Understanding H.B. 2022 – Amendments to the Texas Residential Construction Liability Act

Understanding H.B. 2022 – Amendments to the Texas Residential Construction Liability Act (RCLA)

Introduction – Residential construction in Texas has been on a continuous rise, with an increasing demand for new homes. To address potential defects and protect homebuyers, the Texas Legislature recently passed House Bill 2022 (H.B. 2022), amending Chapter 27 of the Texas Property Code, which encompasses the Residential Construction Liability Act (RCLA). This blog post aims to explain the changes introduced by H.B. 2022, highlighting the key modifications and clarifications to the existing law.

Background – The Residential Construction Liability Act (RCLA) Enacted in 1989, the RCLA has been a pivotal piece of legislation in resolving residential construction defect disputes in Texas. The act enables homeowners and builders to address construction defects before resorting to litigation, fostering a more amicable and cost-effective resolution process. However, it is crucial to understand that the RCLA does not establish an independent cause of action; rather, it serves as a procedural framework to facilitate dispute resolution.

Objective of H.B. 2022 – H.B. 2022’s primary aim is to provide essential clarifications and limitations on a contractor’s liability in response to concerns about excessive litigiousness in the construction industry. Additionally, the bill seeks to encourage builders to make reasonable offers of repair to rectify defective conditions. Furthermore, the amendments aim to remove outdated references and update the statutory language to align with case law changes and industry practices.

Key Changes Introduced by H.B. 2022 Now, let’s delve into the specific amendments brought forth by H.B. 2022 to the Texas Residential Construction Liability Act:

1. Redefinition of Terms – Section 1 of H.B. 2022 amends Section 27.001 of the Property Code by redefining several terms, including “townhouse,” “appurtenance,” “construction defect,” “contractor,” “economic damages,” “residence,” and “structural failure.” Notably, it removes the existing definitions of “commission” and “third-party inspector”.
2. Removal of Conflicting Provisions – Section 2 of H.B. 2022 amends Section 27.002(b) of the Property Code by removing existing text that creates an exception regarding conflicts between Chapter 27 (RCLA) and any other law. Additionally, the bill eliminates references to Title 16 (Texas Residential Construction Commission Act) regarding prevailing provisions.
3. Limitations on Contractor Liability Section 3 of H.B. 2022 modifies Section 27.003 of the Property Code, specifying the extent of a contractor’s liability in actions related to construction defects. Under the amended provision, a contractor is liable only if a defective condition causes actual physical damage to the residence, an actual failure or lack of capability of a building component, or a verifiable danger to the occupants’ safety. The contractor is not liable for damages caused by certain factors, such as the claimant’s failure to mitigate damages or timely notify the contractor of defects.
4. Warrant of Habitability – Section 3(c) of H.B. 2022 introduces a requirement for a claimant to establish that a construction defect was latent at the time of the residence’s completion or title conveyance and rendered the residence unsuitable for its intended use as a home to maintain a claim of breach of the warranty of habitability.
5. Revised Procedures and Timelines – Section 4 of H.B. 2022 amends Section 27.004 of the Property Code, specifying the procedure for contractor inspections, claimant notice, and settlement offers. Contractors now have up to 35 days to schedule an inspection after receiving notice from the claimant and must be given the opportunity to conduct up to three inspections during that 35-day period. The contractor may provide a written offer of settlement within 60 days of receiving the notice, describing the repairs to be made and the time for completion. If the claimant rejects the offer, the contractor has an additional 10 days to make another settlement offer.
6. Effect of Arbitration on Limitations Period – Section 7 of H.B. 2022 adds Section 27.008 to the Property Code, clarifying that submitting an action subject to the RCLA to arbitration has the same effect on the running of the limitations period as filing a lawsuit in a Texas court.
7. No Waiver of RCLA Provisions – Section 7 of H.B. 2022 also adds Section 27.009 to the Property Code, stating that any attempted waiver of the provisions of the RCLA in a contract subject to the act is void.
8. Amended Statute of Limitations – HB 2024 further amends Section 16.009 of the Texas Civil Practice and Remedies Code to restrict the statute of limitations on certain claims arising out of residential construction (i.e., personal injury, wrongful death, contribution, indemnity, and injury, damage, or loss to real or personal property), being 10 years for claims against a person who constructs or repairs the defective improvement, and 6 years if the defendant is a contractor that has provided a written warranty for the residence with a minimum warranty period of one year for workmanship and materials, two years for plumbing, electrical, and HVAC, and five years for major structural components.

Conclusion The amendments introduced by H.B. 2022 to the Texas Residential Construction Liability Act (RCLA) aim to strike a balance between protecting the rights of homeowners and encouraging builders to resolve construction defect disputes amicably. The revised provisions provide clarity on a contractor’s liability, specify timelines for inspections and settlement offers, and ensure that homeowners are aware of their rights and options under the RCLA. By updating the statutory language and removing conflicting provisions, the legislature seeks to maintain an effective framework for resolving construction defect disputes in the ever-growing Texas residential construction market.