Texas 2009 - 81st Regular

Texas House Bill HB2095 Compare Versions

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11 81R4908 BEF-F
22 By: Farrar H.B. No. 2095
33
44
55 A BILL TO BE ENTITLED
66 AN ACT
77 relating to the regulation of and claims against residential home
88 builders.
99 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1010 ARTICLE 1. CHANGES TO TEXAS RESIDENTIAL
1111 CONSTRUCTION COMMISSION ACT
1212 SECTION 1.01. Section 401.003(a), Property Code, is amended
1313 to read as follows:
1414 (a) In this title, "builder" means any person who, for a
1515 fixed price, commission, fee, wage, or other compensation, sells,
1616 constructs, or supervises or manages the construction of, or
1717 contracts for the construction of or the supervision or management
1818 of the construction of:
1919 (1) a new home;
2020 (2) a material improvement to a home, other than an
2121 improvement solely to replace or repair a roof of an existing home;
2222 or
2323 (3) an improvement to the interior of an existing home
2424 [when the cost of the work exceeds $10,000].
2525 SECTION 1.02. Chapter 401, Property Code, is amended by
2626 adding Section 401.008 to read as follows:
2727 Sec. 401.008. HOMEOWNER FEES NOT REQUIRED. A homeowner may
2828 not be charged a fee in connection with:
2929 (1) filing a complaint with the commission;
3030 (2) a state-sponsored inspection or dispute
3131 resolution process;
3232 (3) an arbitration required by this title; or
3333 (4) a complaint, request, or other proceeding under
3434 Chapter 409 or Subtitle D or E.
3535 SECTION 1.03. Section 406.001(a), Property Code, is amended
3636 to read as follows:
3737 (a) The Texas Residential Construction Commission consists
3838 of nine members appointed by the governor with the advice and
3939 consent of the senate as follows:
4040 (1) four members must be builders who each hold a
4141 certificate of registration under Chapter 416;
4242 (2) three members must be representatives of the
4343 general public who have consistently shown an interest in consumer
4444 protection;
4545 (3) one member must be a licensed professional
4646 engineer who practices in the area of residential construction; and
4747 (4) one member must be either a licensed architect who
4848 practices in the area of residential construction or a building
4949 inspector who meets the requirements set forth in Chapter 427 and
5050 practices in the area of residential construction.
5151 SECTION 1.04. Section 416.004, Property Code, is amended by
5252 amending Subsections (a) and (b), and adding Subsection (a-1) to
5353 read as follows:
5454 (a) The commission shall charge and collect:
5555 (1) a filing fee for an application for an original
5656 certificate of registration of at least [that does not exceed]
5757 $500;
5858 (2) a fee for renewal of a certificate of registration
5959 of at least [that does not exceed] $300; and
6060 (3) a late fee that does not exceed the amount of the
6161 fee due if payment of a registration application or renewal fee due
6262 under this title is late.
6363 (a-1) A fee charged under Subsection (a) applies to each
6464 builder, including a corporation, limited liability company,
6565 partnership, limited partnership, limited liability partnership,
6666 sole proprietor, and any subsidiary of those persons.
6767 (b) The commission shall establish a fee schedule that takes
6868 into consideration the unit volume or dollar volume of potential
6969 applicants. The commission may raise registration and renewal fees
7070 as necessary to provide public service in connection with
7171 investigations of construction defect complaints filed by
7272 homeowners under this title.
7373 SECTION 1.05. Section 416.005, Property Code, is amended to
7474 read as follows:
7575 Sec. 416.005. GENERAL ELIGIBILITY REQUIREMENTS. A person
7676 may not receive a certificate of registration under this chapter
7777 unless:
7878 (1) the person, at the time of the application:
7979 (A) is at least 18 years of age; [and]
8080 (B) is a citizen of the United States or a
8181 lawfully admitted alien; and
8282 (C) provides proof of financial responsibility
8383 as required by Section 416.013; and
8484 (2) the commission is satisfied with the person's
8585 honesty, trustworthiness, and integrity based on information
8686 supplied or discovered in connection with the person's application.
8787 SECTION 1.06. Section 416.010(c), Property Code, is amended
8888 to read as follows:
8989 (c) If a builder operates under any name other than the name
9090 that is set forth on the builder's certificate of registration, the
9191 builder shall, within 20 [45] days of operating under this other
9292 name, disclose this other name to the commission.
9393 SECTION 1.07. Sections 416.011(a) and (b), Property Code,
9494 are amended to read as follows:
9595 (a) The commission shall establish rules and procedures for
9696 a program through which a builder can be designated as a "Texas Star
9797 Builder." A builder's participation in the program is mandatory
9898 [voluntary] and is [not] a requirement for holding and renewing
9999 [the issuance of] a certificate of registration required under this
100100 chapter.
101101 (b) A builder shall [who participates in this program will
102102 be allowed to] represent to the public that the builder is a "Texas
103103 Star Builder" and meets all of the requirements and qualifications
104104 that are set forth by the commission for the program.
105105 SECTION 1.08. Chapter 416, Property Code, is amended by
106106 adding Sections 416.013 and 416.014 to read as follows:
107107 Sec. 416.013. INSURANCE REQUIREMENTS. (a) To be eligible
108108 for an original or renewal certificate of registration under this
109109 chapter, a builder must provide proof of financial responsibility
110110 to the commission by maintaining a general liability insurance
111111 policy with a limit of at least $500,000.
112112 (b) The commission may increase the insurance requirements
113113 based on the builder's unit or dollar volume.
114114 Sec. 416.014. BOND REQUIREMENT. A builder shall maintain a
115115 surety bond for each construction project described by Section
116116 401.003. The bond must:
117117 (1) guarantee the builder's performance under the
118118 builder's contract with the owner; and
119119 (2) be issued in an amount not less than the fair
120120 market value of the completed project if the project had no defects.
121121 SECTION 1.09. Section 418.001, Property Code, is amended to
122122 read as follows:
123123 Sec. 418.001. GROUNDS FOR DISCIPLINARY ACTION. A person,
124124 including a builder or a person who is designated as a builder's
125125 agent under Section 416.006, or a person who owns or controls a
126126 majority ownership interest in the builder is subject to
127127 disciplinary action under this chapter for:
128128 (1) fraud or deceit in obtaining a registration or
129129 certification under this subtitle;
130130 (2) misappropriation or misapplication of trust funds
131131 in the practice of residential construction, including a violation
132132 of Chapter 32, Penal Code, or Chapter 162, if found by a final
133133 nonappealable court judgment;
134134 (3) naming false consideration in a contract to sell a
135135 new home or in a construction contract;
136136 (4) discriminating on the basis of race, color,
137137 religion, sex, national origin, or ancestry;
138138 (5) publishing a false or misleading advertisement;
139139 (6) failure to honor, within a reasonable time, a
140140 check issued to the commission, or any other instrument of payment,
141141 including a credit or debit card or electronic funds transfer,
142142 after the commission has sent by certified mail a request for
143143 payment to the person's last known business address, according to
144144 commission records;
145145 (7) failure to pay an administrative penalty assessed
146146 by the commission under Chapter 419 or a fee due under Chapter 426;
147147 (8) failure to pay a final nonappealable court
148148 judgment arising from a construction defect or other transaction
149149 between the person and a homeowner;
150150 (9) failure to register a home as required by Section
151151 426.003;
152152 (10) failure to remit the fee for registration of a
153153 home under Section 426.003;
154154 (11) failure to reimburse a homeowner the amount
155155 ordered by the commission as provided by Section 428.004(d);
156156 (12) engaging in statutory or common-law fraud or
157157 misappropriation of funds, as determined by the commission after a
158158 hearing under Section 418.003;
159159 (13) a repeated failure to participate in the
160160 state-sponsored inspection and dispute resolution process if
161161 required by this title;
162162 (14) failure to register as a builder as required
163163 under Chapter 416;
164164 (15) using or attempting to use a certificate of
165165 registration that has expired or that has been revoked;
166166 (16) falsely representing that the person holds a
167167 certificate of registration issued under Chapter 416;
168168 (17) acting as a builder using a name other than the
169169 name or names disclosed to the commission;
170170 (18) aiding, abetting, or conspiring with a person who
171171 does not hold a certificate of registration to evade the provisions
172172 of this title or rules adopted under this title, if found by a final
173173 nonappealable court judgment;
174174 (19) allowing the person's certificate of registration
175175 to be used by another person;
176176 (20) acting as an agent, partner, or associate of a
177177 person who does not hold a certificate of registration with the
178178 intent to evade the provisions of this title or rules adopted under
179179 this title;
180180 (21) a failure to reasonably perform on an accepted
181181 offer to repair or a repeated failure to make an offer to repair
182182 based on:
183183 (A) the recommendation of a third-party
184184 inspector under Section 428.004; or
185185 (B) the final holding of an appeal under Chapter
186186 429;
187187 (22) a repeated failure to respond to a commission
188188 request for information;
189189 (23) a failure to obtain a building permit required by
190190 a political subdivision before constructing a new home or an
191191 improvement to an existing home;
192192 (24) abandoning, without justification, any home
193193 improvement contract or new home construction project engaged in or
194194 undertaken by the person, if found to have done so by a final,
195195 nonappealable court judgment;
196196 (25) a repeated failure to comply with the
197197 requirements of Subtitle F; [or]
198198 (26) failure by the builder to complete a home under
199199 the contract terms with a homeowner;
200200 (27) failure by the builder to correct a failure to
201201 comply with building codes or standards;
202202 (28) failure by the builder to comply with
203203 architectural drawings specified in a contract to build or purchase
204204 a home;
205205 (29) failure by the builder to comply with an
206206 engineering design of a home, including the home's foundation;
207207 (30) failure by the builder to satisfy a court
208208 judgment or a judgment in a binding arbitration; or
209209 (31) otherwise violating this title or a commission
210210 rule adopted under this title.
211211 SECTION 1.10. Section 426.001(b), Property Code, is amended
212212 to read as follows:
213213 (b) This subtitle does not apply to a dispute arising out
214214 of:
215215 (1) an alleged violation of Section 27.01, Business &
216216 Commerce Code; or
217217 (2) [a builder's wrongful abandonment of an
218218 improvement project before completion; or
219219 [(3)] a violation of Chapter 162.
220220 SECTION 1.11. Sections 428.001(a), (b), and (d), Property
221221 Code, are amended to read as follows:
222222 (a) If a dispute between a homeowner and a builder arises
223223 out of an alleged construction defect, the homeowner [or the
224224 builder] may submit to the commission a written request for
225225 state-sponsored inspection and dispute resolution.
226226 (b) The request must:
227227 (1) specify in reasonable detail each alleged
228228 construction defect that is a subject of the request;
229229 (2) state the amount of any known out-of-pocket
230230 expenses and engineering or consulting fees incurred by the
231231 homeowner in connection with each alleged construction defect; and
232232 (3) [include any evidence that depicts the nature and
233233 cause of each alleged construction defect and the nature and extent
234234 of repairs necessary to remedy the construction defect, including,
235235 if available, expert reports, photographs, and videotapes, if that
236236 evidence would be discoverable under Rule 192, Texas Rules of Civil
237237 Procedure;
238238 [(4) be accompanied by the fees required under Section
239239 426.004; and
240240 [(5)] state the name of any person who has, on behalf
241241 of the homeowner [requestor], inspected the home in connection with
242242 an alleged construction defect.
243243 (d) At the time a person submits a request under this
244244 section, the person must send by certified mail, return receipt
245245 requested, a copy of the request[, including evidence submitted
246246 with the request,] to each other party involved in the dispute.
247247 SECTION 1.12. Section 428.002(a), Property Code, is amended
248248 to read as follows:
249249 (a) In addition to the right of inspection provided by
250250 Section 428.001(c), [at any time] before the conclusion of the
251251 state-sponsored inspection and dispute resolution process and on
252252 the builder's written request, the builder shall be given
253253 reasonable opportunity to inspect the home that is the subject of
254254 the request or have the home inspected to determine the nature and
255255 cause of the construction defect and the nature and extent of
256256 repairs necessary to remedy the construction defect.
257257 SECTION 1.13. Sections 428.004(b) and (d), Property Code,
258258 are amended to read as follows:
259259 (b) If the dispute involves a structural matter in the home,
260260 the commission shall appoint an approved engineer to be the
261261 third-party inspector. The third-party inspector shall inspect the
262262 home not later than the 15th [30th] day after the date the request
263263 is submitted and issue a recommendation not later than the 30th
264264 [60th] day after the date the third-party inspector receives the
265265 assignment from the commission[, unless additional time is
266266 requested by the third-party inspector or a party to the dispute.
267267 The commission shall adopt rules governing the extension of time
268268 under this subsection].
269269 (d) Except as provided by this subsection, the third-party
270270 inspector's recommendation may not include payment of any monetary
271271 consideration. [If the inspector finds for the party who submitted
272272 the request, the commission may order the other party to reimburse
273273 all or part of the fees and inspection expenses paid by the
274274 requestor under Section 426.004.]
275275 SECTION 1.14. Section 429.001(c), Property Code, is amended
276276 to read as follows:
277277 (c) The panel shall:
278278 (1) review the recommendation for compliance with this
279279 title as required by rules adopted by the commission;
280280 (2) approve, reject, or modify the recommendation of
281281 the third-party inspector or remand the dispute for further action
282282 by the third-party inspector; and
283283 (3) issue written findings of fact and a ruling on the
284284 appeal not later than the 15th [30th] day after the date the notice
285285 of appeal is filed with the commission.
286286 SECTION 1.15. Section 430.001(b), Property Code, is amended
287287 to read as follows:
288288 (b) The warranty periods shall be:
289289 (1) two years [one year] for workmanship and
290290 materials;
291291 (2) two years for plumbing, electrical, heating, and
292292 air-conditioning delivery systems; and
293293 (3) 10 years for major structural components of the
294294 home.
295295 SECTION 1.16. Chapter 430, Property Code, is amended by
296296 adding Section 430.0075 to read as follows:
297297 Sec. 430.0075. FULL DISCLOSURE WITH INFORMED CONSENT. (a)
298298 Before a contract may be executed between a builder and seller and a
299299 buyer for construction of a new home and before money may be
300300 exchanged between the parties to the contract, the builder and
301301 seller must provide to the buyer a full disclosure and informed
302302 consent document that meets the following requirements:
303303 (1) the buyer must receive from the builder and seller
304304 full disclosure of product installation, care and component
305305 warranties, building standards, risks, and hazards of the
306306 particular property and home to be purchased;
307307 (2) the buyer must receive from the builder and seller
308308 full disclosure in understandable terms of any mandatory
309309 alternative dispute resolution provisions, including mandatory
310310 binding arbitration, and the associated costs of the various
311311 processes; and
312312 (3) the buyer must consent in writing to accept the
313313 terms of the builder's and seller's disclosures and provisions for
314314 new home construction by signing and dating the consent document.
315315 (b) The builder and seller shall fully disclose in writing:
316316 (1) the products that are installed in the home;
317317 (2) care and component warranties;
318318 (3) building standards; and
319319 (4) risks and hazards of the home.
320320 SECTION 1.17. Section 430.008(a), Property Code, is amended
321321 to read as follows:
322322 (a) The commission may approve as a third-party warranty
323323 company for the purposes of Section 430.009:
324324 (1) [an entity that has operated warranty programs in
325325 this state for at least five years;
326326 [(2)] a company whose performance is insured by an
327327 insurance company authorized to engage in the business of insurance
328328 in this state; or
329329 (2) [(3)] an insurance company that insures the
330330 warranty obligations of a builder under the statutory warranty and
331331 building and performance standards.
332332 SECTION 1.18. Section 430.010, Property Code, is amended to
333333 read as follows:
334334 Sec. 430.010. MINIMUM STANDARDS FOR DETERMINATION OF
335335 DEFECT. A third-party warranty company shall use defect inspection
336336 procedures substantially similar to the procedures adopted by the
337337 commission under this subtitle. A warranty company may adopt
338338 warranty standards in addition to the standards adopted by the
339339 commission. A third-party warranty company may not reduce the
340340 limited statutory warranty and building and performance
341341 standards[, except that a third-party warranty company shall not be
342342 required to provide a warranty of habitability].
343343 SECTION 1.19. Section 430.011(c), Property Code, is amended
344344 to read as follows:
345345 (c) Breach of a limited statutory warranty adopted by the
346346 commission or breach of the statutory warranty of habitability is
347347 [shall not, by itself, constitute] a violation of the Deceptive
348348 Trade Practices-Consumer Protection Act (Subchapter E, Chapter 17,
349349 Business & Commerce Code).
350350 SECTION 1.20. Sections 416.011(c), 426.004, 426.007,
351351 426.008(b), 428.004(e), and 430.009(e), Property Code, are
352352 repealed.
353353 SECTION 1.21. (a) On the effective date of this Act, the
354354 terms of the three public members of the Texas Residential
355355 Construction Commission serving on that date expire.
356356 (b) Not later than the 30th day after the effective date of
357357 this Act, the governor shall appoint three members to the Texas
358358 Residential Construction Commission to comply with Section
359359 406.001(a), Property Code, as amended by this article, as follows:
360360 (1) one member for a term expiring February 1, 2011;
361361 (2) one member for a term expiring February 1, 2013;
362362 and
363363 (3) one member for a term expiring February 1, 2015.
364364 SECTION 1.22. Not later than March 1, 2010, the Texas
365365 Residential Construction Commission shall adopt any rules
366366 necessary to implement the changes in law made by this article,
367367 including Section 416.011, Property Code.
368368 ARTICLE 2. CHANGES TO RESIDENTIAL CONSTRUCTION LIABILITY CHAPTER
369369 SECTION 2.01. Section 27.002(d), Property Code, is amended
370370 to read as follows:
371371 (d) This chapter does not apply to an action to recover
372372 damages that arise from:
373373 (1) a violation of Section 27.01, Business & Commerce
374374 Code; or
375375 (2) [a contractor's wrongful abandonment of an
376376 improvement project before completion; or
377377 [(3)] a violation of Chapter 162.
378378 SECTION 2.02. Sections 27.004(a), (b), (g), and (l),
379379 Property Code, are amended to read as follows:
380380 (a) In a claim not subject to Subtitle D, Title 16, before
381381 the 60th day preceding the date a claimant seeking from a contractor
382382 damages or other relief arising from a construction defect
383383 initiates an action, the claimant shall give written notice by
384384 certified mail, return receipt requested, to the contractor, at the
385385 contractor's last known address, specifying in reasonable detail
386386 the construction defects that are the subject of the complaint. [On
387387 the request of the contractor, the claimant shall provide to the
388388 contractor any evidence that depicts the nature and cause of the
389389 defect and the nature and extent of repairs necessary to remedy the
390390 defect, including expert reports, photographs, and videotapes, if
391391 that evidence would be discoverable under Rule 192, Texas Rules of
392392 Civil Procedure.] During the 20-day [35-day] period after the date
393393 the contractor receives the notice, [and on the contractor's
394394 written request,] the contractor shall be given a reasonable
395395 opportunity to inspect and have inspected the property that is the
396396 subject of the complaint to determine the nature and cause of the
397397 defect and the nature and extent of repairs necessary to remedy the
398398 defect. The contractor may take reasonable steps to document the
399399 defect. In a claim subject to Subtitle D, Title 16, a contractor is
400400 entitled to make an offer of repair in accordance with Subsection
401401 (b). A claimant is not required to give written notice to a
402402 contractor under this subsection in a claim subject to Subtitle D,
403403 Title 16.
404404 (b) Not later than the 15th day after the date of a final,
405405 unappealable determination of a dispute under Subtitle D, Title 16,
406406 if applicable, or not later than the 45th day after the date the
407407 contractor receives the notice under this section, if Subtitle D,
408408 Title 16, does not apply, the contractor may make a written offer of
409409 settlement to the claimant. The offer must be sent to the claimant
410410 at the claimant's last known address or to the claimant's attorney
411411 by certified mail, return receipt requested. The offer may include
412412 either an agreement by the contractor to repair or to have repaired
413413 by an independent contractor partially or totally at the
414414 contractor's expense or at a reduced rate to the claimant any
415415 construction defect described in the notice and shall describe in
416416 reasonable detail the kind of repairs which will be made. The
417417 repairs shall be made not later than the 20th [45th] day after the
418418 date the contractor receives written notice of acceptance of the
419419 settlement offer, unless completion is delayed by the claimant or
420420 by other events beyond the control of the contractor. If a
421421 contractor makes a written offer of settlement that the claimant
422422 considers to be unreasonable:
423423 (1) on or before the 25th day after the date the
424424 claimant receives the offer, the claimant shall advise the
425425 contractor in writing and in reasonable detail of the reasons why
426426 the claimant considers the offer unreasonable; and
427427 (2) not later than the 10th day after the date the
428428 contractor receives notice under Subdivision (1), the contractor
429429 may make a supplemental written offer of settlement to the claimant
430430 by sending the offer to the claimant or the claimant's attorney.
431431 (g) In [Except as provided by Subsection (e), in] an action
432432 subject to this chapter the claimant may recover only the following
433433 economic damages proximately caused by a construction defect:
434434 (1) the reasonable cost of repairs necessary to cure
435435 any construction defect;
436436 (2) the reasonable and necessary cost for the
437437 replacement or repair of any damaged goods in the residence;
438438 (3) reasonable and necessary engineering and
439439 consulting fees;
440440 (4) the reasonable expenses of temporary housing
441441 reasonably necessary during the repair period;
442442 (5) the reduction in current market value, if any,
443443 after the construction defect is repaired if the construction
444444 defect is a structural failure; and
445445 (6) reasonable and necessary attorney's fees.
446446 (l) If Subtitle D, Title 16, applies to the claim and the
447447 contractor's offer of repair is accepted by the claimant, the
448448 contractor, on completion of the repairs and at the contractor's
449449 expense, shall engage the third-party inspector who provided the
450450 recommendation regarding the construction defect involved in the
451451 claim to inspect the repairs and determine whether the residence,
452452 as repaired, complies with the applicable limited statutory
453453 warranty and building and performance standards adopted by the
454454 commission. [The contractor is entitled to a reasonable period not
455455 to exceed 15 days to address minor cosmetic items that are necessary
456456 to fully complete the repairs.] The determination of the
457457 third-party inspector of whether the repairs comply with the
458458 applicable limited statutory warranty and building and performance
459459 standards adopted by the commission establishes a rebuttable
460460 presumption on that issue. A party seeking to dispute, vacate, or
461461 overcome that presumption must establish by clear and convincing
462462 evidence that the determination is inconsistent with the applicable
463463 limited statutory warranty and building and performance standards.
464464 SECTION 2.03. Section 27.0042(c), Property Code, is amended
465465 to read as follows:
466466 (c) If a contractor elects to purchase the residence under
467467 Subsection (a):
468468 (1) the contractor shall pay the current market value
469469 [original purchase price] of the residence determined as if the
470470 residence did not have the construction defects, and closing costs
471471 incurred by the homeowner and the cost of transferring title to the
472472 contractor under the election;
473473 (2) the homeowner may recover:
474474 (A) reasonable and necessary attorney's and
475475 expert fees as identified in Section 27.004(g);
476476 (B) reimbursement for permanent improvements the
477477 owner made to the residence after the date the owner purchased the
478478 residence from the builder; and
479479 (C) reasonable costs to move from the residence;
480480 and
481481 (3) conditioned on the payment of the purchase price,
482482 the homeowner shall tender a special warranty deed to the
483483 contractor, free of all liens and claims to liens as of the date the
484484 title is transferred to the contractor, and without damage caused
485485 by the homeowner.
486486 SECTION 2.04. Sections 27.004(e) and (f), Property Code,
487487 are repealed.
488488 SECTION 2.05. The changes in law made by this article apply
489489 only to a cause of action that accrues on or after the effective
490490 date of this Act. A cause of action that accrues before the
491491 effective date of this Act is governed by the law in effect
492492 immediately before that date, and that law is continued in effect
493493 for that purpose.
494494 ARTICLE 3. EFFECTIVE DATE
495495 SECTION 3.01. This Act takes effect September 1, 2009.