The Residential Construction Liability Act may Affect your Post-Harvey Dispute

By Jarett Dillard

In the wake of Hurricane Harvey and other episodes of flooding in Texas, many Texans are currently engaging residential contractors for the repairs and/or renovations of their damaged homes. Unfortunately, some of these repairs and renovations will not turn out as expected and will lead to claims which are governed by the Residential Construction Liability Act (the “RCLA”).

Construction Defect: The Texas Legislature intended the RCLA to govern a wide variety of issues that arise under a residential construction project. The term “construction defect” is broadly defined to include any “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.” Fairly recent case law also demonstrates that construction defects can also include delays resulting from subsequent repairs or alterations attributable to a contractor’s work on a residential construction project. Timmerman v. Dale, 397 S.W.3d 327 (Tex. App.—Dallas 2013, pet. denied).

Pre-Suit Notice and Offer of Settlement: In order to comply with the RCLA, a claimant must follow the Notice of Offer and Settlement provisions. Tex. Prop. Code § 27.004. In short, the following provides an overview of the RCLA’s notice and settlement requirements:

  • Prior to filing for suit or arbitration, a homeowner who complains of a construction defect must give the contractor sixty (60) days written notice of the claim;
  • Upon notice, the contractor is granted thirty-five (35) days to inspect the property and forty-five (45) days to make a written offer of settlement. These timelines run concurrently, commencing from the date the contractor received notice of the complaint. The contractor’s offer of settlement may include an agreement by the contractor to repair the damage that forms the subject of the complaint.
  • If a claimant rejects a reasonable offer or does not permit the contractor a reasonable opportunity to inspect or repair the condition, the claimant may not recover an amount in excess of (1) the fair market value of the contractor’s last offer of settlement, or (2) the amount of a reasonable monetary settlement offer to purchase the residence

It should be noted that the limiting effect of 27.004 (e) is only applicable if the contractor makes a “reasonable offer” and the claimant subsequently rejects that offer. See Perry Homes v. Alwattari, 33 S.W.3d 376, 382 (Tex. App.—Fort Worth 2000, pet. denied).

Available Damages Under the RCLA When a Reasonable Offer is not Made: Except as provided in 27.004(e), the RCLA limits a claimant’s recovery to specifically prescribed economic damages, proximately caused by a construction defect, which include the following: (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; (5) the reduction in 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.

Contractor’s Affirmative Defenses: Under section 27.003, the Contractor is not liable for any percentage of damages caused by: (1) the negligence of a person other than the contractor or an agent, employee, or subcontractor of the contractor; (2) failure of a person other than the contractor or an agent, employee, or subcontractor of the contractor to take reasonable action to mitigate the damages; (3) normal wear, tear, or deterioration; (4) normal shrinkage due to drying or settlement of the construction components within the tolerance of building standards; or (5) the contractor’s reliance of written information relating to the residence, appurtenance, or real property on which the residence or 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. In addition, if the Contractor is not provided notice of the defect before repairs are made by the homeowner or an insurance company on the homeowner’s behalf or other subrogee, then the Contractor will not be liable for any of the repairs performed.

Notice is critical under the RCLA. If a lawsuit or arbitration is started by the homeowner before notice and an opportunity to inspect is given to the contractor of the defect, then the contractor can seek an abatement of the legal proceeding, pending an inspection and reasonable settlement offer.

Mediation: The RCLA authorizes the contractor or the claimant to compel mediation if the damages arising from the construction defect are greater than $7,500. To compel mediation the claimant or contractor need only file a Motion to Compel Mediation by the 90th day after the date the suit is filed. Tex. Prop. Code. § 27.0041.

In sum, both homeowners and contractors have good reason to seek construction law counsel to help guide them through the process to protect their rights.

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