By: Herrero H.B. No. 3443
A BILL TO BE ENTITLED
AN ACT
relating to relief for residential property owners; providing
penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. RESIDENCE HOMESTEAD EXEMPTION FROM
AD VALOREM TAXATION BY SCHOOL DISTRICTS
SECTION 1.01. Section 11.13(b), Tax Code, is amended to
read as follows:
(b) An adult is entitled to exemption from taxation by a
school district of $45,000 [$15,000] of the appraised value of the
adult's residence homestead, except that $40,000 [$10,000] of the
exemption does not apply to an entity operating under former
Chapter 17, 18, 25, 26, 27, or 28, Education Code, as those chapters
existed on May 1, 1995, as permitted by Section 11.301, Education
Code.
SECTION 1.02. This article takes effect January 1, 2006,
but only if the constitutional amendment proposed by the 79th
Legislature, Regular Session, 2005, increasing the amount of the
residence homestead exemption from ad valorem taxation for public
school purposes is approved by the voters. If that amendment is not
approved by the voters, this article has no effect.
ARTICLE 2. PRIOR APPROVAL OF RESIDENTIAL PROPERTY
INSURANCE RATES AND POLICY FORMS
SECTION 2.01. Article 5.13(a), Insurance Code, is amended
to read as follows:
(a) This subchapter applies to every insurance company,
corporation, interinsurance exchange, mutual, reciprocal,
association, Lloyd's plan, or other organization or insurer writing
any of the characters of insurance business herein set forth,
hereinafter called "Insurer"; provided that nothing in this entire
subchapter shall be construed to apply to any county or farm mutual
insurance company or association, as regulated under Chapters 911
and 912 of this code, except that Article 5.13-2 of this code shall
apply to a county mutual insurance company with respect to personal
automobile and commercial automobile insurance, [residential and]
commercial property insurance, and inland marine insurance.
SECTION 2.02. Section 2, Section 5.13-2, Insurance Code, is
amended by amending Subsection (a) and adding Subsection (c) to
read as follows:
(a) This article applies to all lines of the following
insurance written under policies or contracts of insurance issued
by an insurer authorized to engage in the business of insurance in
this state:
(1) general liability insurance;
(2) [residential and] commercial property insurance,
including farm and ranch insurance and farm and ranch owners
insurance;
(3) personal and commercial casualty insurance,
except as provided by Subsection (b) of this section;
(4) medical professional liability insurance;
(5) fidelity and surety bonds other than criminal
court appearance bonds;
(6) personal umbrella insurance;
(7) personal liability insurance;
(8) guaranteed auto protection (GAP) insurance;
(9) involuntary unemployment insurance;
(10) financial guaranty insurance;
(11) inland marine insurance;
(12) rain insurance;
(13) hail insurance on farm crops; and
(14) personal and commercial automobile insurance.
(c) Notwithstanding any other law, rates and forms for
residential property insurance are governed by Subchapters C, L,
and U, Chapter 5, of this code.
SECTION 2.03. Article 5.96(a-1), Insurance Code, is amended
to read as follows:
(a-1) This article does not apply to the setting of rates
for [personal automobile insurance under Article 5.101 of this
code, rates for fire and allied lines insurance under Subchapter Q
of this chapter or, on and after December 1, 2004, rates for
personal automobile insurance and fire and allied] lines of
insurance subject to [under] Article 5.13-2 of this code. This
article applies to the setting of rates for residential property
insurance.
SECTION 2.04. The heading to Article 5.145, Insurance Code,
is amended to read as follows:
Art. 5.145. POLICY FORMS FOR PERSONAL AUTOMOBILE INSURANCE
COVERAGE [AND RESIDENTIAL PROPERTY INSURANCE COVERAGE]
SECTION 2.05. Section 1(1), Article 5.145, Insurance Code,
is amended to read as follows:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity authorized to write personal automobile
insurance [or residential property insurance] in this state. The
term includes an affiliate, as described by this code, if that
affiliate is authorized to write and is writing personal automobile
insurance [or residential property insurance] in this state. The
term does not include[:
[(A) the Texas Windstorm Insurance Association
under Article 21.49 of this code;
[(B) the FAIR Plan Association under Article
21.49A of this code; or
[(C)] the Texas Automobile Insurance Plan Association under
Article 21.81 of this code.
SECTION 2.06. Section 2, Article 5.145, Insurance Code, is
amended to read as follows:
Sec. 2. REGULATION OF POLICY FORMS AND ENDORSEMENTS. (a)
Notwithstanding any other provision in this code and except as
provided by this section, an insurer is governed by the provisions
of Section 8, Article 5.13-2 of this code, relating to policy forms
and endorsements for personal automobile insurance [and
residential property insurance].
(b) An insurer may continue to use the policy forms and
endorsements promulgated, approved, or adopted under Article
[Articles] 5.06 [and 5.35] of this code on notification to the
commissioner in writing that the insurer will continue to use those
forms.
SECTION 2.07. Article 5.171, Insurance Code, is amended to
read as follows:
Art. 5.171. RATING TERRITORIES. Notwithstanding any other
provision of this code, an insurer, in writing any insurance in this
state including residential property insurance, may not use rating
territories that subdivide a county unless:
(1) the county is subdivided; and
(2) the rate for any subdivisions within that county
is not greater than 15 percent higher than the rate used in any
other subdivisions in the county by that insurer, except that the
commissioner may by rule allow a greater rate difference for
[residential property insurance or] personal automobile insurance.
SECTION 2.08. Section 912.002(b), Insurance Code, is
amended to read as follows:
(b) A county mutual insurance company is subject to:
(1) Sections 38.001, 501.202, 501.203, and 822.204;
(2) Chapters 221, 251, 252, 254, and 541; [and]
(3) [(2)] Articles 1.15, 1.15A, 1.16, [1.35B,] 2.10,
[4.10,] 5.12, 21.21-12, [5.37, 5.38, 5.39, 5.40, 5.49, 21.21,] and
21.49; and
(4) Subchapters C, L, and U, Chapter 5.
SECTION 2.09. Section 941.003(b), Insurance Code, is
amended to read as follows:
(b) A Lloyd's plan is subject to:
(1) Section 5, Article 1.10;
(2) Article 1.15A;
(3) Subchapters A, C, L, [Q, T,] and U, Chapter 5;
(4) Chapters 251, 252, and 541;
(5) Articles 21.21-12 [5.35, 5.38, 5.39, 5.40, and
5.49;
[(5) Articles 21.21] and 21.49-8;
(6) Sections 822.203, 822.205, 822.210, and 822.212;
and
(7) Article 5.13-2, as provided by that article.
SECTION 2.10. Section 942.003(b), Insurance Code, is
amended to read as follows:
(b) An exchange is subject to:
(1) Section 5, Article 1.10;
(2) Articles 1.15, 1.15A, and 1.16;
(3) Subchapters A, C, L, [Q, T,] and U, Chapter 5;
(4) [Articles 5.35, 5.37, 5.38, 5.39, and 5.40;
[(5)] Articles 21.21-12 [21.21] and 21.49-8;
(5) Chapter 541;
(6) Sections 822.203, 822.205, 822.210, 822.212,
861.254(a)-(f), 861.255, 862.001(b), and 862.003; and
(7) Article 5.13-2, as provided by that article.
SECTION 2.11. The following laws are repealed:
(1) Article 5.25(b), Insurance Code;
(2) Article 5.25A(b), Insurance Code;
(3) Article 5.26(i), Insurance Code;
(4) Article 5.29(b), Insurance Code;
(5) Article 5.30(b), Insurance Code;
(6) Article 5.31(b), Insurance Code;
(7) Article 5.32(b), Insurance Code;
(8) Article 5.34(b), Insurance Code;
(9) Article 5.35(k), Insurance Code, as added by
Section 21.22, Chapter 206, Acts of the 78th Legislature, Regular
Session, 2003;
(10) Article 5.39(b), Insurance Code;
(11) Article 5.40(d), Insurance Code;
(12) Article 5.41(b), Insurance Code; and
(13) Section 1(3), Article 5.145, Insurance Code.
SECTION 2.12. This article applies only to an insurance
policy that is delivered, issued for delivery, or renewed on or
after January 1, 2006. A policy that is delivered, issued for
delivery, or renewed before January 1, 2006, is governed by the law
as it existed immediately before the effective date of this Act, and
that law is continued in effect for this purpose.
ARTICLE 3. RATE FILING AND RATE ASSESSMENT
FOR RESIDENTIAL PROPERTY INSURANCE
SECTION 3.01. Subchapter B, Chapter 5, Insurance Code, is
amended by adding Article 5.14 to read as follows:
Art. 5.14. FILING OF RESIDENTIAL PROPERTY INSURANCE RATES
FOR RATE ASSESSMENT
Sec. 1. APPLICABILITY; DEFINITIONS. (a) This article
applies only to residential property insurance.
(b) The definitions under Article 5.13-2 of this code apply
to this article.
Sec. 2. CONSTRUCTION WITH OTHER LAW. (a) Notwithstanding
any other law, rates for residential property insurance are
governed by this article from the effective date of this article
until the completion of the rate assessment under this article and
any resulting hearings or other proceedings under this article.
(b) When the rate assessment and any resulting hearings or
other proceedings under this article are completed, rates for
residential property insurance are governed by Subchapters C, L,
and U, Chapter 5, of this code.
Sec. 3. RATE STANDARDS. (a) A rate filed by an insurer
under Section 4 of this article or a rate ordered by the
commissioner following a rate hearing under Section 5 of this
article may not be excessive, inadequate, unfairly discriminatory,
or unreasonable.
(b) A rate ordered by the commissioner following a rate
hearing under Section 5 of this article must comply with the rate
standards described by Subsection (a) of this section and may not be
confiscatory.
Sec. 4. RATE FILING; RATE ASSESSMENT. (a) Not later than
the 20th day after the effective date of this article, each insurer
writing residential property insurance that is also subject to
Subchapter C, Chapter 5, of this code shall file with the
commissioner the insurer's rates, supporting information, and
supplementary rating information. If the insurer has made a rate
filing under Article 5.13-2 of this code not more than 30 days
before the effective date of this article, the insurer may:
(1) notify the department that the insurer is using
the rate filing submitted under Article 5.13-2 of this code to
comply with the requirements of this article; or
(2) file an update to the material filed under Article
5.13-2 of this code.
(b) If, after reviewing a filing under Subsection (a) of
this section, the commissioner determines that the filing does not
contain information sufficient to allow the commissioner to
determine if the filed rate meets all rate standards under Section 3
of this article, not later than the 10th day after the insurer makes
the filing, the commissioner may request in writing any specific
additional information from the insurer necessary to make the
determination.
(c) Not later than the 30th day after the date the
department receives an insurer's filing under Subsection (a) of
this section, the commissioner shall:
(1) if the filed rate meets all rate standards under
Section 3 of this article, approve the filed rate; or
(2) if the filed rate fails to meet any rate standard
under Section 3 of this article, disapprove the filed rate and issue
an order specifying in what respects the filed rate fails to comply
with the rate standards.
Sec. 5. HEARING. If the commissioner disapproves a rate
under Section 4(c)(2) of this article, the department shall hold a
rate hearing and the commissioner shall issue an order in
accordance with Chapter 40 of this code.
Sec. 6. JUDICIAL REVIEW. (a) Not later than the 10th day
after the date an insurer receives the commissioner's order issued
under Section 5 of this article, the insurer may file a petition for
judicial review in a district court of Travis County. The standard
of review of the commissioner's order is substantial evidence.
(b) During the pendency of an appeal under this section, the
insurer may charge either the insurer's existing rates or the rate
ordered by the commissioner under Section 5 of this article.
Sec. 7. REFUND. If on final appeal a court upholds the
commissioner's order issued under Section 5 of this article, the
insurer shall refund the difference in overcharged premium, if any,
plus interest to each policyholder. The interest rate is the prime
rate for the calendar year in which the refund is issued, plus six
percent.
Sec. 8. CERTAIN SETTLEMENTS PROHIBITED. If an insurer
files a petition for judicial review under Section 6 of this
article, the department may not agree to a settlement of the lawsuit
in any amount that is less than the amount of the refund, including
interest, that the insurer would be obligated to pay under Section 7
of this article.
Sec. 9. EXPIRATION. (a) This article expires September 1,
2006.
(b) The expiration of this article does not affect an action
or proceeding against an insurer subject to this article for a
failure to comply with this article before the expiration of this
article, regardless of when the action or proceeding was commenced,
and this article is continued in effect only for that purpose.
SECTION 3.02. This article applies to a residential
property insurance policy that is delivered, issued for delivery,
or renewed on or after the effective date of this Act and to rates
for such a policy. A residential property insurance policy
delivered, issued for delivery, or renewed before the effective
date of this Act and the rates for such a policy are governed by the
law as it existed immediately before the effective date of this Act,
and that law is continued in effect for that purpose.
ARTICLE 4. USE OF CERTAIN POLICY FORMS
SECTION 4.01. Article 5.35, Insurance Code, is amended by
adding Subsection (l) to read as follows:
(l) An insurer that offers a residential property insurance
policy in this state and that is authorized to offer a Homeowners
"B" policy form, as adopted by the commissioner, must write the
residential property insurance policy using a Homeowners "B" policy
form unless the insured rejects coverage under an HO-B policy in
writing.
SECTION 4.02. This article applies only to an insurance
policy that is delivered, issued for delivery, or renewed on or
after January 1, 2006. A policy that is delivered, issued for
delivery, or renewed before January 1, 2006, is governed by the law
as it existed immediately before the effective date of this Act, and
that law is continued in effect for this purpose.
ARTICLE 5. REGULATION OF UNDERWRITING GUIDELINES
SECTION 5.01. Subchapter B, Chapter 21, Insurance Code, is
amended by adding Article 21.21-12 to read as follows:
Article 21.21-12. REGULATION OF UNDERWRITING GUIDELINES
Sec. 1. DEFINITIONS. In this article:
(1) "Actuarially sound" means the underwriting
guideline is shown to differentiate among consumers who have
different expected costs associated with the transfer of risk, all
other relevant factors being the same.
(2) "Person" includes any individual or entity engaged
in the business of insurance, including any individual or entity
described by Section 82.002 of this code.
(3) "Residential property insurance" means insurance
against loss to real or tangible personal property at a fixed
location provided in a homeowners policy, a tenant policy, a
condominium owners policy, or a residential fire and allied lines
policy.
(4) "Underwriting guideline" means a rule, standard,
marketing decision, guideline, or practice, whether written, oral,
or electronic, used by an insurer or its agent to examine, bind,
accept, reject, renew, nonrenew, cancel, or limit coverages made
available to classes of consumers or individual consumers.
Sec. 2. PROHIBITION. A person may not use an underwriting
guideline for residential property insurance, other than
underwriting guidelines described by Section 3 of this article,
without the prior approval of the commissioner.
Sec. 3. PERMISSIBLE UNDERWRITING GUIDELINES. (a) A person
is not required to obtain the commissioner's prior approval to use
an underwriting guideline if the guideline complies with this
section.
(b) An underwriting guideline for residential property
insurance may be based on the following characteristics:
(1) the physical condition of the property to be
insured, provided the underwriting guideline has specific and
objective measures to evaluate the hazard;
(2) claim experience on a residential property policy
arising out of the owner's negligence;
(3) whether the structure to be insured is vacant or
unoccupied for more than 60 days;
(4) the making of a fraudulent insurance claim; or
(5) an act of arson.
(c) A person may use an underwriting guideline adopted by
the commissioner by rule. The commissioner may adopt an
underwriting guideline under this subsection only if the
commissioner determines after a hearing that the underwriting
guideline:
(1) is actuarially sound;
(2) promotes the mitigation of losses; and
(3) does not have an adverse impact based on the
insured's income level.
Sec. 4. PRIOR APPROVAL STANDARDS. (a) The commissioner may
not approve the use of an underwriting guideline unless the
underwriting guideline:
(1) is actuarially sound;
(2) promotes the mitigation of losses; and
(3) does not have an adverse impact based on the
insured's income level.
(b) The burden of proof in any proceeding regarding whether
an underwriting guideline is actuarially sound is on the party that
used or intends to use the underwriting guideline.
Sec. 5. CREDIT SCORING PROHIBITED. The commissioner may
not approve, and a person may not use, an underwriting guideline
based in whole or in part on credit scoring prohibited under Article
21.49-2U.
SECTION 5.02. This article applies only to an insurance
policy that is delivered, issued for delivery, or renewed on or
after January 1, 2006. A policy that is delivered, issued for
delivery, or renewed before January 1, 2006, is governed by the law
as it existed immediately before the effective date of this Act, and
that law is continued in effect for this purpose.
ARTICLE 6. CREDIT SCORING
SECTION 6.01. Article 21.49-2U, Insurance Code, is amended
by adding Section 3A to read as follows:
Sec. 3A. USE OF CREDIT INFORMATION IN WRITING CERTAIN
POLICIES PROHIBITED. (a) Notwithstanding any other provision of
this article, in writing a residential property insurance policy or
a residential fire and allied lines insurance policy, an insurer
may not:
(1) use an underwriting guideline that is based, in
whole or in part, on the credit information, credit report, or
credit score of an applicant for insurance coverage or any other
person other than the applicant who would be insured under a policy
of personal insurance;
(2) refuse to underwrite, cancel, or nonrenew the
policy based, in whole or in part, on the credit information, credit
report, or credit score of an applicant for insurance coverage or
any other person other than the applicant who would be insured under
the policy;
(3) take an action that results in an adverse effect
against a consumer because the consumer does not have a credit card
account;
(4) charge an applicant for the policy a higher
premium than otherwise would be charged based, in whole or in part,
on the credit information, credit report, or credit score of the
applicant or any other person other than the applicant who would be
insured under the policy;
(5) rate a risk based, in whole or in part, on the
credit information, credit report, or credit score of the applicant
or any other person other than the applicant who would be insured
under the policy, including:
(A) providing or removing a discount;
(B) assigning the applicant to a rating tier; or
(C) placing the applicant with an affiliated
company; or
(6) require a particular payment plan based, in whole
or in part, on the credit information, credit report, or credit
score of the applicant or any other person other than the applicant
who would be insured under the policy.
(b) An insurer may not consider an absence of credit
information or an inability to determine credit information for an
applicant for an insurance policy described by Subsection (a) or
insured as a factor in underwriting or rating the policy.
ARTICLE 7. WITHDRAWAL AND RESTRICTION PLANS
SECTION 7.01. Section 827.001, Insurance Code, is amended
by adding Subdivision (3) to read as follows:
(3) "Affiliate" has the meaning described by Section
823.003.
SECTION 7.02. Sections 827.006, 827.007, and 827.008,
Insurance Code, are amended to read as follows:
Sec. 827.006. [RESUMPTION OF] WRITING INSURANCE AFTER
[COMPLETE] WITHDRAWAL. An insurer that withdraws from writing all
lines of insurance or from writing residential property insurance
in this state and any affiliate of that insurer may not, without the
approval of the commissioner, write any line of [resume writing]
insurance in this state before the fifth anniversary of the date of
withdrawal.
Sec. 827.007. PENALTIES. The commissioner may impose the
civil penalties under Chapter 82 on an insurer that violates this
chapter [fails to obtain the commissioner's approval before the
insurer:
[(1) withdraws from writing a line of insurance in
this state; or
[(2) reduces the insurer's total annual premium volume
by 75 percent or more in any year].
Sec. 827.008. RESTRICTION PLAN. (a) Before an insurer [,
in response to a catastrophic natural event that occurred during
the preceding six months,] may restrict writing new business or new
residential property insurance business in this state or a rating
territory [in a line of personal automobile or residential property
insurance], the insurer must file a proposed restriction plan with
the commissioner for the commissioner's review and approval.
(b) The commissioner may not approve a restriction plan that
affects residential property insurance unless the commissioner
determines that the plan will not have an adverse impact on the
affordability and availability of that insurance in this state.
The commissioner may modify, restrict, or limit a restriction plan
under this section as necessary if the commissioner finds that a
line of insurance subject to the restriction plan is not offered in
this state in a quantity or manner to adequately cover the risks in
this state or to adequately protect the residents of this state and
policyholders in this state in light of the impact of the
catastrophic natural event. The commissioner may by order set the
date on which the insurer's restriction begins.
(c) A withdrawal plan must be filed and approved under
Sections 827.003 and 827.004 if an insurer's decision not to accept
new business in a line of personal automobile or residential
property insurance results in a reduction of the insurer's total
annual premium volume by 50 percent or more.
SECTION 7.03. Sections 827.010(a) and (d), Insurance Code,
are amended to read as follows:
(a) The commissioner may impose a moratorium of not longer
than two years on:
(1) the approval of withdrawal plans; or
(2) the approval [implementation] of plans to restrict
the writing of new business described by Section 827.008.
(d) To impose or renew a moratorium under this section, the
commissioner must determine, after notice and hearing, that [a
catastrophic event has occurred and that as a result of that event]
a particular line of insurance is not reasonably expected to be
available and affordable to a substantial number of policyholders
or potential policyholders in this state or, in the case of lines of
personal automobile or residential property insurance, in a rating
territory.
SECTION 7.04. The change in law made by this article applies
only to the conduct of an insurer or its affiliate on or after
September 1, 2005. The conduct of an insurer or its affiliate
before September 1, 2005, is governed by the law as it existed at
the time the conduct occurred and that law is continued in effect
for this purpose.
ARTICLE 8. DISPUTE RESOLUTION CONCERNING
CONSTRUCTION DEFECTS
SECTION 8.01. Title 4, Property Code, is amended by adding
Chapter 30 to read as follows:
CHAPTER 30. TEXAS HOMEBUYER PROTECTION ACT
Sec. 30.001. SHORT TITLE. This chapter may be cited as the
Texas Homebuyer Protection Act.
Sec. 30.002. DEFINITIONS. In this chapter:
(1) "Administrator" means the administrator of the
Texas Real Estate Commission.
(2) "Commission" means the Texas Real Estate
Commission.
(3) "Contractor" means a person who, for compensation,
engages in the construction, remodeling, repair, modification, or
improvement of a building or a portion of a building used primarily
for residential purposes.
(4) "Defect" means a condition that prevents a home
from conforming to a contractor's warranty, including the implied
warranty that the home will conform to each applicable building
code.
(5) "Home" means a single-family house, duplex,
triplex, or quadruplex or a unit in a multiunit structure used for
residential purposes that is used or intended to be used as a
dwelling by one of the owners.
(6) "Homebuyer" means a person who:
(A) purchased a home from a contractor and is
entitled to enforce the terms of a contractor's warranty with
respect to the home;
(B) is a lessor or lessee, other than a
sublessee, who purchased or leased the home from a contractor; or
(C) is a transferee or assignee of a person
described by Paragraph (A) or (B) if the transferee or assignee is a
resident of this state and entitled to enforce the terms of a
contractor's warranty.
(7) "Serious safety hazard" means a life-threatening
malfunction, installation defect, or nonconformity that
substantially impedes a person's ability to live in or use a home or
that creates a substantial risk of fire, explosion, or exposure to a
toxic substance.
(8) "Warranty" means an express or implied warranty.
Sec. 30.003. APPLICABILITY OF CERTAIN OTHER LAW OR CONTRACT
PROVISIONS. (a) This chapter supersedes any other law or contract
provision that conflicts with this chapter, including Title 16.
(b) The remedies provided by this chapter supersede
remedies available under Chapter 27 or Title 16.
(c) Except as provided by this section, this chapter does
not limit the rights or remedies otherwise available to a homebuyer
under any other law.
(d) A contract provision that excludes or modifies the
remedies provided by this chapter is prohibited and is void as
against public policy unless the exclusion or modification is
included in a settlement agreement between a homebuyer and a
contractor.
Sec. 30.004. COMPLAINT. A homebuyer may seek a remedy
provided by this chapter by:
(1) providing to the contractor written notice
identifying each defect in the home that is covered by the
contractor's warranty; and
(2) filing a complaint with the commission that
includes a copy of the notice provided under Subdivision (1) on or
before the 30th day after the date the notice is provided.
Sec. 30.005. HEARING. (a) The administrator may set a
hearing on any allegation in a complaint that is not privately
resolved between the homebuyer and the contractor.
(b) The contested case provisions of Chapter 2001,
Government Code, apply to a hearing conducted under this chapter.
Sec. 30.006. TIME FOR FILING COMPLAINT. (a) Except as
provided by Subsection (b), a homebuyer must file a complaint under
this chapter before the earlier of:
(1) the date the express warranty period expires; or
(2) the 10th anniversary of the closing date.
(b) A homebuyer may file a complaint to which Section 30.010
applies on or before the 10th anniversary of the closing date.
Sec. 30.007. AFFIRMATIVE DEFENSE. In a hearing before the
administrator under this chapter, a contractor may assert as an
affirmative defense to an allegation of a defect made in a complaint
filed under this chapter that the defect is the result of abuse,
neglect, or modifications or alterations of the home made by a
person other than the contractor.
Sec. 30.008. REPAIR REQUIRED. (a) Except as provided by
Section 30.010, if a defect exists, the contractor shall make the
repairs necessary to conform the home to the contractor's
warranties if:
(1) the homebuyer or the homebuyer's designated agent
reported the defect to the contractor or the contractor's agent
before the expiration of the applicable time limit under Section
30.006; or
(2) a breach of an implied warranty on the home is
established under Subsection (c).
(b) The contractor must make the repairs required under
Subsection (a) not later than the 120th day after the date the
notice of the defect required by Section 30.004 is received by the
commission.
(c) There is a presumption that a breach of an implied
warranty on a home exists if the home does not comply with:
(1) a building code applicable to the home;
(2) the latest edition, published before the
construction of the home, of:
(A) the International Building Code for One- and
Two-Family Dwellings;
(B) the National Electric Code; or
(C) the manufacturer's specific installation
instructions for the part or component used in construction of the
home; or
(3) structural engineering standards or practices
intended to prevent structural damage or a decrease in the market
value of the home resulting from the failure of the foundation or
other load-bearing portions of the home, including standards or
practices used to ensure that a foundation is structurally
sufficient without artificial moisture controls or other
extraordinary maintenance by the homeowner.
Sec. 30.009. RETURN OR REPLACEMENT REQUIRED. (a) Except as
provided by Section 30.010, if the contractor is unable to cure a
defect within the 120-day period prescribed by Section 30.008(b)
and the defect creates a serious safety hazard, substantially
impairs the use of the home, or decreases the home's market value by
more than five percent, the contractor shall at the homebuyer's
option:
(1) replace the home with a comparable home in the same
neighborhood; or
(2) accept return of the home from the homebuyer and
refund to the homebuyer the full purchase price and any closing
costs and reasonable moving costs.
(b) The administrator may not order a remedy under this
section unless the contractor has been provided at least 120
calendar days to cure the defect that is subject to the remedy
provided by this section. The 120-day period required by this
subsection is extended by the amount of time during which repair
services are not available to a homebuyer because of a war,
invasion, strike, or fire, flood, or other natural disaster.
Sec. 30.011. REIMBURSEMENT OF EXPENSES. (a) If a
contractor is ordered to replace a home or refund the purchase price
under Section 30.009 or the contractor shall reimburse the
homebuyer for:
(1) reasonable incidental costs resulting from the
loss of the use of the home because of the defect; and
(2) lost wages resulting from time required for
appointments with the contractor or the contractor's
representative that are necessary because of the defect.
(b) As necessary to promote the public interest, the
commission by rule:
(1) shall define the incidental costs that are
eligible for reimbursement under Subsection (a) and specify other
requirements necessary to determine an eligible cost; and
(2) may set a maximum amount that is eligible for
reimbursement, either by type of eligible cost or by a total for all
costs.
(c) Refunds shall be made to the homebuyer and primary
lienholder, as applicable.
Sec. 30.012. OTHER REMEDIES NOT PRECLUDED. This chapter
does not prevent a homebuyer from obtaining a remedy available to
the homebuyer under a new home warranty that provides remedies in
addition to those provided by this chapter.
Sec. 30.013. RIGHT TO FILE ACTION. (a) Except as provided
by this section, a homebuyer may not seek the remedies provided by
this chapter in a civil action unless the homebuyer files a
complaint against the contractor under this chapter and exhausts
the administrative proceedings provided by this chapter. A court
shall dismiss an action filed in violation of this section.
(b) If the hearing examiner does not issue a proposal for
decision and make a recommendation to the administrator for a final
order on or before the 150th day after the date a complaint is filed
under this chapter, the administrator shall provide written notice,
by certified mail, to the complainant and the contractor.
(c) The notice must inform the recipient of:
(1) the date the period for issuing a final order under
this chapter expires; and
(2) the complainant's right to file an action under
this section.
(d) After receiving a notice of the right to file an action
under Subsection (b), a complainant may file an action against a
contractor named in the complaint. The administrator's failure to
issue a notice of the right to file an action does not affect a
complainant's right to bring an action under this section.
Sec. 30.014. JUDICIAL REVIEW. A final order of the
administrator under this chapter:
(1) is the final action of the commission under this
chapter; and
(2) is subject to review only by judicial review as
provided by Chapter 2001, Government Code, to the extent that
chapter is not inconsistent with this chapter.
Sec. 30.015. INITIATION OR REMOVAL OF ACTION. (a) Except
as otherwise provided by this chapter, an appeal initiated under
this chapter may be removed to the Third Court of Appeals District
if any party to the action files a notice of removal with the
district court before the trial in the district court begins.
(b) An appeal initiated in or removed to the Third Court of
Appeals District:
(1) must be initiated under Chapter 2001, Government
Code, as if initiated in a Travis County district court; and
(2) is governed from the time of filing by the Texas
Rules of Appellate Procedure.
(c) If evidence outside the commission's record is to be
admitted in an appeal under Chapter 2001, Government Code, or
otherwise, the action:
(1) must be initiated in a Travis County district
court; or
(2) if initiated in the Third Court of Appeals
District, is subject to remand to a Travis County district court for
proceedings in accordance with instructions from the court of
appeals.
(d) Citation must be served on the administrator and each
party of record before the commission. For an appeal initiated in
the Third Court of Appeals District, the court shall cause citation
to be issued.
Sec. 30.016. DILIGENCE REQUIRED. (a) An appellant must
pursue an appeal with reasonable diligence. If an appellant fails
to prosecute an appeal in the six-month period after the appeal is
filed, the court shall presume that the appeal has been abandoned
and dismiss the appeal if a motion for dismissal is submitted by the
attorney general or another party.
(b) An appeal may not be dismissed under this section if the
appellant, after receiving notice and an opportunity to be heard,
demonstrates good cause for a delay.
Sec. 30.017. DISCLOSURE REQUIRED. (a) A contractor that is
ordered to refund the purchase price of or replace a home under this
chapter shall provide to the first retail purchaser of the home
after the home was repurchased or replaced by the contractor a
disclosure statement stating that the home was repurchased or
replaced by the contractor under this chapter.
(b) The disclosure statement must include the toll-free
telephone number established by the commission under Section
30.019.
(c) Before a home repurchased or replaced under this chapter
may be sold again, the deed that transfers title to the home must be
marked with a clear statement that indicates that the home was
repurchased or replaced under this chapter.
Sec. 30.018. RESTORATION OF WARRANTY REQUIRED. A
contractor who sells a home after repurchasing or replacing the
home under this chapter must:
(1) restore the home in a manner that conforms with
applicable building codes; and
(2) issue an express warranty for the home.
Sec. 30.019. TOLL-FREE TELEPHONE NUMBER. The commission
shall establish a toll-free telephone number for providing
information to persons who request information about a defect that
was the basis for ordering a remedy under this chapter. The
commission shall maintain an effective method of providing
information to persons who make requests.
Sec. 30.020. ANNUAL REPORT. (a) The commission shall
publish and make available to the public an annual report relating
to homes ordered repurchased or replaced by a contractor under this
chapter.
(b) The report must:
(1) list the number of homes by subdivision name, if
any;
(2) identify the contractor; and
(3) include a brief description of each defect that
was the subject of a remedy provided by this chapter.
(c) The commission may charge a reasonable fee to recover
the cost of the report.
Sec. 30.021. ADMINISTRATIVE PENALTY. (a) The commission
may impose an administrative penalty on a person who violates this
chapter or a rule or order adopted under this chapter.
(b) The imposition of a penalty is governed by Subchapter O,
Chapter 1101, Occupations Code.
Sec. 30.022. RULES. The commission, in consultation with
the Texas Real Estate Inspector Committee, shall adopt rules
necessary for the enforcement and administration of this chapter.
SECTION 8.02. Section 27.001, Property Code, is amended by
amending Subdivisions (4) and (8) to read as follows:
(4) "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.
(8) "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.
SECTION 8.03. Section 27.003(a), Property Code, is amended
to read as follows:
(a) In an action to recover damages or other relief arising
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 required by Section 27.004 [or fails to request
state-sponsored inspection and dispute resolution under Chapter
428, if applicable,] 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.
SECTION 8.04. Section 27.004, Property Code, is amended by
amending Subsections (a), (b), (c), and (d) to read as follows:
(a) Before [In a claim not subject to Subtitle D, Title 16,
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, 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 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 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.
(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 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 notice is not required. However, the action or counterclaim
shall specify in reasonable detail each construction defect that is
the subject of the complaint. The [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, the] inspection provided
for by Subsection (a) may be made not later than the 75th day after
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 the date of service [, if Subtitle D, Title 16,
does not apply]. If, while an action 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 shall be abated to allow
compliance with Subsections (a) and (b).
(d) The court or arbitration tribunal shall dismiss an
action 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 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 is automatically dismissed without the order of the court or
tribunal beginning on the 11th day after the date a motion to
dismiss is filed if the motion:
(1) is verified and alleges that the person against
whom the action is pending did not receive the written notice
required by Subsection (a), the person against whom the action is
pending 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 is filed.
SECTION 8.05. Section 27.0042(b), Property Code, is amended
to read as follows:
(b) A contractor may not elect to purchase the residence
under Subsection (a) if [:
[(1)] the residence is more than five years old at the
time an action is initiated [; or
[(2) the contractor makes such an election later than
the 15th day after the date of a final, unappealable determination
of a dispute under Subtitle D, Title 16, if applicable].
SECTION 8.06. Section 408.001, Property Code, is amended to
read as follows:
Sec. 408.001. RULES. 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;
(2) [(3)] approving third-party warranty companies;
and
(3) [(4)] approving third-party inspectors.
SECTION 8.07. Section 409.001(a), Property Code, is amended
to read as follows:
(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.
SECTION 8.08. Section 418.001, Property Code, is amended to
read as follows:
Sec. 418.001. GROUNDS FOR DISCIPLINARY ACTION. A person is
subject to disciplinary action under this chapter for:
(1) fraud or deceit in obtaining a registration or
certification under this subtitle;
(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 419; and
(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)].
SECTION 8.09. The following laws are repealed:
(1) Sections 27.001(3) and (9), Property Code;
(2) Section 27.004(l), Property Code; and
(3) Subtitles D and E, Title 16, Property Code.
SECTION 8.10. (a) Chapter 30, Property Code, as added by
this Act, applies only to the sale of a new home for which the
closing date is on or after the effective date of this Act. A sale
of a new home for which the closing date was before the effective
date of this Act is governed by the law in effect at the time of the
sale, and that law is continued in effect for that purpose.
(b) Except as provided by this subsection, the change in law
made by this article applies to an action, including an
arbitration, commenced on or after the effective date of this Act.
An action commenced before the effective date of this Act or with
respect to which a request was filed under Section 428.001,
Property Code, repealed by this Act, before the effective date of
this Act is governed by the law in effect immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
(c) The change in law made by this article to Section
27.003(a)(2), Property Code, applies only to a repair made on or
after the effective date of this Act. A repair made before the
effective date of this Act is subject to the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
(d) The repeal by this article of Section 428.005, Property
Code, does not apply to the receipt by a builder of a notice
described by that section before the effective date of this Act.
The receipt by a builder of a notice described by that section
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.
(e) The repeal by this article of Chapter 430, Property
Code, applies only to residential construction under a contract
that is entered into on or after the effective date of this Act.
Residential construction under a contract entered into before the
effective date of this Act is subject to the warranties and building
and performance standards applicable to the construction
immediately before the effective date of this Act.
(f) The repeal by this article of Section 436.003, Property
Code, and Chapters 437 and 438, Property Code, by this Act, apply
only to an arbitration initiated on or after the effective date of
this Act. An arbitration initiated before the effective date of
this Act is governed by the law applicable to the arbitration
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
ARTICLE 9. EFFECTIVE DATE
SECTION 9.01. Except as provided by Section 1.02 of this
Act, this Act takes effect September 1, 2005.