HB 2024 – Statute of Repose Shortened to Six Years if a Builder Provides a Warranty
A statute of repose is the outside deadline for a claimant to bring a legal action. For nearly 50 years, Texas has imposed a ten-year statute of repose on suits against builders and contractors who construct or repair improvements to real property.
HB 2024 provides an exception to the ten-year statute of repose found at Section 16.009 of the Texas Civil Practice & Remedies Code. Under the exception, the statute of repose is shortened to six years if a builder or contractor provides a written warranty that includes a one-year warranty for workmanship and materials, a two-year warranty for plumbing, electrical, heating, and air-conditioning delivery systems, and a six-year warranty for major structural components.
The exception is limited to: 1) a detached one-family dwelling; 2) a detached two-family dwelling; or 3) a townhouse up to three stories in height with a separate means of egress. The exception applies to condominiums as long as they fall within one of the three categories described above.
What You Need to Know: Any builder who constructs a detached one family dwelling or a two family dwelling or townhouses up to three stories should consider providing a warranty with minimum coverage terms to qualify for the shortened statute of repose. Any developer who hires a builder or general contractor to construct improvements should carefully review the warranty proposed to be delivered by the builder or general contractor.
Practice Tip: Consider adding a statement in the conveyance deed that describes the warranty provided so any grantee is put on notice of the facts that would give rise to the shorter repose period.
Effective June 9, 2023
House Bill 2022 – Changes to the Residential Construction Liability Act (RCLA)
RCLA is a mandatory dispute resolution process that applies to construction defects. A claimant must provide notice and an opportunity to inspect and correct before filing suit. The procedures are outlined in Chapter 27 of the Texas Property Code.
HB 2022 modifies RCLA by: 1) by removing language referring to the defunct Texas Residential Construction Commission; 2) expanding definitions; 3) providing additional procedures for special circumstances; and 4) limiting liability for certain defective conditions. HB 2022:
- Limits liability for a defective condition to situations where the defect proximately causes actual physical damage, an actual failure or lack of capability of a building component to perform its intended function or purpose, or a verifiable danger to the safety of the occupants of a residence.
- Excludes from the definition of “economic damages” any damages for bodily or personal injury.
- Limits a contractor from liability for damages caused by an owner’s failure to timely notify the contractor of a defect.
- Requires a claimant alleging a latent defect to establish a construction defect was latent on the date the residence was completed or title was conveyed to the original purchaser and the defect has rendered the residence unsuitable for its intended use.
- Provides the contactor the opportunity to conduct up to three inspections during the inspection period.
- Provides flexibility with regard to the deadline by which a contractor may make a written settlement offer and the deadline by which repairs must be made.
- Requires a claimant who seeks to recover damages to prove the construction defect existed at the time of completion of the construction, alteration, or repair.
- Provides that any attempted waiver of the provisions of Chapter 27 in a contract subject to Chapter 27 is void.
What You Need To Know: The RCLA process has long been recognized as a procedural minefield and a confusing amalgamation of band-aid legislative changes. RCLA has been substantially overhauled so it now provides claimants and respondents with more information about their respective rights and obligations under Chapter 27.
Practice Tip: Review the terms of your dispute resolution clauses in any contracts, governing documents, and warranties to ensure the terms are consistent with the new requirements of Chapter 27 of the Texas Property Code.
Effective September 1, 2023
Contacts:
Preston Patten | 512.370.2856 | ppatten@winstead.com
Alex Valdes | 512.370.2842 | avaldes@winstead.com
Sarah Hanes | 214.745.5467 | shanes@winstead.com
Kristen Sherwin | 214.745.5392 | ksherwin@winstead.com
Disclaimer: Content contained within this news alert provides information on general legal issues and is not intended to provide advice on any specific legal matter or factual situation. This information is not intended to create, and receipt of it does not constitute a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel.