely for:
(A) personal injury, survival, or wrongful
death; or
(B) damage to goods; and
(2) a request is submitted to the commission on or
before the 10th anniversary of the date of the initial transfer of
title from the builder to the initial owner of the home or the
improvement that is the subject of the dispute or, if there is not a
closing, the date on which the contract for construction of the
improvement was entered into.
(b) This subtitle does not apply to a dispute arising out
of:
(1) an alleged violation of Section 27.01, Business &
Commerce Code;
(2) a builder's wrongful abandonment of an improvement
project before completion; or
(3) a violation of Chapter 162.
(c) For the purposes of this section, "damage to goods" does
not include damage to a home.
Sec. 426.002. CONFLICT WITH CERTAIN OTHER LAW. To the
extent of any conflict between this subtitle and any other law,
including Chapter 27 and the Deceptive Trade Practices-Consumer
Protection Act (Subchapter E, Chapter 17, Business & Commerce
Code), this subtitle prevails.
Sec. 426.003. REGISTRATION OF HOME. (a) A builder shall
register a new home with the commission on or before the 15th day of
the month following the month in which the transfer of title from
the builder to the homeowner occurs. The registration must include
the information required by the commission by rule and be
accompanied by the fee required by Subsection (c).
(b) A builder who enters into a transaction governed by this
title, other than the transfer of title of a new home from the
builder to the seller, shall register the home involved in the
transaction with the commission. The registration must:
(1) include the information required by the commission
by rule;
(2) be accompanied by the fee required by Subsection
(c); and
(3) be delivered to the commission not later than the
15th day after the earlier of:
(A) the date of the agreement that describes the
transaction between the homeowner and the builder; or
(B) the commencement of the work on the home.
(c) A builder must remit to the commission a registration
fee for each home registered with the commission in an amount
determined by the commission. The fee set by the commission under
this subsection may not exceed $125.
(d) The commission may assess a late payment penalty that
does not exceed $500 against a builder who fails to pay a required
registration fee in the time prescribed by this section.
Sec. 426.004. APPLICATION AND INSPECTION FEES. (a) A party
who submits a matter to the commission for the state-sponsored
inspection and dispute resolution process shall pay to the
commission:
(1) an application fee in an amount determined by the
commission; and
(2) any additional amount required by the commission
to cover the expense of the third-party inspector.
(b) The commission shall adopt rules permitting a waiver or
reduction of the application fee and inspection expenses for
homeowners demonstrating a financial inability to pay the fees and
expenses.
(c) If the transfer of the title of the home from the builder
to the initial homeowner occurred before January 1, 2004, or if the
contract for improvements or additions between the builder and
homeowner was entered into before January 1, 2004, the person who
submits a request involving the home shall pay, in addition to the
application fee and inspection expenses required by this section,
the registration fee required by Section 426.003.
Sec. 426.005. PREREQUISITE TO ACTION. (a) A homeowner must
comply with this subtitle before initiating an action for damages
or other relief arising from an alleged construction defect.
(b) An action described by Subsection (a) must be filed:
(1) on or before the 90th day after the date the
third–party inspector issues the inspector's recommendation; or
(2) if the recommendation is appealed, not later than
the 90th day after the date the commission issues its ruling on the
appeal.
(c) Any claim for personal injuries, damages to personal
goods, or consequential damages or other relief arising out of an
alleged construction defect must be included in any action
concerning the construction defect.
(d) This section does not apply to an action that is
initiated by a person subrogated to the rights of a claimant if
payment was made pursuant to a claim made under an insurance policy.
Sec. 426.006. TIME FOR REQUESTING INSPECTION AND DISPUTE
RESOLUTION. The state-sponsored inspection and dispute resolution
process must be requested on or before the second anniversary of the
date of discovery of the conditions claimed to be evidence of the
construction defect but not later than the 30th day after the date
the applicable warranty period expires.
Sec. 426.007. ADMISSIBILITY OF CERTAIN EVIDENCE. A person
who submits a request for state-sponsored inspection and dispute
resolution must disclose in the request the name of any person who,
before the request is submitted, inspected the home on behalf of the
requestor in connection with the construction defect alleged in the
request. If a person's name is known to the requestor at the time of
the request and is not disclosed as required by this section, the
requestor may not designate the person as an expert or use materials
prepared by that person in:
(1) the state-sponsored inspection and dispute
resolution process arising out of the request; or
(2) any action arising out of the construction defect
that is the subject of the request.
Sec. 426.008. REBUTTABLE PRESUMPTION OF THIRD-PARTY
INSPECTOR'S RECOMMENDATION OR RULING BY PANEL OF STATE INSPECTORS.
(a) In any action involving a construction defect brought after a
recommendation by a third-party inspector or ruling by a panel of
state inspectors on the existence of the construction defect or its
appropriate repair, the recommendation or ruling shall constitute a
rebuttable presumption. A party seeking to dispute, vacate, or
overcome that presumption must establish by clear and convincing
evidence that the recommendation or ruling is inconsistent with the
applicable warranty and building and performance standards.
(b) The presumption established by this section applies
only to an action between the homeowner and the builder. A
recommendation or ruling under this subtitle is not admissible in
an action between any other parties.
CHAPTER 427. INSPECTORS
Sec. 427.001. QUALIFICATIONS OF THIRD-PARTY INSPECTORS.
(a) A third-party inspector approved by the commission must:
(1) meet the minimum qualifications prescribed by this
section and any other qualifications prescribed by the commission
by rule; and
(2) submit an application to the commission annually
with an application fee in the amount required by the commission by
rule.
(b) A third-party inspector who inspects an issue involving
workmanship and materials must:
(1) have a minimum of five years' experience in the
residential construction industry; and
(2) be certified as a residential combination
inspector by the International Code Council.
(c) A third-party inspector who inspects an issue involving
a structural matter must:
(1) be an approved structural engineer or approved
architect; and
(2) have a minimum of 10 years' experience in
residential construction.
(d) Each third-party inspector who inspects an issue
involving a structural matter must receive, in accordance with
commission rules:
(1) initial training regarding the state-sponsored
inspection and dispute resolution process and this subtitle; and
(2) annual continuing education in the inspector's
area of practice.
(e) A third-party inspector may not receive more than 10
percent of the inspector's gross income in a federal income tax year
from providing expert witness services, including retention for the
purpose of providing testimony, evidence, or consultation in
connection with a pending or threatened legal action.
(f) In adopting rules under Subsection (d), the commission
shall recognize any continuing education requirements established
for engineers and architects.
Sec. 427.002. STATE INSPECTORS. (a) The commission shall
employ state inspectors to:
(1) review on an appeals panel the recommendations of
third-party inspectors;
(2) provide consultation to third-party inspectors;
and
(3) administer the state-sponsored inspection and
dispute resolution process.
(b) A state inspector must be certified as a residential
combination inspector by the International Code Council.
CHAPTER 428. STATE-SPONSORED INSPECTION AND DISPUTE
RESOLUTION PROCESS
Sec. 428.001. REQUEST FOR RESOLUTION. (a) If a dispute
between a homeowner and a builder arises out of an alleged
construction defect, the homeowner or the builder may submit to the
commission a written request for state-sponsored inspection and
dispute resolution.
(b) The request must:
(1) specify in reasonable detail each alleged
construction defect that is a subject of the request;
(2) state the amount of any known out-of-pocket
expenses and engineering or consulting fees incurred by the
homeowner in connection with each alleged construction defect;
(3) include any evidence that depicts the nature and
cause of each alleged construction defect and the nature and extent
of repairs necessary to remedy the construction defect, including,
if available, expert reports, photographs, and videotapes, if that
evidence would be discoverable under Rule 192, Texas Rules of Civil
Procedure;
(4) be accompanied by the fees required under Section
426.004; and
(5) state the name of any person who has, on behalf of
the requestor, inspected the home in connection with an alleged
construction defect.
(c) Not later than the 30th day before the date a homeowner
submits a request under this section, the homeowner must notify the
builder in writing of each construction defect the homeowner claims
to exist. After the notice is provided, the builder must be
provided with a reasonable opportunity to inspect the home or have
the builder's designated consultants inspect the home.
(d) A person who submits a request under this section must
send by certified mail, return receipt requested, a copy of the
request, including evidence submitted with the request, to each
other party involved in the dispute.
(e) The commission by rule shall establish methods by which
homeowners may be notified of the name, mailing address, and
telephone number of the commission for the purpose of directing a
request to the commission.
(f) The commission shall provide a person who files a
request with a copy of the commission's policies and procedures
relating to investigation and resolution of a request.
(g) The commission by rule shall establish a standard form
for submitting a request under this section and provide a means to
submit a request electronically.
(h) The filing of a request under this section tolls the
limitations period in an action between the homeowner and the
builder arising out of the subject of the request until the 45th day
after the date a final, nonappealable recommendation is issued
under this title in response to the request.
Sec. 428.002. BUILDER'S RIGHT OF INSPECTION. (a) In
addition to the right of inspection provided by Section 428.001(c),
at any time before the conclusion of the state-sponsored inspection
and dispute resolution process and on the builder's written
request, the builder shall be given reasonable opportunity to
inspect the home that is the subject of the request or have the home
inspected to determine the nature and cause of the construction
defect and the nature and extent of repairs necessary to remedy the
construction defect.
(b) The builder may take reasonable steps to document the
construction defect and the condition of the home.
(c) If the homeowner delays the inspection for more than
five days after the date of receiving the builder's written
request, any period for subsequent action to be taken by the builder
or the third-party inspector shall be extended one day for each day
the inspection is delayed after the fifth day.
Sec. 428.003. INSPECTION BY THIRD-PARTY INSPECTOR. (a) On
or before the 15th day after the date the commission receives a
request, the commission shall appoint a third-party inspector to
inspect the home and meet with the homeowner and the builder.
(b) The commission shall establish rules and regulations
that allow the homeowner and the builder to each have the right to
strike the appointment of a third-party inspector one time for each
request submitted.
Sec. 428.004. INSPECTOR'S RECOMMENDATION. (a) If the
dispute involves workmanship and materials in the home of a
nonstructural matter, the third-party inspector shall issue a
recommendation not later than the 15th day after the date the
third-party inspector receives the appointment from the
commission.
(b) If the dispute involves a structural matter in the home,
the commission shall appoint an approved engineer to be the
third-party inspector. The third-party inspector shall inspect the
home not later than the 30th day after the date the request is
submitted and issue a recommendation not later than the 60th day
after the date the third-party inspector receives the assignment
from the commission, unless additional time is requested by the
third-party inspector or a party to the dispute. The commission
shall adopt rules governing the extension of time under this
subsection.
(c) The third-party inspector's recommendation must:
(1) address only the construction defect, based on the
applicable warranty and building and performance standards; and
(2) designate a method or manner of repair, if any.
(d) Except as provided by this subsection, the third-party
inspector's recommendation may not include payment of any monetary
consideration. If the inspector finds for the party who submitted
the request, the commission may order the other party to reimburse
all or part of the fees and inspection expenses paid by the
requestor under Section 426.004.
Sec. 428.005. THREAT TO HEALTH OR SAFETY. A builder who
receives written notice of a request relating to a construction
defect that creates an imminent threat to the health or safety of
the inhabitants of the residence shall take reasonable steps to
cure the defect as soon as practicable. If the builder fails to
cure the defect in a reasonable time, the homeowner may have the
defect cured and recover from the builder the reasonable cost of the
cure plus reasonable attorney's fees and expenses associated with
curing the defect in addition to any other damages not inconsistent
with this subtitle.
CHAPTER 429. APPEAL OF THIRD-PARTY INSPECTOR'S RECOMMENDATION
Sec. 429.001. APPEAL. (a) A homeowner or builder may
appeal a third-party inspector's recommendation on or before the
15th day after the date the recommendation is issued.
(b) If a homeowner or builder appeals a third-party
inspector's recommendation, the executive director shall appoint
three state inspectors to a panel to review the recommendation. If
the recommendation involves a dispute regarding a structural
failure, one of the state inspectors on the panel must be a licensed
professional engineer.
(c) The panel shall:
(1) review the recommendation without a hearing unless
a hearing is otherwise required by rules adopted by the commission;
(2) approve, reject, or modify the recommendation of
the third-party inspector or remand the dispute for further action
by the third-party inspector; and
(3) issue written findings of fact and a ruling on the
appeal not later than the 30th day after the date the notice of
appeal is filed with the commission.
CHAPTER 430. WARRANTIES AND BUILDING AND PERFORMANCE STANDARDS
Sec. 430.001. LIMITED STATUTORY WARRANTIES AND BUILDING AND
PERFORMANCE STANDARDS. (a) The commission by rule shall adopt
limited statutory warranties and building and performance
standards for residential construction that comply with this
section.
(b) The warranty periods shall be:
(1) one year for workmanship and materials;
(2) two years for plumbing, electrical, heating, and
air-conditioning delivery systems; and
(3) 10 years for major structural components of the
home.
(c) The limited statutory warranties and building and
performance standards must:
(1) require substantial compliance with the
nonelectrical standards contained in the version of the
International Residential Code for One- and Two-Family Dwellings
published by the International Code Council that is applicable
under Subsection (d) and the electrical standards contained in the
version of the National Electrical Code that is applicable under
Subsection (e);
(2) include standards for mold reduction and
remediation that comply with Section 430.002;
(3) establish standards for performance for interior
and exterior components of a home, including foundations, floors,
ceilings, walls, roofs, drainage, landscaping, irrigation,
heating, cooling, and electrical and plumbing components; and
(4) contain standards that are not less stringent than
the standards required by the United States Department of Housing
and Urban Development for FHA programs as set forth in 24 C.F.R.
Sections 203.202 through 203.206.
(d) The International Residential Code for One- and
Two-Family Dwellings that applies to nonelectrical aspects of
residential construction for the purposes of the limited statutory
warranties and building and performance standards adopted under
this section is:
(1) for residential construction located in a
municipality or the extraterritorial jurisdiction of a
municipality, the version of the International Residential Code
applicable to nonelectrical aspects of residential construction in
the municipality under Section 214.212, Local Government Code;
(2) for residential construction located in an
unincorporated area not in the extraterritorial jurisdiction of a
municipality, the version of the International Residential Code
applicable to nonelectrical aspects of residential construction in
the municipality that is the county seat of the county in which the
construction is located; and
(3) for residential construction located in an
unincorporated area in a county that does not contain an
incorporated area, the version of the International Residential
Code that existed on May 1, 2001.
(e) The National Electrical Code for One- and Two-Family
Dwellings that applies to electrical aspects of residential
construction for the purposes of this section is:
(1) for residential construction located in a
municipality or the extraterritorial jurisdiction of a
municipality, the version of the National Electrical Code
applicable to electrical aspects of residential construction in the
municipality under Section 214.214, Local Government Code;
(2) for residential construction located in an
unincorporated area not in the extraterritorial jurisdiction of a
municipality, the version of the National Electrical Code
applicable to electrical aspects of residential construction in the
municipality that is the county seat of the county in which the
construction is located; and
(3) for residential construction located in an
unincorporated area in a county that does not contain an
incorporated area, the version of the National Electrical Code that
existed on May 1, 2001.
(f) Except as provided by a written agreement between the
builder and the initial homeowner, a warranty period adopted under
this section for a new home begins on the earlier of the date of:
(1) occupancy; or
(2) transfer of title from the builder to the initial
homeowner.
(g) A warranty period adopted under this section for an
improvement other than a new home begins on the date the improvement
is substantially completed.
(h) The building and performance standards adopted by the
commission under this section may be adopted in phases and amended
or supplemented by the commission from time to time as the
commission receives additional evidence or information from task
forces or other sources regarding any improvements or developments
in the areas of residential homebuilding practices, procedures, or
technology.
Sec. 430.002. MOLD REDUCTION AND REMEDIATION; TASK FORCE.
(a) The building and performance standards adopted under Section
430.001 must include measures that are designed to reduce the
general population's exposure to mold often formed in water-damaged
building materials and that include:
(1) methods by which mold, water damage, and microbial
volatile compounds in indoor environments may be recognized; and
(2) recommended management practices for:
(A) limiting moisture intrusion in a home,
including the use of a water leak detection system listed by
Underwriters Laboratories that is capable of shutting off a valve
on the main water line coming into the structure immediately upon
detecting a water leak in the structure; and
(B) mold remediation.
(b) The commission shall appoint a task force to advise the
commission with regard to adoption of standards under this section.
The task force must include representatives of public health
officers of this state, health and medical experts, mold abatement
experts, and representatives of affected consumers and industries.
The commission and the task force shall consider the feasibility of
adopting permissible limits for exposure to mold in indoor
environments.
Sec. 430.003. CERTAIN DESIGN RECOMMENDATIONS; ADVISORY
COMMITTEE. The commission shall appoint a task force to develop
design recommendations for residential construction that encourage
rain harvesting and water recycling.
Sec. 430.004. STATUTORY WARRANTIES EXCLUSIVE. The
warranties established under this chapter supersede all implied
warranties. The only warranties that exist for residential
construction or residential improvements are warranties created by
this chapter or by other statutes expressly referring to
residential construction or residential improvements, or any
express, written warranty acknowledged by the homeowner and the
builder. A court may not discern or declare any other implied
warranty.
Sec. 430.005. WAIVER BY CONTRACT PROHIBITED. A contract
between a builder and a homeowner may not waive the limited
statutory warranties and building and performance standards
adopted under this chapter. This section does not prohibit a
builder and a homeowner from contracting for more stringent
warranties and building standards than are provided under this
chapter.
Sec. 430.006. APPROVAL OF THIRD-PARTY WARRANTY COMPANY.
(a) The commission may approve as a third-party warranty company
for the purposes of Section 430.007:
(1) an entity that has operated warranty programs in
this state for at least five years;
(2) a company whose performance is insured by an
insurance company authorized to engage in the business of insurance
in this state; or
(3) an insurance company that insures the warranty
obligations of a builder under the statutory warranty and building
and performance standards.
(b) A third-party warranty company must submit to the
commission an annual application and fee in the form and in the
amount required by the commission by rule before the company may be
approved under this section.
Sec. 430.007. THIRD-PARTY WARRANTY COMPANY. (a) If a
builder chooses to provide a third-party warranty company approved
by the commission, the builder may limit liability to a homeowner
under the terms of that warranty.
(b) A limitation of liability under this section is not
effective unless the company providing the warranty:
(1) agrees to perform the builder's warranty
obligations under this chapter; and
(2) actually pays for or corrects any construction
defect covered by the warranty.
(c) A third-party warranty company approved by the
commission has all of the obligations and rights of a builder under
this subtitle regarding performance of repairs to remedy
construction defects or payment of money instead of repair.
(d) The third-party warranty company may not assume
liability for personal injuries or damage to personal property. A
builder does not avoid liability for personal injuries or damage to
personal property for which the builder would otherwise be liable
under law by providing a written warranty from a third-party
warranty company.
(e) A company that administers a warranty for a third-party
warranty company is not liable for any damages resulting from a
construction defect or from repairs covered under the warranty.
Sec. 430.008. MINIMUM STANDARDS FOR DETERMINATION OF
DEFECT. A third-party warranty company shall use defect inspection
procedures substantially similar to the procedures adopted by the
commission under this subtitle. A warranty company may adopt
warranty standards in addition to the standards adopted by the
commission, but it may not reduce the limited statutory warranty
and building and performance standards.
Sec. 430.009. EFFECT OF SUBTITLE ON OTHER RIGHTS AND
OBLIGATIONS. (a) This subtitle provides the sole rights and
obligations between a homeowner and a builder unless additional
rights and obligations are provided in an express, written contract
between the homeowner and the builder. Except as permitted by this
subtitle, an express, written contract between a homeowner and a
builder may not limit the obligations of a builder under this title.
(b) After the issuance of written findings of fact and a
ruling on an appeal under Chapter 429, a homeowner may bring a cause
of action against a builder or third-party warranty company for
breach of a limited statutory warranty adopted by the commission
under this subtitle. In an action brought under this subsection,
the homeowner may recover only those damages provided by Section
27.004(g).
(c) This subtitle creates the only cognizable cause of
action available against a builder or third-party warranty company
with regard to construction defects.
SECTION 1.02. (a) On or before December 1, 2003, the
governor shall appoint the members of the Texas Residential
Construction Commission in accordance with Title 16, Property Code,
as added by this article. In making the initial appointments, the
governor shall designate three members for terms expiring February
1, 2005, three members for terms expiring February 1, 2007, and
three members for terms expiring February 1, 2009.
(b) The governor shall designate a person to perform the
ministerial acts necessary for posting notice of and holding the
first meeting of the commission.
(c) Section 406.006, Property Code, as added by this
article, does not apply to a member of the Texas Residential
Construction Commission until March 1, 2004.
SECTION 1.03. As soon as possible after appointment of its
members, the Texas Residential Construction Commission shall adopt
limited statutory warranties and building and performance
standards under Section 430.001, Property Code, as added by this
article. The warranties and building and performance standards
adopted by the commission apply only to residential construction
that begins on or after the effective date of those warranties and
building and performance standards as determined by the commission.
Residential construction that begins before the effective date of
those warranties and building and performance standards is governed
by the warranties and building and performance standards applicable
to the construction before that date.
SECTION 1.04. On or before March 1, 2004, the Texas
Residential Construction Commission shall begin requiring
registration under Subtitle C, Title 16, Property Code, as added by
this article.
SECTION 1.05. On January 1, 2004, the Texas Residential
Construction Commission shall begin collecting, and builders are
required to remit, the registration fee required by Section
426.003, Property Code, as added by this Act.
ARTICLE 2. RESIDENTIAL CONSTRUCTION LIABILITY ACTIONS
SECTION 2.01. Section 27.001, Property Code, is amended to
read as follows:
Sec. 27.001. DEFINITIONS. In this chapter:
(1) "Action" means a court or judicial proceeding or
an arbitration.
(2) "Appurtenance" means any structure or
recreational facility that is appurtenant to a residence but is not
a part of the dwelling unit.
(3) "Commission" means the Texas Residential
Construction Commission.
(4) [(2)] "Construction defect" has the meaning
assigned by Section 401.004 for an action to which Subtitle D, Title
16, applies and for any other action means a matter concerning the
design, construction, or repair of a new residence, of an
alteration of or repair or addition to an existing residence, or of
an appurtenance to a residence, on which a person has a complaint
against a contractor. The term may include any physical damage to
the residence, any appurtenance, or the real property on which the
residence and appurtenance are affixed proximately caused by a
construction defect.
(5) [(3)] "Contractor" means a builder, as defined by
Section 401.003, and any person contracting with an owner for the
construction or sale of a new residence constructed by that person
or of an alteration of or addition to an existing residence, repair
of a new or existing residence, or construction, sale, alteration,
addition, or repair of an appurtenance to a new or existing
residence. The term includes:
(A) an owner, officer, director, shareholder,
partner, or employee of the contractor; and
(B) a risk retention group registered under
Article 21.54, Insurance Code, that insures all or any part of a
contractor's liability for the cost to repair a residential
construction defect.
(6) "Economic damages" means compensatory damages for
pecuniary loss proximately caused by a construction defect. The
term does not include exemplary damages or damages for physical
pain and mental anguish, loss of consortium, disfigurement,
physical impairment, or loss of companionship and society.
(7) [(4)] "Residence" means the real property and
improvements for a single-family house, duplex, triplex, or
quadruplex or a unit in a multiunit residential structure in which
title to the individual units is transferred to the owners under a
condominium or cooperative system.
(8) [(5)] "Structural failure" has the meaning
assigned by Section 401.002 for an action to which Subtitle D, Title
16, applies and for any other action means actual physical damage to
the load-bearing portion of a residence caused by a failure of the
load-bearing portion.
(9) "Third-party inspector" has the meaning assigned
by Section 401.002.
SECTION 2.02. Section 27.002, Property Code, is amended by
amending Subsections (a) and (b) and adding Subsection (d) to read
as follows:
(a) This chapter applies to:
(1) any action to recover damages or other relief
arising [resulting] from a construction defect, except a claim for
personal injury, survival, or wrongful death or for damage to
goods; and
(2) any subsequent purchaser of a residence who files
a claim against a contractor.
(b) To the extent of conflict between this chapter and any
other law, including the Deceptive Trade Practices-Consumer
Protection Act (Subchapter E, Chapter 17, Business & Commerce Code)
or a common law cause of action, this chapter prevails.
(d) This chapter does not apply to an action to recover
damages that arise from:
(1) a violation of Section 27.01, Business & Commerce
Code;
(2) a contractor's wrongful abandonment of an
improvement project before completion; or
(3) a violation of Chapter 162.
SECTION 2.03. Section 27.003, Property Code, is amended to
read as follows:
Sec. 27.003. LIABILITY. (a) In an action to recover
damages or other relief arising [resulting] from a construction
defect:
(1) a contractor is not liable for any percentage of
damages caused by:
(A) negligence of a person other than the
contractor or an agent, employee, or subcontractor of the
contractor;
(B) failure of a person other than the contractor
or an agent, employee, or subcontractor of the contractor to:
(i) take reasonable action to mitigate the
damages; or
(ii) take reasonable action to maintain the
residence;
(C) normal wear, tear, or deterioration;
(D) normal shrinkage due to drying or settlement
of construction components within the tolerance of building
standards; or
(E) the contractor's reliance on written
information relating to the residence, appurtenance, or real
property on which the residence and appurtenance are affixed that
was obtained from official government records, if the written
information was false or inaccurate and the contractor did not know
and could not reasonably have known of the falsity or inaccuracy of
the information; and
(2) if an assignee of the claimant or a person
subrogated to the rights of a claimant fails to provide the
contractor with the written notice and opportunity to inspect and
offer to repair [to the contractor] required by Section 27.004 or
fails to request state-sponsored inspection and dispute resolution
under Chapter 428, if applicable, [27.004(a)] before performing
repairs, the contractor is not liable for the cost of any repairs or
any percentage of damages caused by repairs made to a construction
defect at the request of an assignee of the claimant or a person
subrogated to the rights of a claimant by a person other than the
contractor or an agent, employee, or subcontractor of the
contractor.
(b) Except as provided by this chapter [herein], this
chapter does not limit or bar any other defense or defensive matter
or other defensive cause of action applicable to an action to
recover damages or other relief arising [resulting] from a
construction defect.
SECTION 2.04. Section 27.004, Property Code, is amended to
read as follows:
Sec. 27.004. NOTICE AND OFFER OF SETTLEMENT. (a) In a
claim not subject to Subtitle D, Title 16, before [Before] the 60th
day preceding the date a claimant seeking from a contractor damages
or other relief arising from a construction defect initiates an
action [files suit], the claimant shall give written notice by
certified mail, return receipt requested, to the contractor, at the
contractor's last known address, specifying in reasonable detail
the construction defects that are the subject of the complaint. On
the request of the contractor, the claimant shall provide to the
contractor any evidence that depicts the nature and cause of the
defect and the nature and extent of repairs necessary to remedy the
defect, including expert reports, photographs, and videotapes, if
that evidence would be discoverable under Rule 192, Texas Rules of
Civil Procedure. During the 35-day period after the date the
contractor receives the notice, and on the contractor's written
request, the contractor shall be given a reasonable opportunity to
inspect and have inspected the property that is the subject of the
complaint to determine the nature and cause of the defect and the
nature and extent of repairs necessary to remedy the defect. The
contractor may take reasonable steps to document the defect. In a
claim subject to Subtitle D, Title 16, a contractor is entitled to
make an offer of repair in accordance with Subsection (b). A
claimant is not required to give written notice to a contractor
under this subsection in a claim subject to Subtitle D, Title 16.
(b) Not later than the 15th day after the date of a final,
unappealable determination of a dispute under Subtitle D, Title 16,
if applicable, or not later than the 45th day [Within the 45-day
period] after the date the contractor receives the notice under
this section, if Subtitle D, Title 16, does not apply, the
contractor may make a written offer of settlement to the claimant.
The offer must be sent to the claimant at the claimant's last known
address or to the claimant's attorney by certified mail, return
receipt requested. The offer may include either an agreement by the
contractor to repair or to have repaired by an independent
contractor partially or totally at the contractor's expense or at a
reduced rate to the claimant any construction defect described in
the notice and shall describe in reasonable detail the kind of
repairs which will be made. The repairs shall be made not later
than the 45th day [within the 45-day period] after the date the
contractor receives written notice of acceptance of the settlement
offer, unless completion is delayed by the claimant or by other
events beyond the control of the contractor. If a contractor makes
a written offer of settlement that the claimant considers to be
unreasonable:
(1) on or before the 25th day after the date the
claimant receives the offer, the claimant shall advise the
contractor in writing and in reasonable detail of the reasons why
the claimant considers the offer unreasonable; and
(2) not later than the 10th day after the date the
contractor receives notice under Subdivision (1), the contractor
may make a supplemental written offer of settlement to the claimant
by sending the offer to the claimant or the claimant's attorney.
[For the purposes of this section, "independent contractor" means a
person who is independent of the contractor and did not perform any
of the work complained of in the claimant's notice. The claimant
and the contractor may agree in writing to extend the periods
described by this subsection.]
(c) If compliance with Subtitle D, Title 16, or the giving
of the notice under Subsections (a) and (b) within the period
prescribed by those subsections is impracticable because of the
necessity of initiating an action [filing suit] at an earlier date
to prevent expiration of the statute of limitations or if the
complaint is asserted as a counterclaim, compliance with Subtitle
D, Title 16, or the [that] notice is not required. However, the
action [suit] or counterclaim shall specify in reasonable detail
each construction defect that is the subject of the complaint. If
Subtitle D, Title 16, applies to the complaint, simultaneously with
the filing of an action by a claimant, the claimant must submit a
request under Section 428.001. If Subtitle D, Title 16, does not
apply, [and] the inspection provided for by Subsection (a) may be
made not later than the 75th day after [during the 60-day period
following] the date of service of the suit, request for
arbitration, or counterclaim on the contractor, and the offer
provided for by Subsection (b) may be made not later than the 15th
day after the date the state-sponsored inspection and dispute
resolution process is completed, if Subtitle D, Title 16, applies,
or not later than the 60th day after [within the 60-day period
following] the date of service, if Subtitle D, Title 16, does not
apply. If, while an action [a suit] subject to this chapter is
pending, the statute of limitations for the cause of action would
have expired and it is determined that the provisions of Subsection
(a) were not properly followed, the action [suit] shall be abated
[for up to 75 days in order] to allow compliance with Subsections
(a) and (b).
(d) The court or arbitration tribunal shall dismiss an
action [abate a suit] governed by this chapter if Subsection (c)
does not apply and the court or tribunal, after a hearing, finds
that the contractor is entitled to dismissal [an abatement] because
the claimant failed to comply with the requirements of Subtitle D,
Title 16, if applicable, failed to provide the notice or failed to
give the contractor a reasonable opportunity to inspect the
property as required by Subsection (a), or failed to follow the
procedures specified by Subsection (b). An action [A suit] is
automatically dismissed [abated] without the order of the court or
tribunal beginning on the 11th day after the date a motion to
dismiss [plea in abatement] is filed if the motion [plea in
abatement]:
(1) is verified and alleges that the person against
whom the action [suit] is pending did not receive the written notice
required by Subsection (a), the person against whom the action is
pending [or] was not given a reasonable opportunity to inspect the
property as required by Subsection (a), or the claimant failed to
follow the procedures specified by Subsection (b) or Subtitle D,
Title 16; and
(2) is not controverted by an affidavit filed by the
claimant before the 11th day after the date on which the motion to
dismiss [plea in abatement] is filed.
(e) [An abatement under Subsection (d) continues until the
60th day after the date that written notice is served in compliance
with Subsection (a).
[(f)] If a claimant [unreasonably] rejects a reasonable
[an] offer made under Subsection (b) [as provided by this section]
or does not permit the contractor or independent contractor a
reasonable opportunity to inspect or repair the defect pursuant to
an accepted offer of settlement, the claimant:
(1) may not recover an amount in excess of:
(A) the fair market value of the contractor's
last offer of settlement under Subsection (b) [reasonable cost of
the offered repairs which are necessary to cure the construction
defect and which are the responsibility of the contractor]; or
(B) the amount of a reasonable monetary
settlement or purchase offer made under Subsection (n); and
(2) may recover only the amount of reasonable and
necessary costs and attorney's fees as prescribed by Rule 1.04,
Texas Disciplinary Rules of Professional Conduct, [and costs]
incurred before the offer was rejected or considered rejected.
(f) [(g)] If a contractor fails to make a reasonable offer
under Subsection (b) [this section], or fails to make a reasonable
attempt to fully perform under [complete the repairs specified in]
an accepted offer made under this section, or fails to complete, in
a good and workmanlike manner, the repairs specified in an accepted
offer made under this section, the limitations on damages [and
defenses to liability] provided for in Subsection (e) [this
section] shall not apply.
(g) [(h)] Except as provided by Subsection (e) [(f)], in an
action [a suit] subject to this chapter the claimant may recover
only the following economic damages proximately caused by a
construction defect:
(1) the reasonable cost of repairs necessary to cure
any construction defect[, including any reasonable and necessary
engineering or consulting fees required to evaluate and cure the
construction defect, that the contractor is responsible for
repairing under this chapter];
(2) the reasonable and necessary cost for the
replacement or repair of any damaged goods in the residence;
(3) reasonable and necessary engineering and
consulting fees;
(4) the reasonable expenses of temporary housing
reasonably necessary during the repair period;
(5) [(3)] the reduction in current market value, if
any, after the construction defect is repaired if the construction
defect is a [to the extent the reduction is due to] structural
failure; and
(6) [(4)] reasonable and necessary attorney's fees.
(h) A homeowner and a contractor may agree in writing to
extend any time period described in this chapter [(i) The total
damages awarded in a suit subject to this chapter may not exceed the
greater of the claimant's purchase price for the residence or the
current fair market value of the residence without the construction
defect].
(i) [(j)] An offer of settlement made under this section
that is not accepted before the 25th day after the date the offer is
received by the claimant is considered rejected.
(j) [(k)] An affidavit certifying rejection of a settlement
offer under this section may be filed with the court or arbitration
tribunal. The trier of fact shall determine the reasonableness of a
final [an] offer of settlement made under this section.
(k) [(l)] A contractor who makes or provides for repairs
under this section is entitled to take reasonable steps to document
the repair and to have it inspected.
(l) If Subtitle D, Title 16, applies to the claim and the
contractor's offer of repair is accepted by the claimant, the
contractor, on completion of the repairs and at the contractor's
expense, shall engage the third-party inspector who provided the
recommendation regarding the construction defect involved in the
claim to inspect the repairs and determine whether the residence,
as repaired, complies with the applicable limited statutory
warranty and building and performance standards adopted by the
commission. The contractor is entitled to a reasonable period not
to exceed 15 days to address minor cosmetic items that are necessary
to fully complete the repairs. The determination of the
third-party inspector of whether the repairs comply with the
applicable limited statutory warranty and building and performance
standards adopted by the commission establishes a rebuttable
presumption on that issue. A party seeking to dispute, vacate, or
overcome that presumption must establish by clear and convincing
evidence that the determination is inconsistent with the applicable
limited statutory warranty and building and performance standards.
(m) Notwithstanding Subsections (a), (b), and (c), a
contractor who receives written notice of a construction defect
resulting from work performed by the contractor or an agent,
employee, or subcontractor of the contractor and creating an
imminent threat to the health or safety of the inhabitants of the
residence shall take reasonable steps to cure the defect as soon as
practicable. If the contractor fails to cure the defect in a
reasonable time, the owner of the residence may have the defect
cured and may recover from the contractor the reasonable cost of the
repairs plus attorney's fees and costs in addition to any other
damages recoverable under any law not inconsistent with the
provisions of this chapter.
(n) This section does not preclude a contractor from making
a monetary settlement offer or an offer to purchase the residence.
(o) A notice and response letter prescribed by this chapter
must be sent by certified mail, return receipt requested, to the
last known address of the recipient. If previously disclosed in
writing that the recipient of a notice or response letter is
represented by an attorney, the letter shall be sent to the
recipient's attorney in accordance with Rule 21a, Texas Rules of
Civil Procedure [The inspection and repair provisions of this
chapter are in addition to any rights of inspection and settlement
provided by common law or by another statute, including Section
17.505, Business & Commerce Code].
(p) If the contractor provides written notice of a claim for
damages arising from a construction defect to a subcontractor, the
contractor retains all rights of contribution from the
subcontractor if the contractor settles the claim with the
claimant.
SECTION 2.05. Chapter 27, Property Code, is amended by
adding Section 27.0042 to read as follows:
Sec. 27.0042. CONDITIONAL SALE TO BUILDER. (a) A written
agreement between a contractor and a homeowner may provide that,
except as provided by Subsection (b), if the reasonable cost of
repairs necessary to repair a construction defect that is the
responsibility of the contractor exceeds an agreed percentage of
the current fair market value of the residence, as determined
without reference to the construction defects, then, in an action
subject to this chapter, the contractor may elect as an alternative
to the damages specified in Section 27.004(g) that the contractor
who sold the residence to the homeowner purchase it.
(b) A contractor may not elect to purchase the residence
under Subsection (a) if the residence is more than five years old at
the time an action is initiated.
(c) If a contractor elects to purchase the residence under
Subsection (a):
(1) the contractor shall pay the original purchase
price of the residence and closing costs incurred by the homeowner
and the cost of transferring title to the contractor under the
election;
(2) the homeowner may recover:
(A) reasonable and necessary attorney's and
expert fees as identified in Section 27.004(g);
(B) reimbursement for permanent improvements the
owner made to the residence after the date the owner purchased the
residence from the builder; and
(C) reasonable costs to move from the residence;
and
(3) conditioned on the payment of the purchase price,
the homeowner shall tender a special warranty deed to the
contractor, free of all liens and claims to liens as of the date the
title is transferred to the contractor, and without damage caused
by the homeowner.
(d) An offer to purchase a claimant's home that complies
with this section is considered reasonable absent clear and
convincing evidence to the contrary.
SECTION 2.06. Section 27.007(a), Property Code, is amended
to read as follows:
(a) A written contract subject to this chapter must contain
next to the signature lines in the contract a notice printed or
typed in 10-point boldface type or the computer equivalent that
reads substantially similar to the following:
"This contract is subject to Chapter 27 of the Texas[,]
Property Code. The provisions of that chapter may affect your right
to recover damages arising from the performance of this contract.
If you have a complaint concerning a construction defect arising
from the performance of this contract and that defect has not been
corrected through normal warranty service, you must provide the
notice required by Chapter 27 of the Texas Property Code [regarding
the defect] to the contractor by certified mail, return receipt
requested, not later than the 60th day before the date you file suit
to recover damages in a court of law or initiate arbitration. The
notice must refer to Chapter 27 of the Texas[,] Property Code[,] and
must describe the construction defect. If requested by the
contractor, you must provide the contractor an opportunity to
inspect and cure the defect as provided by Section 27.004 of the
Texas[,] Property Code."
SECTION 2.07. (a) The changes in law made by this article
to Sections 27.002, 27.003, and 27.004, Property Code, apply only
to a cause of action that accrues on or after the effective date of
this Act. A cause of action that accrues before the effective date
of this Act is governed by the law in effect immediately before
that date, and that law is continued in effect for that purpose.
(b) Section 27.0042, Property Code, as added by this article
and the changes in law made by this article to Section 27.007(a),
Property Code, apply only with respect to a contract between a
contractor and a homeowner that is entered into on or after the
effective date of this Act. With respect to a contract that is
entered into before the effective date of this Act, the law in
effect immediately before the effective date applies, and that law
is continued in effect for that purpose.
ARTICLE 3. EFFECTIVE DATE
SECTION 3.01. This Act takes effect September 1, 2003.
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