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A BILL TO BE ENTITLED
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AN ACT
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relating to construction contract trust funds. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter A, Chapter 162, Property Code, is |
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amended by adding Section 162.011 to read as follows: |
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Sec. 162.011. FUNDS RESERVED OR REQUIRED TO BE RESERVED. |
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(a) Funds reserved or required to be reserved by a property owner |
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under Section 53.101 are trust funds under this chapter only to the |
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extent that: |
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(1) beneficiaries have perfected a mechanic's or |
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materialman's lien claim to those reserved funds under Subchapter |
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E, Chapter 53; and |
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(2) the property is subject to a senior lien in favor |
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of a lender. |
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(b) If an owner finances the construction of improvements to |
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real property through a loan from a lender independent of the owner |
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that is secured wholly or partly by a lien on the property, funds |
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reserved or required to be reserved under Section 53.101 are not |
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trust funds under this chapter until the lender disburses those |
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funds to the owner. |
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(c) Notwithstanding Section 162.003(a), funds reserved or |
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required to be reserved under Section 53.101 that an owner in good |
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faith releases to a contractor or subcontractor before the end of |
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the period described by Section 53.101 are not trust funds under |
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this chapter. |
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SECTION 2. Section 162.003(a), Property Code, is amended to |
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read as follows: |
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(a) An artisan, laborer, mechanic, contractor, |
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subcontractor, or materialman who labors or who furnishes labor or |
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material for the construction or repair of an improvement on |
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specific real property in this state is a beneficiary of any trust |
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funds: |
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(1) paid or received in connection with the |
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improvement; or |
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(2) reserved or required to be reserved under Section |
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53.101 in connection with the improvement. |
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SECTION 3. Section 162.031, Property Code, is amended by |
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adding Subsection (a-1) to read as follows: |
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(a-1) A trustee's failure to reserve funds that were |
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required to be reserved under Section 53.101 for the construction |
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or repair of a new or existing single-family house, duplex, |
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triplex, or quadruplex, to be used for residential purposes, |
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including improvements appurtenant to the residence, is not |
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misapplication of trust funds under this section. |
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SECTION 4. Section 162.032, Property Code, is amended by |
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adding Subsection (d) to read as follows: |
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(d) A trustee is not liable for any damages to a beneficiary |
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for misapplication of trust funds unless the trustee misapplied |
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trust funds with intent to defraud. |
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SECTION 5. Subchapter B, Chapter 162, Property Code, is |
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amended by adding Section 162.034 to read as follows: |
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Sec. 162.034. ATTORNEY'S FEES AND COSTS. The court shall |
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award costs and reasonable attorney's fees to a prevailing party in |
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an action brought under this chapter. |
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SECTION 6. (a) Except as provided by Subsection (b) of this |
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section, the changes in law made by this Act apply only to a |
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construction contract that is entered into on or after the |
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effective date of this Act. |
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(b) Section 162.034, Property Code, as added by this Act, |
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applies only to an action commenced on or after the effective date |
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of this Act. |
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SECTION 7. This Act takes effect September 1, 2025. |