Legislative Update

Construction Law

By Ben L. Aderholt

The 88th Texas Legislature made modest changes in construction law. HB 2022 amends Property Code Section 27.001 for cases arising after September 1, 2023, as to procedures and notice concerning settlement and recovery of arbitration fees and costs in residential cases. A late offer by a contractor may be permitted if the contractor was prejudiced without opportunity to inspect, if the owner fails to provide information, or if it is late due to events beyond the contractor’s control. It defines “construction defect” as a deficiency in the design, construction, or repair of a residence on a claim against a contractor. Bodily or personal injury damages are not defined as economic damages. It limits a contractor’s liability to the extent the defective condition causes any actual physical damage to the residence, an actual failure of a building component to perform its intended function, or verifiable damage to the safety of occupants. A claimant must prove the construction defect existed at the time of the construction. To claim a breach of a warranty of habitability, a claimant must establish that a construction defect was latent at the time the residence was completed or title was conveyed to the original purchaser and has rendered the residence unsuitable for its intended use.

HB 2024 amends Civil Practice and Remedies Code Section 16.009 effective June 9, 2023, as to the statute of repose for residential construction for a claim arising out of the design, construction, or repair that commences after the effective date, unless the contract was entered into before the effective date. A residence means a detached dwelling or townhouse not more than three stories. The statute of repose remains for 10 years unless a contractor has provided a written warranty and then the statute of repose is shortened to six years. A warranty must provide a minimum period of one year for workmanship and materials; two years for plumbing, electrical, heating, and air-conditioning; and six years for major structural components.

HB 2518 significantly amends the law on public work contracts for public property leased by a governmental entity. It applies to leases entered into after September 1, 2023. Leases by a governmental entity must require the contractor to provide payment and performance bonds to all subcontractors not later than the fifth day after the date the subcontract is executed. The lessee also must provide a notice of commencement prior to starting construction so that the government entity can stop the construction if it is not authorized to proceed. If a governmental entity fails to include in a lease these terms, the entity is subject to the same liability that a surety would have if the surety had issued a payment bond. This amendment of Section 2253.021 of the McGregor Act ought to remedy maneuvers by public entities to avoid requiring bonds by claiming they were not contracting with a prime contractor. This maneuver frustrated the intent of the act to protect unpaid subcontractors—especially because subcontractors have no lien rights on public projects.

HB 2007 removes the certificate of merit for certain design build claims and applies to actions commenced after September 1, 2023, on a design build project in which a governmental entity contracts with a single entity to provide both design and construction services for civil works or a highway project. So, a third-party plaintiff that is a design build group is not required to file a certificate of merit when filing a third-party claim against a professional.
Chapter 2272 of the Government Code requires notice and opportunity to inspect and correct construction defects except: claims for personal injury, survival, or wrongful death; residential construction claims; Texas Department of Transportation contracts; and a project that receives money from a state/federal highway fund and civil works projects. The amendment in HB 2965 applies to actions accruing after September 1, 2023, and makes any purported waiver void.

HB 679 applies to contracts whose first solicitation was after September 1, 2023. It amends Government Code Chapter 2252 to prohibit use of experience modifiers as a basis for solicitation and selection. A violation makes the contract voidable.

HB 3485 amends Government Code 2251.0521 whereby a vendor or subcontractor may elect not to proceed with additional work directed by an entity without a fully executed change order if the aggregate value exceeds 10% of the subcontractor contract entered into after September 1, 2023.

HB 14 revises the law on third-party review of plats. Local Government Code Chapter 247 requires third-party review or inspection of development documents submitted after September 1, 2023, when a regulatory authority does not approve a development document by the 15th day after date prescribed in the statute and does not conduct required development inspection by the 15th day after date prescribed in the statute. A third-party inspection must provide notice to the regulatory authority of the results of the inspection and must provide notice to the regulatory authority of the results of the inspection not later than the 15th day after completing the inspection. An applicant may appeal the decision not later than the 15th day after the date the decision is made. If the governing body hearing the appeal does not affirm the decision by a majority vote on or before the 60th day, the appeal is considered approved, or the inspection will be considered waived.

Grateful recognition is made to Ben Westcott and Cathy Altman, who keep the State Bar of Texas Construction Law Section current on the law.

BEN L. ADERHOLT has served for many years as a member of the editorial board of the Construction Law Journal and continues to teach construction law at South Texas College of Law Houston. He is a past president of the Houston Bar Association.