CHAPTER 27. RESIDENTIAL CONSTRUCTION LIABILITY
PROPERTY CODE
TITLE 4. ACTIONS AND REMEDIES
CHAPTER 27. RESIDENTIAL CONSTRUCTION LIABILITY
Sec. 27.001. DEFINITIONS. In this chapter:
(1) "Action" means a court or judicial proceeding or an
arbitration.
(2) "Appurtenance" means any structure or recreational facility
that is 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.
(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 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 for the construction of a new 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 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.
(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 physical pain and
mental anguish, loss of consortium, disfigurement, physical
impairment, or loss of companionship and society.
(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 is transferred to the owners under
a condominium or cooperative system.
(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.
(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.
Added by Acts 1989, 71st Leg., ch. 1072, Sec. 1, eff. Sept. 1,
1989. Amended by Acts 1993, 73rd Leg., ch. 797, Sec. 1, 2 eff.
Aug. 30, 1993; Acts 1999, 76th Leg., ch. 189, Sec. 1, eff. Sept.
1, 1999; Acts 2003, 78th Leg., ch. 458, Sec. 2.01, eff. Sept. 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
750, Sec. 1, eff. September 1, 2007.
Sec. 27.002. APPLICATION OF CHAPTER. (a) This chapter applies
to:
(1) any action to recover damages or other relief arising from a
construction defect, except a claim for personal injury,
survival, or wrongful death or for damage to goods; and
(2) any subsequent purchaser of a residence who files a claim
against a contractor.
(b) 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.
(c) In this section:
(1) "Goods" does not include a residence.
(2) "Personal injury" does not include mental anguish.
(d) This chapter does not apply to an action to recover damages
that arise from:
(1) a violation of Section 27.01, Business & Commerce Code;
(2) a contractor's wrongful abandonment of an improvement
project before completion; or
(3) a violation of Chapter 162.
Added by Acts 1989, 71st Leg., ch. 1072, Sec. 1, eff. Sept. 1,
1989. Amended by Acts 1993, 73rd Leg., ch. 797, Sec. 3, eff. Aug.
30, 1993; Acts 1999, 76th Leg., ch. 189, Sec. 2, eff. Sept. 1,
1999; Acts 2003, 78th Leg., ch. 458, Sec. 2.02, eff. Sept. 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
843, Sec. 2, eff. September 1, 2007.
Sec. 27.003. LIABILITY. (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 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
or inaccurate and the contractor did not know and could not
reasonably have known of the falsity or inaccuracy of the
information; 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.
(b) Except as provided by this chapter, this chapter does not
limit or bar any other defense or defensive matter or other
defensive cause of action applicable to an action to recover
damages or other relief arising from a construction defect.
Added by Acts 1989, 71st Leg., ch. 1072, Sec. 1, eff. Sept. 1,
1989. Amended by Acts 1993, 73rd Leg., ch. 797, Sec. 4, eff. Aug.
30, 1993; Acts 1999, 76th Leg., ch. 189, Sec. 3, eff. Sept. 1,
1999; Acts 2003, 78th Leg., ch. 458, Sec. 2.03, eff. Sept. 1,
2003.
Sec. 27.0031. FRIVOLOUS SUIT; HARASSMENT. A party who files a
suit under this chapter that is groundless and brought in bad
faith or for purposes of harassment is liable to the defendant
for reasonable and necessary attorney's fees and court costs.
Added by Acts 1999, 76th Leg., ch. 189, Sec. 4, eff. Sept. 1,
1999.
Sec. 27.004. NOTICE AND OFFER OF SETTLEMENT. (a) 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. 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 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. 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. The repairs shall be made 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 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. 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.
(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:
(A) the fair market value of the contractor's last offer of
settlement under Subsection (b); or
(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.
(f) If a contractor fails to make a reasonable offer under
Subsection (b), the limitations on damages provided for in
Subsection (e) shall not apply.
(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.
(h) A homeowner and a contractor may agree in writing to extend
any time period described in this chapter.
(i) An offer of settlement made under this section that is not
accepted before the 25th day after the date the offer is received
by the claimant is considered rejected.
(j) An affidavit certifying rejection of a settlement offer
under this section may be filed with the court or arbitration
tribunal. The trier of fact shall determine the reasonableness of
a final offer of settlement made under this section.
(k) A contractor who makes or provides for repairs under this
section is entitled to take reasonable steps to document the
repair and to have it inspected.
(l) If Subtitle D, Title 16, applies to the claim and the
contractor's offer of repair is accepted by the claimant, the
contractor, on completion of the repairs and at the contractor's
expense, shall engage the third-party inspector who provided the
recommendation regarding the construction defect involved in the
claim to inspect the repairs and determine whether the residence,
as repaired, complies with the applicable limited statutory
warranty and building and performance standards adopted by the
commission. The contractor is entitled to a reasonable period not
to exceed 15 days to address minor cosmetic items that are
necessary to fully complete the repairs. The determination of the
third-party inspector of whether the repairs comply with the
applicable limited statutory warranty and building and
performance standards adopted by the commission establishes a
rebuttable presumption on that issue. A party seeking to dispute,
vacate, or overcome that presumption must establish by clear and
convincing evidence that the determination is inconsistent with
the applicable limited statutory warranty and building and
performance standards.
(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.
(n) This section does not preclude a contractor from making a
monetary settlement offer or an offer to purchase the residence.
(o) A notice and response letter prescribed by this chapter must
be sent by certified mail, return receipt requested, to the last
known address of the recipient. If previously disclosed in
writing that the recipient of a notice or response letter is
represented by an attorney, the letter shall be sent to the
recipient's attorney in accordance with Rule 21a, Texas Rules of
Civil Procedure.
(p) If the contractor provides written notice of a claim for
damages arising from a construction defect to a subcontractor,
the contractor retains all rights of contribution from the
subcontractor if the contractor settles the claim with the
claimant.
(q) If a contractor refuses to initiate repairs under an
accepted offer made under this section, the limitations on
damages provided for in this section shall not apply.
Added by Acts 1989, 71st Leg., ch. 1072, Sec. 1, eff. Sept. 1,
1989. Amended by Acts 1993, 73rd Leg., ch. 797, Sec. 5, eff. Aug.
30, 1993; Acts 1995, 74th Leg., ch. 414, Sec. 10, eff. Sept. 1,
1995; Acts 1999, 76th Leg., ch. 189, Sec. 5, eff. Sept. 1, 1999;
Acts 2003, 78th Leg., ch. 458, Sec. 2.04, eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
843, Sec. 3, eff. September 1, 2007.
Sec. 27.0041. MEDIATION. (a) If a claimant files suit seeking
from a contractor damages arising from a construction defect in
an amount greater than $7,500, the claimant or contractor may
file a motion to compel mediation of the dispute. The motion must
be filed not later than the 90th day after the date the suit is
filed.
(b) Not later than the 30th day after the date a motion is filed
under Subsection (a), the court shall order the parties to
mediate the dispute. If the parties cannot agree on the
appointment of a mediator, the court shall appoint the mediator.
(c) The court shall order the parties to begin mediation of the
dispute not later than the 30th day after the date the court
enters its order under Subsection (b) unless the parties agree
otherwise or the court determines additional time is required. If
the court determines that additional time is required, the court
may order the parties to begin mediation of the dispute not later
than the 60th day after the date the court enters its order under
Subsection (b).
(d) Unless each party who has appeared in a suit filed under
this chapter agrees otherwise, each party shall participate in
the mediation and contribute equally to the cost of the
mediation.
(e) Section 154.023, Civil Practice and Remedies Code, and
Subchapters C and D, Chapter 154, Civil Practice and Remedies
Code, apply to a mediation under this section to the extent those
laws do not conflict with this section.
Added by Acts 1999, 76th Leg., ch. 189, Sec. 6, eff. Sept. 1,
1999.
Sec. 27.0042. CONDITIONAL SALE TO BUILDER. (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.
(b) A contractor may not elect to purchase the residence under
Subsection (a) if:
(1) the residence is more than five years old at the time an
action is initiated; or
(2) the contractor makes such an election later than the 15th
day after the date of a final, unappealable determination of a
dispute under Subtitle D, Title 16, if applicable.
(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
(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.
(d) An offer to purchase a claimant's home that complies with
this section is considered reasonable absent clear and convincing
evidence to the contrary.
Added by Acts 2003, 78th Leg., ch. 458, Sec. 2.05, eff. Sept. 1,
2003.
Sec. 27.005. LIMITATIONS ON EFFECT OF CHAPTER. This chapter
does not create a cause of action or derivative liability or
extend a limitations period.
Added by Acts 1989, 71st Leg., ch. 1072, Sec. 1, eff. Sept. 1,
1989. Amended by Acts 1999, 76th Leg., ch. 189, Sec. 7, eff.
Sept. 1, 1999.
Sec. 27.006. CAUSATION. In an action to recover damages
resulting from a construction defect, the claimant must prove
that the damages were proximately caused by the construction
defect.
Added by Acts 1993, 73rd Leg., ch. 797, Sec. 6, eff. Aug. 30,
1993.
Sec. 27.007. DISCLOSURE STATEMENT REQUIRED. (a) A written
contract subject to this chapter, other than a contract between a
developer of a condominium and a contractor for the construction
or repair of a residence or appurtenance to a residence in a
condominium, must contain in the contract a notice printed or
typed in 10-point boldface type or the computer equivalent that
reads substantially similar to the following:
"This contract is subject to Chapter 27 of the Texas Property
Code. The provisions of that chapter may affect your right to
recover damages arising from a construction defect. If you have
a complaint concerning a construction defect and that defect has
not been corrected as may be required by law or by contract, you
must provide the notice required by Chapter 27 of the Texas
Property Code to the contractor by certified mail, return receipt
requested, not later than the 60th day before the date you file
suit to recover damages in a court of law or initiate
arbitration. The notice must refer to Chapter 27 of the Texas
Property Code and must describe the construction defect. If
requested by the contractor, you must provide the contractor an
opportunity to inspect and cure the defect as provided by Section
27.004 of the Texas Property Code."
(b) If a contract does not contain the notice required by this
section, the claimant may recover from the contractor a civil
penalty of $500 in addition to any other remedy provided by this
chapter.
(c) This section does not apply to a contract relating to a home
required to be registered under Section 426.003.
Added by Acts 1999, 76th Leg., ch. 189, Sec. 8, eff. Sept. 1,
2000. Amended by Acts 2003, 78th Leg., ch. 458, Sec. 2.06, eff.
Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
750, Sec. 2, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch.
843, Sec. 4, eff. September 1, 2007.