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A BILL TO BE ENTITLED
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AN ACT
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relating to residential construction liability. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 27.001, Property Code, is amended to |
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read as follows: |
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Sec. 27.001. DEFINITIONS. In this chapter: |
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(1) "Action" means a court or judicial proceeding or |
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an arbitration. |
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(2) "Appurtenance" means any garage, outbuilding, |
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retaining wall, landscaping improvement, or other improvement, |
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structure, or recreational facility that is constructed by a |
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contractor in connection with the construction of a new residence, |
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regardless of whether or not it is attached to or [appurtenant to a |
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residence but is not] a part of the dwelling unit. |
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(3) ["Commission" means the Texas Residential |
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Construction Commission. |
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[(4)] "Construction defect" [has the meaning assigned |
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by Section 401.004 for an action to which Subtitle D, Title 16, |
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applies and for any other action] means a matter concerning the |
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design, construction, or repair of a new residence, of an |
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alteration of or repair or addition to an existing residence, or of |
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an appurtenance to a residence, on which a person has a complaint |
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against a contractor. The term may include any physical damage to |
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the residence, any appurtenance, or the real property on which the |
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residence and appurtenance are affixed proximately caused by a |
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construction defect. |
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(4) [(5)] "Contractor": |
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(A) means: |
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(i) a builder [, as defined by Section |
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401.003,] contracting with an owner for the construction or repair |
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of a new residence, for the repair or alteration of or an addition |
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to an existing residence, or for the construction, sale, |
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alteration, addition, or repair of an appurtenance to a new or |
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existing residence; |
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(ii) any person contracting [with a |
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purchaser] for the sale or construction of a new residence |
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constructed by or on behalf of that person; or |
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(iii) a person contracting with an owner or |
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the developer of a condominium or other housing project for the |
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construction of one or more [a] new residences [residence], for an |
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alteration of or an addition to an existing residence, for repair of |
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a new or existing residence, or for the construction, sale, |
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alteration, addition, or repair of an appurtenance to a new or |
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existing residence; and |
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(B) includes: |
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(i) an owner, officer, director, |
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shareholder, partner, or employee of the contractor; and |
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(ii) a risk retention group registered |
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under Chapter 2201 [Article 21.54], Insurance Code, that insures |
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all or any part of a contractor's liability for the cost to repair a |
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residential construction defect. |
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(5) [(6)] "Economic damages" means compensatory |
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damages for pecuniary loss proximately caused by a construction |
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defect. The term does not include exemplary damages, speculative |
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damages, or damages for bodily or personal injury, physical pain |
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and mental anguish, loss of consortium, disfigurement, physical |
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impairment, or loss of companionship and society. |
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(6) [(7)] "Residence" means the real property and |
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improvements for a single-family house, duplex, triplex, or |
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quadruplex or a unit and the common elements in a multiunit |
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residential structure in which [title to] the individual units are |
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sold or leased [is transferred] to the owners or occupants under a |
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condominium or cooperative system. |
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(7) [(8)] "Structural failure" [has the meaning |
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assigned by Section 401.002 for an action to which Subtitle D, Title |
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16, applies and for any other action] means actual physical damage |
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to the load-bearing portion of a residence, such as a foundation or |
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framing system [caused by a failure of the load-bearing portion]. |
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(8) [(9) "Third-party inspector" has the meaning |
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assigned by Section 401.002. |
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[(10)] "Developer of a condominium" means a declarant, |
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as defined by Section 82.003, of a condominium consisting of one or |
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more residences. |
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SECTION 2. Section 27.002(b), Property Code, is amended to |
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read as follows: |
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(b) To [Except as provided by this subsection, to] the |
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extent of conflict between this chapter and any other law, |
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including the Deceptive Trade Practices-Consumer Protection Act |
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(Subchapter E, Chapter 17, Business & Commerce Code) or a common law |
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cause of action, this chapter prevails. [To the extent of conflict |
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between this chapter and Title 16, Title 16 prevails.] |
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SECTION 3. Section 27.003(a), Property Code, is amended to |
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read as follows: |
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(a) In an action to recover damages or other relief arising |
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from a construction defect: |
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(1) a contractor is not liable for any percentage of |
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damages caused by: |
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(A) negligence of a person other than the |
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contractor or an agent, employee, or subcontractor of the |
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contractor; |
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(B) failure of a person other than the contractor |
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or an agent, employee, or subcontractor of the contractor to: |
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(i) take reasonable action to mitigate the |
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damages; or |
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(ii) take reasonable action to maintain the |
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residence; |
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(C) normal wear, tear, or deterioration; |
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(D) normal shrinkage or cracking due to drying or |
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settlement of construction components within the tolerance of |
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building standards; [or] |
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(E) the contractor's reliance on written |
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information relating to the residence, appurtenance, or real |
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property on which the residence and appurtenance are affixed that |
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was obtained from official government records, if the written |
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information was false, outdated, or inaccurate and the contractor |
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did not know and could not reasonably have known of the falsity, |
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modification, or inaccuracy of the information; or |
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(F) any condition, including noncompliance with |
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an applicable code, standard, warranty, manufacturer's |
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recommendation, or contractual plan or specification, that does not |
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result in either: |
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(i) actual physical damage to the |
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residence; or |
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(ii) the failure of a building component to |
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perform its intended function or purpose at the time the notice |
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required by Section 27.004 is sent; and |
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(2) if an assignee of the claimant or a person |
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subrogated to the rights of a claimant fails to provide the |
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contractor with the written notice and opportunity to inspect and |
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offer to repair required by Section 27.004 [or fails to request |
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state-sponsored inspection and dispute resolution under Chapter |
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428, if applicable,] before performing repairs, the contractor is |
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not liable for the cost of any repairs or any percentage of damages |
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caused by repairs made to a construction defect at the request of an |
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assignee of the claimant or a person subrogated to the rights of a |
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claimant by a person other than the contractor or an agent, |
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employee, or subcontractor of the contractor. |
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SECTION 4. Sections 27.004(a), (b), (c), (d), (e), (g), and |
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(m), Property Code, are amended to read as follows: |
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(a) Before [In a claim not subject to Subtitle D, Title 16, |
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before] the 60th day preceding the date a claimant seeking from a |
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contractor damages or other relief arising from a construction |
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defect initiates an action, the claimant shall give written notice |
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by certified mail, return receipt requested, to the contractor, at |
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the contractor's last known address, specifying in reasonable |
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detail the construction defects that are the subject of the |
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complaint. The [On the request of the contractor, the] claimant |
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shall provide to the contractor any evidence that depicts the |
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nature and cause of the defect and the nature and extent of repairs |
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necessary to remedy the defect, including any expert reports, |
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photographs, and videotapes [, if that evidence would be |
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discoverable under Rule 192, Texas Rules of Civil Procedure]. |
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During the 35-day period after the date the contractor receives the |
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notice, and on the contractor's written request, the contractor |
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shall be given a reasonable opportunity to inspect and have |
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inspected the property that is the subject of the complaint to |
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determine the nature and cause of the defect and the nature and |
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extent of repairs necessary to remedy the defect. To the extent |
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requested, the contractor shall be given the opportunity to conduct |
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multiple inspections during the 35-day period after the date the |
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contractor receives the notice and during any extension of that |
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inspection period provided by law or agreed to by the parties. The |
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contractor may take reasonable steps to document the defect. [In a |
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claim subject to Subtitle D, Title 16, a contractor is entitled to |
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make an offer of repair in accordance with Subsection (b). A |
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claimant is not required to give written notice to a contractor |
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under this subsection in a claim subject to Subtitle D, Title 16.] |
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(b) Not later than the [15th day after the date of a final, |
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unappealable determination of a dispute under Subtitle D, Title 16, |
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if applicable, or not later than the] 45th day after the date the |
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contractor receives the notice under this section, [if Subtitle D, |
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Title 16, does not apply,] the contractor may make a written offer |
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of settlement to the claimant. The offer must be sent to the |
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claimant at the claimant's last known address or to the claimant's |
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attorney by certified mail, return receipt requested. The offer |
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may include either an agreement by the contractor to repair or to |
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have repaired by an independent contractor partially or totally at |
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the contractor's expense or at a reduced rate to the claimant any |
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construction defect described in the notice and shall describe in |
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reasonable detail the kind of repairs which will be made and the |
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estimated time for completion of the repairs. The repairs shall be |
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made within a reasonable time [not later than the 45th day after the |
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date the contractor receives written notice of acceptance of the |
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settlement offer], unless completion is delayed by the claimant or |
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by other events beyond the control of the contractor. If the offer |
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of repair is accepted, the estimated time stated in the offer shall |
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be considered reasonable. If a contractor makes a written offer of |
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settlement that the claimant considers to be unreasonable: |
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(1) on or before the 25th day after the date the |
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claimant receives the offer, the claimant shall advise the |
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contractor in writing and in reasonable detail of the reasons why |
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the claimant considers the offer unreasonable; and |
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(2) not later than the 10th day after the date the |
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contractor receives notice under Subdivision (1), the contractor |
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may make a supplemental written offer of settlement to the claimant |
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by sending the offer to the claimant or the claimant's attorney. |
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(c) If [compliance with Subtitle D, Title 16, or] the giving |
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of the notice under Subsections (a) and (b) within the period |
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prescribed by those subsections is impracticable because of the |
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necessity of initiating an action at an earlier date to prevent |
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expiration of the statute of limitations or if the complaint is |
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asserted as a counterclaim, [compliance with Subtitle D, Title 16, |
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or] the notice is not required. However, the action or counterclaim |
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shall specify in reasonable detail each construction defect that is |
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the subject of the complaint. The [If Subtitle D, Title 16, applies |
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to the complaint, simultaneously with the filing of an action by a |
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claimant, the claimant must submit a request under Section 428.001. |
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If Subtitle D, Title 16, does not apply, the] inspection provided |
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for by Subsection (a) may be made not later than the 75th day after |
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the date of service of the suit, request for arbitration, or |
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counterclaim on the contractor, and the offer provided for by |
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Subsection (b) may be made not later than the [15th day after the |
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date the state-sponsored inspection and dispute resolution process |
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is completed, if Subtitle D, Title 16, applies, or not later than |
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the] 60th day after the date of service [, if Subtitle D, Title 16, |
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does not apply]. If, while an action subject to this chapter is |
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pending, the statute of limitations for the cause of action would |
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have expired and it is determined that the provisions of Subsection |
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(a) were not properly followed, the action shall be abated to allow |
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compliance with Subsections (a) and (b). |
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(d) The court or arbitration tribunal shall dismiss [abate] |
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an action governed by this chapter if Subsection (c) does not apply |
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and the court or tribunal, after a hearing, finds that the |
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contractor is entitled to dismissal [abatement] because the |
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claimant [failed to comply with the requirements of Subtitle D, |
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Title 16, if applicable,] failed to provide the notice or failed to |
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give the contractor a reasonable opportunity to inspect the |
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property as required by Subsection (a), or failed to follow the |
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procedures specified by Subsection (b). An action is |
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automatically dismissed [abated] without the order of the court or |
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tribunal beginning on the 11th day after the date a motion to |
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dismiss [abate] is filed if the motion: |
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(1) is verified and alleges that the person against |
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whom the action is pending did not receive the written notice |
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required by Subsection (a), the person against whom the action is |
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pending was not given a reasonable opportunity to inspect the |
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property as required by Subsection (a), or the claimant failed to |
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follow the procedures specified by Subsection (b) [or Subtitle D, |
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Title 16]; and |
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(2) is not controverted by an affidavit filed by the |
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claimant before the 11th day after the date on which the motion to |
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dismiss [abate] is filed. |
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(e) If a claimant rejects a reasonable offer made under |
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Subsection (b) or does not permit the contractor or independent |
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contractor a reasonable opportunity to inspect or repair the defect |
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pursuant to an accepted offer of settlement, the claimant[: |
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[(1)] may not recover an amount in excess of: |
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(1) [(A)] the fair market value of the contractor's |
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last offer of settlement under Subsection (b); or |
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(2) [(B)] the amount of a reasonable monetary |
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settlement or purchase offer made under Subsection (n)[; and |
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[(2) may recover only the amount of reasonable and |
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necessary costs and attorney's fees as prescribed by Rule 1.04, |
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Texas Disciplinary Rules of Professional Conduct, incurred before |
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the offer was rejected or considered rejected]. |
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(g) Except as provided by Subsection (e), in an action |
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subject to this chapter the claimant may recover only the following |
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economic damages proximately caused by a construction defect: |
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(1) the reasonable cost of repairs necessary to cure |
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any construction defect; |
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(2) the reasonable and necessary cost for the |
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replacement or repair of any damaged goods in the residence; |
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(3) reasonable and necessary engineering and |
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consulting fees; |
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(4) the reasonable expenses of temporary housing |
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reasonably necessary during the repair period; and |
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(5) the reduction in current market value, if any, |
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after the construction defect is repaired if the construction |
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defect is a structural failure [; and |
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[(6) reasonable and necessary attorney's fees]. |
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(m) Notwithstanding Subsections (a), (b), and (c), a |
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contractor who receives written notice of a construction defect |
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resulting from work performed by the contractor or an agent, |
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employee, or subcontractor of the contractor and creating an |
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imminent threat to the health or safety of the inhabitants of the |
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residence shall take reasonable steps to cure the defect as soon as |
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practicable. If the contractor fails to cure the defect in a |
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reasonable time, the owner of the residence may have the defect |
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cured and may recover from the contractor the reasonable cost of the |
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repairs [plus attorney's fees and costs in addition to any other |
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damages recoverable under any law not inconsistent with the |
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provisions of this chapter]. |
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SECTION 5. Sections 27.0042(a) and (c), Property Code, are |
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amended to read as follows: |
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(a) A written agreement between a contractor and a homeowner |
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may provide that, [except as provided by Subsection (b),] if the |
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reasonable cost of repairs necessary to repair a construction |
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defect that is the responsibility of the contractor exceeds an |
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agreed percentage of the current fair market value of the |
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residence, as determined without reference to the construction |
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defects, then, in an action subject to this chapter, the contractor |
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may elect as an alternative to the damages specified in Section |
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27.004(g) that the contractor who sold the residence to the |
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homeowner purchase it. |
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(c) If a contractor elects to purchase the residence under |
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Subsection (a): |
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(1) the contractor shall pay the original purchase |
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price of the residence and closing costs incurred by the homeowner |
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and the cost of transferring title to the contractor under the |
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election; |
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(2) the homeowner may recover: |
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(A) [reasonable and necessary attorney's and |
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expert fees as identified in Section 27.004(g); |
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[(B)] reimbursement for permanent improvements |
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the owner made to the residence after the date the owner purchased |
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the residence from the builder; and |
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(B) [(C)] reasonable costs to move from the |
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residence; and |
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(3) conditioned on the payment of the purchase price, |
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the homeowner shall tender a special warranty deed to the |
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contractor, free of all liens and claims to liens as of the date the |
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title is transferred to the contractor, and without damage caused |
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by the homeowner. |
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SECTION 6. Section 27.005, Property Code, is amended to |
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read as follows: |
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Sec. 27.005. [LIMITATIONS ON] EFFECT OF CHAPTER; REPOSE. |
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(a) This chapter does not create a cause of action or derivative |
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liability or extend a limitations period. |
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(b) Notwithstanding any other law, including Sections |
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16.008 and 16.009, Civil Practice and Remedies Code, an action |
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subject to this chapter must be initiated by filing and service of a |
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lawsuit or a demand for arbitration not later than five years after |
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the earlier of: |
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(1) the date construction of the residence was |
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completed; |
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(2) the date a final inspection or certificate of |
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occupancy was issued; |
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(3) the date of transfer of title to the first owner of |
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the residence; |
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(4) the date of first occupancy of the residence; |
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(5) the date of final payment to the contractor; or |
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(6) the date an affidavit of completion is filed in the |
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county in which the residence is located. |
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SECTION 7. Section 27.006, Property Code, is amended to |
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read as follows: |
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Sec. 27.006. CAUSATION. In an action to recover damages |
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resulting from a construction defect, the claimant must prove that |
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actual physical [the] damages to the residence were proximately |
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caused by the construction defect. In no event may a claimant |
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recover anything other than economic damages in connection with a |
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claim subject to this chapter. |
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SECTION 8. The following provisions of the Property Code |
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are repealed: |
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(1) Section 27.0031; |
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(2) Sections 27.004(f) and (l); |
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(3) Section 27.0042(b); and |
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(4) Section 27.007(c). |
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SECTION 9. The changes in law made by this Act apply only to |
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a cause of action that accrues on or after the effective date of |
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this Act. A cause of action that accrued before the effective date |
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of this Act is governed by the law as it existed immediately before |
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the effective date of this Act, and that law is continued in effect |
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for that purpose. |
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SECTION 10. This Act takes effect September 1, 2021. |