PROPERTY CODE
CHAPTER 27. RESIDENTIAL CONSTRUCTION LIABILITY
§ 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" means a builder, as defined by
Section 401.003, and any person contracting with an owner for the
construction or sale of a new residence constructed by that person
or of an alteration of or addition to an existing residence, repair
of a new or existing residence, or construction, sale, alteration,
addition, or repair of an appurtenance to a new or existing
residence. The term includes:
(A) an owner, officer, director, shareholder,
partner, or employee of the contractor; and
(B) 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 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.
Added by Acts 1989, 71st Leg., ch. 1072, § 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 797, § 1, 2 eff. Aug. 30,
1993; Acts 1999, 76th Leg., ch. 189, § 1, eff. Sept. 1, 1999;
Acts 2003, 78th Leg., ch. 458, § 2.01, eff. Sept. 1, 2003.
§ 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) 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.
(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, § 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 797, § 3, eff. Aug. 30,
1993; Acts 1999, 76th Leg., ch. 189, § 2, eff. Sept. 1, 1999;
Acts 2003, 78th Leg., ch. 458, § 2.02, eff. Sept. 1, 2003.
§ 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, § 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 797, § 4, eff. Aug. 30,
1993; Acts 1999, 76th Leg., ch. 189, § 3, eff. Sept. 1, 1999;
Acts 2003, 78th Leg., ch. 458, § 2.03, eff. Sept. 1, 2003.
§ 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, § 4, eff. Sept. 1, 1999.
§ 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 dismiss 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 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 without the order of the court or
tribunal beginning on the 11th day after the date a motion to
dismiss 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 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, § 1, eff. Sept. 1, 1989.
Amended by Acts 1993, 73rd Leg., ch. 797, § 5, eff. Aug. 30,
1993; Acts 1995, 74th Leg., ch. 414, § 10, eff. Sept. 1, 1995;
Acts 1999, 76th Leg., ch. 189, § 5, eff. Sept. 1, 1999; Acts
2003, 78th Leg., ch. 458, § 2.04, eff. Sept. 1, 2003.
§ 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, § 6, eff. Sept. 1, 1999.
§ 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, § 2.05, eff. Sept. 1,
2003.
§ 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, § 1, eff. Sept. 1, 1989.
Amended by Acts 1999, 76th Leg., ch. 189, § 7, eff. Sept. 1,
1999.
§ 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, § 6, eff. Aug. 30, 1993.
§ 27.007. DISCLOSURE STATEMENT REQUIRED. (a) A
written contract subject to this chapter must contain next to the
signature lines 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 the performance of this contract. If
you have a complaint concerning a construction defect arising from
the performance of this contract and that defect has not been
corrected through normal warranty service, 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.
Added by Acts 1999, 76th Leg., ch. 189, § 8, eff. Sept. 1, 2000.
Amended by Acts 2003, 78th Leg., ch. 458, § 2.06, eff. Sept. 1,
2003.
