|
|
|
A BILL TO BE ENTITLED
|
|
AN ACT
|
|
relating to the regulation of and claims against residential home |
|
builders. |
|
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
|
ARTICLE 1. CHANGES TO TEXAS RESIDENTIAL |
|
CONSTRUCTION COMMISSION ACT |
|
SECTION 1.01. Section 401.003(a), Property Code, is amended |
|
to read as follows: |
|
(a) In this title, "builder" means any person who, for a |
|
fixed price, commission, fee, wage, or other compensation, sells, |
|
constructs, or supervises or manages the construction of, or |
|
contracts for the construction of or the supervision or management |
|
of the construction of: |
|
(1) a new home; |
|
(2) a material improvement to a home, other than an |
|
improvement solely to replace or repair a 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]. |
|
SECTION 1.02. Chapter 401, Property Code, is amended by |
|
adding Section 401.008 to read as follows: |
|
Sec. 401.008. HOMEOWNER FEES NOT REQUIRED. A homeowner may |
|
not be charged a fee in connection with: |
|
(1) filing a complaint with the commission; |
|
(2) a state-sponsored inspection or dispute |
|
resolution process; |
|
(3) an arbitration required by this title; or |
|
(4) a complaint, request, or other proceeding under |
|
Chapter 409 or Subtitle D or E. |
|
SECTION 1.03. Section 406.001(a), Property Code, is amended |
|
to read as follows: |
|
(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 who have consistently shown an interest in consumer |
|
protection; |
|
(3) one member must be a licensed professional |
|
engineer who practices in the area of residential construction; and |
|
(4) one member must be either a licensed architect who |
|
practices in the area of residential construction or a building |
|
inspector who meets the requirements set forth in Chapter 427 and |
|
practices in the area of residential construction. |
|
SECTION 1.04. Section 416.004, Property Code, is amended by |
|
amending Subsections (a) and (b), and adding Subsection (a-1) to |
|
read as follows: |
|
(a) The commission shall charge and collect: |
|
(1) a filing fee for an application for an original |
|
certificate of registration of at least [that does not exceed] |
|
$500; |
|
(2) a fee for renewal of a certificate of registration |
|
of at least [that does not exceed] $300; and |
|
(3) a late fee that does not exceed the amount of the |
|
fee due if payment of a registration application or renewal fee due |
|
under this title is late. |
|
(a-1) A fee charged under Subsection (a) applies to each |
|
builder, including a corporation, limited liability company, |
|
partnership, limited partnership, limited liability partnership, |
|
sole proprietor, and any subsidiary of those persons. |
|
(b) The commission shall establish a fee schedule that takes |
|
into consideration the unit volume or dollar volume of potential |
|
applicants. The commission may raise registration and renewal fees |
|
as necessary to provide public service in connection with |
|
investigations of construction defect complaints filed by |
|
homeowners under this title. |
|
SECTION 1.05. Section 416.005, Property Code, is amended to |
|
read as follows: |
|
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 |
|
(C) provides proof of financial responsibility |
|
as required by Section 416.013; 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. |
|
SECTION 1.06. Section 416.010(c), Property Code, is amended |
|
to read as follows: |
|
(c) If a builder operates under any name other than the name |
|
that is set forth on the builder's certificate of registration, the |
|
builder shall, within 20 [45] days of operating under this other |
|
name, disclose this other name to the commission. |
|
SECTION 1.07. Sections 416.011(a) and (b), Property Code, |
|
are amended to read as follows: |
|
(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 mandatory |
|
[voluntary] and is [not] a requirement for holding and renewing |
|
[the issuance of] a certificate of registration required under this |
|
chapter. |
|
(b) A builder shall [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. |
|
SECTION 1.08. Chapter 416, Property Code, is amended by |
|
adding Sections 416.013 and 416.014 to read as follows: |
|
Sec. 416.013. INSURANCE REQUIREMENTS. (a) To be eligible |
|
for an original or renewal certificate of registration under this |
|
chapter, a builder must provide proof of financial responsibility |
|
to the commission by maintaining a general liability insurance |
|
policy with a limit of at least $500,000. |
|
(b) The commission may increase the insurance requirements |
|
based on the builder's unit or dollar volume. |
|
Sec. 416.014. BOND REQUIREMENT. A builder shall maintain a |
|
surety bond for each construction project described by Section |
|
401.003. The bond must: |
|
(1) guarantee the builder's performance under the |
|
builder's contract with the owner; and |
|
(2) be issued in an amount not less than the fair |
|
market value of the completed project if the project had no defects. |
|
SECTION 1.09. Section 418.001, Property Code, is amended to |
|
read as follows: |
|
Sec. 418.001. GROUNDS FOR DISCIPLINARY ACTION. A person, |
|
including a builder or a person who is designated as a builder's |
|
agent under Section 416.006, or a person who owns or controls a |
|
majority ownership interest in the builder is subject to |
|
disciplinary action under this chapter for: |
|
(1) fraud or deceit in obtaining a registration or |
|
certification under this subtitle; |
|
(2) misappropriation or misapplication of trust funds |
|
in the practice of residential construction, including a violation |
|
of Chapter 32, Penal Code, or Chapter 162, if found by a final |
|
nonappealable court judgment; |
|
(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, or any other instrument of payment, |
|
including a credit or debit card or electronic funds transfer, |
|
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 or a fee due under Chapter 426; |
|
(8) failure to pay a final nonappealable court |
|
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; |
|
(11) failure to reimburse a homeowner the amount |
|
ordered by the commission as provided by Section 428.004(d); |
|
(12) engaging in statutory or common-law fraud or |
|
misappropriation of funds, as determined by the commission after a |
|
hearing under Section 418.003; |
|
(13) a repeated failure to participate in the |
|
state-sponsored inspection and dispute resolution process if |
|
required by this title; |
|
(14) failure to register as a builder as required |
|
under Chapter 416; |
|
(15) using or attempting to use a certificate of |
|
registration that has expired or that has been revoked; |
|
(16) falsely representing that the person holds a |
|
certificate of registration issued under Chapter 416; |
|
(17) acting as a builder using a name other than the |
|
name or names disclosed to the commission; |
|
(18) aiding, abetting, or conspiring with a person who |
|
does not hold a certificate of registration to evade the provisions |
|
of this title or rules adopted under this title, if found by a final |
|
nonappealable court judgment; |
|
(19) allowing the person's certificate of registration |
|
to be used by another person; |
|
(20) acting as an agent, partner, or associate of a |
|
person who does not hold a certificate of registration with the |
|
intent to evade the provisions of this title or rules adopted under |
|
this title; |
|
(21) a failure to reasonably perform on an accepted |
|
offer to repair or a repeated failure to make an offer to repair |
|
based on: |
|
(A) the recommendation of a third-party |
|
inspector under Section 428.004; or |
|
(B) the final holding of an appeal under Chapter |
|
429; |
|
(22) a repeated failure to respond to a commission |
|
request for information; |
|
(23) a failure to obtain a building permit required by |
|
a political subdivision before constructing a new home or an |
|
improvement to an existing home; |
|
(24) abandoning, without justification, any home |
|
improvement contract or new home construction project engaged in or |
|
undertaken by the person, if found to have done so by a final, |
|
nonappealable court judgment; |
|
(25) a repeated failure to comply with the |
|
requirements of Subtitle F; [or] |
|
(26) failure by the builder to complete a home under |
|
the contract terms with a homeowner; |
|
(27) failure by the builder to correct a failure to |
|
comply with building codes or standards; |
|
(28) failure by the builder to comply with |
|
architectural drawings specified in a contract to build or purchase |
|
a home; |
|
(29) failure by the builder to comply with an |
|
engineering design of a home, including the home's foundation; |
|
(30) failure by the builder to satisfy a court |
|
judgment or a judgment in a binding arbitration; or |
|
(31) otherwise violating this title or a commission |
|
rule adopted under this title. |
|
SECTION 1.10. Section 426.001(b), Property Code, is amended |
|
to read as follows: |
|
(b) This subtitle does not apply to a dispute arising out |
|
of: |
|
(1) an alleged violation of Section 27.01, Business & |
|
Commerce Code; or |
|
(2) [a builder's wrongful abandonment of an
|
|
improvement project before completion; or
|
|
[(3)] a violation of Chapter 162. |
|
SECTION 1.11. Sections 428.001(a), (b), and (d), Property |
|
Code, are amended to read as follows: |
|
(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; and |
|
(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 homeowner [requestor], inspected the home in connection with |
|
an alleged construction defect. |
|
(d) At the time a person submits a request under this |
|
section, the person 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. |
|
SECTION 1.12. Section 428.002(a), Property Code, is amended |
|
to read as follows: |
|
(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. |
|
SECTION 1.13. Sections 428.004(b) and (d), Property Code, |
|
are amended to read as follows: |
|
(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 15th [30th] day after the date the request |
|
is submitted and issue a recommendation not later than the 30th |
|
[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]. |
|
(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.] |
|
SECTION 1.14. Section 429.001(c), Property Code, is amended |
|
to read as follows: |
|
(c) The panel shall: |
|
(1) review the recommendation for compliance with this |
|
title as 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 15th [30th] day after the date the notice |
|
of appeal is filed with the commission. |
|
SECTION 1.15. Section 430.001(b), Property Code, is amended |
|
to read as follows: |
|
(b) The warranty periods shall be: |
|
(1) two years [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. |
|
SECTION 1.16. Chapter 430, Property Code, is amended by |
|
adding Section 430.0075 to read as follows: |
|
Sec. 430.0075. FULL DISCLOSURE WITH INFORMED CONSENT. (a) |
|
Before a contract may be executed between a builder and seller and a |
|
buyer for construction of a new home and before money may be |
|
exchanged between the parties to the contract, the builder and |
|
seller must provide to the buyer a full disclosure and informed |
|
consent document that meets the following requirements: |
|
(1) the buyer must receive from the builder and seller |
|
full disclosure of product installation, care and component |
|
warranties, building standards, risks, and hazards of the |
|
particular property and home to be purchased; |
|
(2) the buyer must receive from the builder and seller |
|
full disclosure in understandable terms of any mandatory |
|
alternative dispute resolution provisions, including mandatory |
|
binding arbitration, and the associated costs of the various |
|
processes; and |
|
(3) the buyer must consent in writing to accept the |
|
terms of the builder's and seller's disclosures and provisions for |
|
new home construction by signing and dating the consent document. |
|
(b) The builder and seller shall fully disclose in writing: |
|
(1) the products that are installed in the home; |
|
(2) care and component warranties; |
|
(3) building standards; and |
|
(4) risks and hazards of the home. |
|
SECTION 1.17. Section 430.008(a), Property Code, is amended |
|
to read as follows: |
|
(a) The commission may approve as a third-party warranty |
|
company for the purposes of Section 430.009: |
|
(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 |
|
(2) [(3)] an insurance company that insures the |
|
warranty obligations of a builder under the statutory warranty and |
|
building and performance standards. |
|
SECTION 1.18. Section 430.010, Property Code, is amended to |
|
read as follows: |
|
Sec. 430.010. 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. A third-party warranty company may not reduce the |
|
limited statutory warranty and building and performance |
|
standards[, except that a third-party warranty company shall not be
|
|
required to provide a warranty of habitability]. |
|
SECTION 1.19. Section 430.011(c), Property Code, is amended |
|
to read as follows: |
|
(c) Breach of a limited statutory warranty adopted by the |
|
commission or breach of the statutory warranty of habitability is |
|
[shall not, by itself, constitute] a violation of the Deceptive |
|
Trade Practices-Consumer Protection Act (Subchapter E, Chapter 17, |
|
Business & Commerce Code). |
|
SECTION 1.20. Sections 416.011(c), 426.004, 426.007, |
|
426.008(b), 428.004(e), and 430.009(e), Property Code, are |
|
repealed. |
|
SECTION 1.21. (a) On the effective date of this Act, the |
|
terms of the three public members of the Texas Residential |
|
Construction Commission serving on that date expire. |
|
(b) Not later than the 30th day after the effective date of |
|
this Act, the governor shall appoint three members to the Texas |
|
Residential Construction Commission to comply with Section |
|
406.001(a), Property Code, as amended by this article, as follows: |
|
(1) one member for a term expiring February 1, 2011; |
|
(2) one member for a term expiring February 1, 2013; |
|
and |
|
(3) one member for a term expiring February 1, 2015. |
|
SECTION 1.22. Not later than March 1, 2010, the Texas |
|
Residential Construction Commission shall adopt any rules |
|
necessary to implement the changes in law made by this article, |
|
including Section 416.011, Property Code. |
|
ARTICLE 2. CHANGES TO RESIDENTIAL CONSTRUCTION LIABILITY CHAPTER |
|
SECTION 2.01. Section 27.002(d), Property Code, is amended |
|
to read as follows: |
|
(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; or |
|
(2) [a contractor's wrongful abandonment of an
|
|
improvement project before completion; or
|
|
[(3)] a violation of Chapter 162. |
|
SECTION 2.02. Sections 27.004(a), (b), (g), and (l), |
|
Property Code, are amended to read as follows: |
|
(a) 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 20-day [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 20th [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. |
|
(g) In [Except as provided by Subsection (e), in] an action |
|
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; |
|
(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) the reduction in current market value, if any, |
|
after the construction defect is repaired if the construction |
|
defect is a structural failure; and |
|
(6) reasonable and necessary attorney's fees. |
|
(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. |
|
SECTION 2.03. Section 27.0042(c), Property Code, is amended |
|
to read as follows: |
|
(c) If a contractor elects to purchase the residence under |
|
Subsection (a): |
|
(1) the contractor shall pay the current market value |
|
[original purchase price] of the residence determined as if the |
|
residence did not have the construction defects, 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. |
|
SECTION 2.04. Sections 27.004(e) and (f), Property Code, |
|
are repealed. |
|
SECTION 2.05. The changes in law made by this article 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. |
|
ARTICLE 3. EFFECTIVE DATE |
|
SECTION 3.01. This Act takes effect September 1, 2009. |