88R19894 AJA-F
 
  By: Leach H.B. No. 2022
 
  Substitute the following for H.B. No. 2022:
 
  By:  Schofield C.S.H.B. No. 2022
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to residential construction liability.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 27.001, Property Code, is amended to
  read as follows:
         Sec. 27.001.  DEFINITIONS. In this chapter:
               (1)  "Action" means a court or judicial proceeding or
  an arbitration.
               (2)  "Appurtenance" means any garage, outbuilding,
  retaining wall, or other structure or recreational facility that is
  constructed by a contractor in connection with the construction or
  alteration of a residence, regardless of whether it is attached to
  or [appurtenant to a residence but is not] a part of the dwelling
  unit.
               (3)  ["Commission" means the Texas Residential
  Construction Commission.
               [(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 deficiency in [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.]
               (4) [(5)]  "Contractor":
                     (A)  means:
                           (i)  a 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 or construction 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 or other housing project for the
  construction or sale of one or more [a] new residences [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.
               (5) [(6)]  "Economic damages" means compensatory
  damages for pecuniary loss proximately caused by a construction
  defect. The term does not include exemplary damages or damages for
  bodily or personal injury, physical pain and mental anguish, loss
  of consortium, disfigurement, physical impairment, or loss of
  companionship and society.
               (6) [(7)]  "Residence" means the real property and
  improvements for a detached one-family or two-family dwelling, a
  townhouse not more than three stories above grade plane in height
  with a separate means of egress, an accessory structure not more
  than three stories above grade plane in height, or a [single-family
  house,] duplex, triplex, or quadruplex or a unit and the common
  elements in a multiunit residential structure in which [title to]
  the individual units are sold [is transferred] to the owners under a
  condominium or cooperative system.
               (7) [(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.
               (8)  [(9)  "Third-party inspector" has the meaning
  assigned by Section 401.002.
               [(10)]  "Developer of a condominium" means a declarant,
  as defined by Section 82.003, of a condominium consisting of one or
  more residences.
               (9)  "Townhouse" means a single-family dwelling unit
  constructed in a group of three or more attached units in which each
  unit extends from foundation to roof and with a yard or public way
  on not less than two sides.
         SECTION 2.  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 3.  Section 27.003, Property Code, is amended by
  amending Subsection (a) and adding Subsection (c) to read as
  follows:
         (a)  In an action subject to this chapter [to recover damages
  or other relief] arising from a construction defect:
               (1)  a contractor is liable only to the extent a
  defective condition proximately causes:
                     (A)  actual physical damage to the residence;
                     (B)  an actual failure or lack of capability of a
  building component to perform its intended function or purpose; or
                     (C)  a verifiable danger to the safety of the
  occupants of the residence;
               (2)  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; or
                           (iii)  timely notify a contractor of a
  construction defect;
                     (C)  normal wear, tear, or deterioration;
                     (D)  normal cracking or shrinkage cracking 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, modified, or inaccurate and the contractor
  did not know and could not reasonably have known of the falsity,
  modification, or inaccuracy of the information; and
               (3)  [(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.
         (c)  To maintain a claim of breach of a warranty of
  habitability, a claimant must establish that a construction defect:
               (1)   was latent at the time the residence was completed
  or title was conveyed to the original purchaser; and
               (2)  has rendered the residence unsuitable for its
  intended use as a home.
         SECTION 4.  Section 27.004, Property Code, is amended by
  amending Subsections (a), (b), (c), (d), and (g) and adding
  Subsection (g-1) 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. The [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 any expert reports,
  photographs, and video or audio recordings [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.  To the extent
  requested, the contractor shall be given the opportunity to conduct
  up to three inspections during the 35-day period after the date the
  contractor receives the notice and during any extension of that
  inspection period provided by law or as otherwise agreed to by the
  parties. 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 60th [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
  and the time for completion of the repairs if more than 60 days. The
  repairs shall be made not later than the 60th [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.
         (g)  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; and
               (7)  reasonable and necessary arbitration filing fees
  and the claimant's share of arbitrator compensation.
         (g-1)  The court or arbitration tribunal may order that an
  offer made by the contractor after the time prescribed is
  considered timely for purposes of Subsection (b) or (c), as
  applicable, if the contractor is prejudiced in the contractor's
  opportunity to inspect as provided for by Subsection (a) or (c) or
  make an offer provided for by Subsection (b) or (c):
               (1)  because the claimant:
                     (A)  failed to provide the contractor evidence
  available and in the claimant's possession, custody, or control at
  the time of the original notice depicting the nature and cause of
  the defect and the nature and extent of repairs necessary to remedy
  the defect, including reports, photographs, videos, or any other
  evidence; or
                     (B)  amended a claim to add a new alleged defect;
  or
               (2)  due to events beyond the contractor's control.
         SECTION 5.  Section 27.0042(a), Property Code, is amended to
  read as follows:
         (a)  A written agreement between a contractor and a homeowner
  may provide that, [except as provided by Subsection (b),] if the
  reasonable cost of repairs necessary to repair a construction
  defect that is the responsibility of the contractor exceeds an
  agreed percentage of the current fair market value of the
  residence, as determined without reference to the construction
  defects, then, in an action subject to this chapter, the contractor
  may elect as an alternative to the damages specified in Section
  27.004(g) that the contractor who sold the residence to the
  homeowner purchase it.
         SECTION 6.  Section 27.006, Property Code, is amended to
  read as follows:
         Sec. 27.006.  CAUSATION.  In an action to recover damages
  resulting from a construction defect, the claimant must prove that:
               (1)  the construction defect existed at the time of
  completion of the construction, alteration, or repair; and
               (2)  the damages were proximately caused by the
  construction defect.
         SECTION 7.  Chapter 27, Property Code, is amended by adding
  Sections 27.008 and 27.009 to read as follows:
         Sec. 27.008.  EFFECT OF ARBITRATION ON LIMITATIONS PERIOD.
  The submission of an action subject to this chapter to arbitration
  has the same effect on the running of a limitations period as a
  filing in a court in this state.
         Sec. 27.009.  NO WAIVER.  An attempted waiver of the
  provisions of this chapter in a contract subject to this chapter is
  void.
         SECTION 8.  The following provisions of the Property Code
  are repealed:
               (1)  Section 27.004(l);
               (2)  Section 27.0042(b); and
               (3)  Section 27.007(c).
         SECTION 9.  The changes in law made by this Act apply only to
  a cause of action that accrues on or after the effective date of
  this Act. A cause of action that accrued 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.
         SECTION 10.  This Act takes effect September 1, 2023.