81R2723 UM-D

By: Smith of Tarrant H.B. No. 1635

A BILL TO BE ENTITLED

AN ACT

relating to the abolition of the Texas Residential Construction Commission.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. (a) The Texas Residential Construction Commission is abolished effective February 1, 2010.

(b) The following statutes are repealed:

(1) Section 214.906, Local Government Code;

(2) Title 16, Property Code;

(3) Section 5.016, Property Code, as added by Section 1, Chapter 843 (H.B. 1038), Acts of the 80th Legislature, Regular Session, 2007; and

(4) Sections 27.001(3) and (9), 27.004(l), and 27.007(c), Property Code.

SECTION 2. (a) The Texas Facilities Commission shall take custody of the property, records, or other assets of the Texas Residential Construction Commission unless the governor designates another appropriate governmental entity to take custody of the property, records, or other assets.

(b) If the Texas Residential Construction Commission has a continuing valid and enforceable obligation, including bonded indebtedness, Section 325.017(f), Government Code, applies in relation to the continuing obligation of the commission.

SECTION 3. Sections 59.011(a) and (c), Finance Code, are amended to read as follows:

(a) For purposes of Chapter 27, Property Code, [and Title 16, Property Code,] a federally insured financial institution regulated under this code is not a builder.

(c) A builder hired by a lender to complete the construction of a foreclosed home is not liable for any construction defects of which the builder had no knowledge that existed prior to the acquisition of the home by the lender, but the builder is subject to Chapter 27, Property Code, [and Title 16, Property Code,] for work performed for the lender subsequent to the acquisition of the home by the lender.

SECTION 4. Sections 27.001(4), (5), and (8), Property Code, are amended 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.

(5) "Contractor":

(A) means:

(i) a person [builder, as defined by Section 401.003,] contracting with an owner for the construction or repair of a new residence, for the repair or alteration of or an addition to an existing residence, or for the construction, sale, alteration, addition, or repair of an appurtenance to a new or existing residence;

(ii) any person contracting with a purchaser for the sale of a new residence constructed by or on behalf of that person; or

(iii) a person contracting with an owner or the developer of a condominium for the construction of a new residence, for an alteration of or an addition to an existing residence, for repair of a new or existing residence, or for the construction, sale, alteration, addition, or repair of an appurtenance to a new or existing residence; and

(B) includes:

(i) an owner, officer, director, shareholder, partner, or employee of the contractor; and

(ii) a risk retention group registered under Chapter 2201 [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.

(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 5. Section 27.002(b), Property Code, is amended to read as follows:

(b) To [Except as provided by this subsection, 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. [To the extent of conflict between this chapter and Title 16, Title 16 prevails.]

SECTION 6. 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 7. Sections 27.004(a), (b), (c), and (d), Property Code, are amended 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 abate 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 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 is automatically abated without the order of the court or tribunal beginning on the 11th day after the date a motion to abate 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 abate is filed.

SECTION 8. 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 9. Section 41.007(a), Property Code, is amended to read as follows:

(a) A contract for improvements to an existing residence described by Section 41.001(b)(3) must contain[:

[(1) the contractor's certificate of registration number from the Texas Residential Construction Commission if the contractor is required to register as a builder with the commission;

[(2) the address and telephone number at which the owner may file a complaint with the Texas Residential Construction Commission about the conduct of the contractor if the contractor is required to register as a builder with the commission; and

[(3)] the following warning conspicuously printed, stamped, or typed in a size equal to at least 10-point bold type or computer equivalent:

"IMPORTANT NOTICE: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW."

SECTION 10. (a) The repeal by this Act of Section 5.016, Property Code, as added by Section 1, Chapter 843 (H.B. 1038), Acts of the 80th Legislature, Regular Session, 2007, applies only to a transfer of residential property that occurs on or after the effective date of this Act. A transfer of residential property that occurs 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.

(b) The repeal by this Act of Sections 420.002 and 420.003, Property Code, applies only to a contract for the construction of a new home or the improvement of an existing home that is entered into on or after the effective date of this Act. A contract for the construction of a new home or the improvement of an existing home that is entered into before the effective date of this Act is 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.

(c) Except as provided by this section, the change in law made by this Act to Chapter 27, Property Code, and the repeal by this Act of Sections 426.005, 426.007, and 426.008, Property Code, apply only to an action 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.

(d) The change in law made by this Act 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.

(e) The repeal by this Act 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.

(f) Except as provided by this section, the repeal by this Act of Chapter 430, Property Code, applies only to residential construction under a contract entered into on or after the effective date of this Act, and the repeal by this Act of Section 401.005(c), Property Code, applies only to a home or material improvement to a home described by Section 401.005(c), Property Code, repealed by this Act, the building or remodeling of which commences after the effective date of this Act. Residential construction under a contract entered into before the effective date of this Act or a home or material improvement to a home described by Section 401.005(c), Property Code, the building or remodeling of which commenced 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.

(g) The repeal by this Act of Section 436.003, Property Code, applies 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.

(h) The repeal by this Act of Chapter 437, Property Code, applies only to an arbitration award filed on or after the effective date of this Act. An award filed 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.

(i) The repeal by this Act of Chapter 438, Property Code, applies only to an arbitration award issued on or after the effective date of this Act. An award issued 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.

SECTION 11. This Act takes effect September 1, 2009.