87R7575 AJA-F
By: Leach H.B. No. 3595
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, landscaping improvement, or other improvement,
structure, or recreational facility that is constructed by a
contractor in connection with the construction of a new residence,
regardless of whether or not 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 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 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, speculative
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 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 or leased [is transferred] to the owners or occupants 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, such as a foundation or
framing system [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.
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(a), Property Code, is amended to
read as follows:
(a) In an action to recover damages or other relief arising
from a construction defect:
(1) 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;
(C) normal wear, tear, or deterioration;
(D) normal shrinkage or 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, outdated, or inaccurate and the contractor
did not know and could not reasonably have known of the falsity,
modification, or inaccuracy of the information; or
(F) any condition, including noncompliance with
an applicable code, standard, warranty, manufacturer's
recommendation, or contractual plan or specification, that does not
result in either:
(i) actual physical damage to the
residence; or
(ii) the failure of a building component to
perform its intended function or purpose at the time the notice
required by Section 27.004 is sent; and
(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.
SECTION 4. Sections 27.004(a), (b), (c), (d), (e), (g), and
(m), Property Code, are amended 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 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
multiple 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 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 [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
estimated time for completion of the repairs. The repairs shall be
made within a reasonable time [not later than the 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 the offer
of repair is accepted, the estimated time stated in the offer shall
be considered reasonable. 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 dismiss [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 dismissal [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 dismissed [abated] without the order of the court or
tribunal beginning on the 11th day after the date a motion to
dismiss [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
dismiss [abate] is filed.
(e) If a claimant rejects a reasonable offer made under
Subsection (b) or does not permit the contractor or independent
contractor a reasonable opportunity to inspect or repair the defect
pursuant to an accepted offer of settlement, the claimant[:
[(1)] may not recover an amount in excess of:
(1) [(A)] the fair market value of the contractor's
last offer of settlement under Subsection (b); or
(2) [(B)] the amount of a reasonable monetary
settlement or purchase offer made under Subsection (n)[; and
[(2) may recover only the amount of reasonable and
necessary costs and attorney's fees as prescribed by Rule 1.04,
Texas Disciplinary Rules of Professional Conduct, incurred before
the offer was rejected or considered rejected].
(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; and
(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].
(m) Notwithstanding Subsections (a), (b), and (c), a
contractor who receives written notice of a construction defect
resulting from work performed by the contractor or an agent,
employee, or subcontractor of the contractor and creating an
imminent threat to the health or safety of the inhabitants of the
residence shall take reasonable steps to cure the defect as soon as
practicable. If the contractor fails to cure the defect in a
reasonable time, the owner of the residence may have the defect
cured and may recover from the contractor the reasonable cost of the
repairs [plus attorney's fees and costs in addition to any other
damages recoverable under any law not inconsistent with the
provisions of this chapter].
SECTION 5. Sections 27.0042(a) and (c), Property Code, are
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.
(c) If a contractor elects to purchase the residence under
Subsection (a):
(1) the contractor shall pay the original purchase
price of the residence 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
(B) [(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 6. Section 27.005, Property Code, is amended to
read as follows:
Sec. 27.005. [LIMITATIONS ON] EFFECT OF CHAPTER; REPOSE.
(a) This chapter does not create a cause of action or derivative
liability or extend a limitations period.
(b) Notwithstanding any other law, including Sections
16.008 and 16.009, Civil Practice and Remedies Code, an action
subject to this chapter must be initiated by filing and service of a
lawsuit or a demand for arbitration not later than five years after
the earlier of:
(1) the date construction of the residence was
completed;
(2) the date a final inspection or certificate of
occupancy was issued;
(3) the date of transfer of title to the first owner of
the residence;
(4) the date of first occupancy of the residence;
(5) the date of final payment to the contractor; or
(6) the date an affidavit of completion is filed in the
county in which the residence is located.
SECTION 7. 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
actual physical [the] damages to the residence were proximately
caused by the construction defect. In no event may a claimant
recover anything other than economic damages in connection with a
claim subject to this chapter.
SECTION 8. The following provisions of the Property Code
are repealed:
(1) Section 27.0031;
(2) Sections 27.004(f) and (l);
(3) Section 27.0042(b); and
(4) 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, 2021.