CHAPTER 27. RESIDENTIAL CONSTRUCTION LIABILITY

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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.

(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;

(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.

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.

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.

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

(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.

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.

State Codes and Statutes

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