88R8698 AJA-F
By: Leach 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 [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) an imminent danger to the safety of the
occupants of the residence;
(2) [(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; 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:
(1) a construction defect existed in the residence on
the date the residence was completed or title was conveyed to the
original purchaser; and
(2) the defect has rendered the residence
uninhabitable.
SECTION 4. Section 27.004, Property Code, is amended by
amending Subsections (a), (b), (c), (d), and (g) and adding
Subsections (d-1) and (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 claimant must act with reasonable diligence after
discovery and investigation of a construction defect to send the
written notice. 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.
(d-1) If the court or arbitration tribunal orders the action
abated under Subsection (d), the court or tribunal may award the
contractor reasonable and necessary attorney's fees incurred by the
contractor to seek the abatement.
(g) Except as provided by Subsection (e), in an action
subject to this chapter the claimant may recover only the following
economic damages, and no other 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.
(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) delayed giving written notice to the
contractor;
(B) failed to provide the contractor evidence
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 available at
the time of the original notice; or
(C) 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. Chapter 27, Property Code, is amended by adding
Section 27.008 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.
SECTION 7. The following provisions of the Property Code
are repealed:
(1) Sections 27.004(f) and (l);
(2) Section 27.0042(b); and
(3) Section 27.007(c).
SECTION 8. 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 9. This Act takes effect September 1, 2023.