The Teas Residential Construction Act

Homeowners and builders can turn to new state agency to resolve disputes.

by Ron Walker   For the first time in Texas history, builders must register with a state agency. House Bill 730, which is known as the Texas Residential Construction Act, created the Texas Residential Construction Commission (TRCC). The act makes it unlawful for a person to act as a builder if he is not registered.

The act defines a builder as a person who for compensation constructs, supervises, or manages the construction of a new home, a material improvement to a home except a roof, or an improvement to the interior of an existing home if the cost is greater than $20,000.

The TRCC has proposed to adopt a definition of “material improvement” to mean any modification to an existing home that increases the living area and that modifies the foundation, perimeter walls, or roof.

Tradesmen licensed by a state agency or political subdivision in the performance of their profession (for example, electricians and plumbers) are not builders. The Texas Residential Construction Act does not apply to an owner who builds or improves his own home that is used as the owner’s primary residence for at least one year after completion of the construction, or a homeowner, broker, or property manager who arranges for the construction of an improvement to a home owned by the homeowner.

The act also requires the TRCC to adopt uniform building and performance standards for residential construction and to adopt statutory warranties for residential construction. The agency also must administer a dispute-resolution process for builders and homeowners that will determine if a construction defect exists, and if so, prescribe any required repairs.
Under the act, a builder must register each home the builder constructs shortly after closing (or the completion of the construction if a sale is not involved). Builders must pay a fee when registering the home or job.

In a dispute over a construction defect, either the homeowner or the builder may submit a request to the commission for a state-sponsored inspection and participation in the TRCC-administered dispute-resolution process. The request must be submitted within two years after discovery of the construction defect and not later than 30 days after the expiration of the applicable warranty period. However, the homeowner must first notify the builder in writing of each alleged construction defect at least 30 days before filing the request. The homeowner must provide the builder with a reasonable opportunity to inspect the defect after sending the notice to the builder. It is important for the homeowner to closely follow the procedures when submitting a request to the TRCC.

This article merely summarizes the overall process. The public may obtain more information about the inspection and dispute-resolution process by contacting the TRCC directly or visiting its Web site at www.trcc.state.tx.us. After receipt of the request, the TRCC will appoint a third-party inspector, who will inspect the alleged defect and make recommendations—based on any applicable warranty and standards—including any recommended repairs. If either party wishes, they may appeal the inspector’s recommendation to a review panel. The final findings under this procedure are critical, because they constitute a presumption as to the existence or nonexistence of a construction defect and as to the reasonable manner of repair, if any.

It appears the intent of the legislation is to reduce litigation over construction defects, as builders probably will not contest the findings and will likely make repairs or remit appropriate compensation for the repair if a construction defect is determined to exist. On the flip side, a homeowner who sees that a state agency has determined that a construction defect does not exist probably will not pursue his claim.

The person submitting the request must, at the time the request is submitted, pay any amount required by the commission to cover the expenses of the third-party inspector. There are specific time limits by which the inspectors must complete their recommendations.

The TRCC is authorized to take disciplinary action against a registered builder on several grounds. Some of the more noteworthy are:
• Misappropriation of trust funds
• Naming false consideration in a contract
• Discriminating on the basis of a protected class
• Publishing false or misleading advertisements
• Nonpayment of a final, non-appealable judgment arising from a construction defect or other transaction between the person and a homeowner

The act requires the TRCC to adopt limited statutory warranties and building and performance standards.

The warranty periods must be:
• One year for workmanship and materials
• Two years for plumbing, electrical, heating,
and air-conditioning
• 10 years for major structural items.

The building standards the TRCC is required to adopt must substantially comply with cited applicable codes for various components (for example, standards of the International Code Council, the National Electrical Code, standards that are not less stringent than required by HUD, and the International Residential Code). The warranties established under the act supersede all implied warranties. A contract between a builder and homeowner may not waive the statutory warranties and building and performance standards or the warranty of habitability. The homeowner and builder may agree to more-stringent warranties and standards.

Any homeowner who has a dispute with a builder concerning a construction defect should contact the TRCC for information as to how to file a complaint or to how to proceed with the state-sponsored dispute-resolution process.

Ron Walker is director of legal affairs for the Texas Association of REALTORS®.

Photo©Photodisc

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