Residential Construction Defect Liability

Over the past several years, one of the most fascinating areas of my legal practice has been representing plaintiffs and defendants in disputes concerning residential construction defects. I continue to see more and more of these cases (likely due to the great amount of physical and economic growth in Lubbock and West Texas over the past several years), and it goes without saying that these matters can become quite complicated. Not only does construction litigation often involve numerous parties (owners, builders, contractors, and subcontractors can often all become involved), but these cases generally require substantial analysis to determine exactly what went wrong, and who is legally responsible for making things right.

Further complicating these matters is the fact that residential construction is one of few industries in Texas that the legislature has given special liability protection. These protections are codified in the Texas Residential Construction Liability Act (the “RCLA”), which outlines the process and procedures that owners of single-family homes, duplexes or triplexes must follow in order to recover damages for construction defects.

On one hand, the RCLA provides builders and contractors with some powerful protections to limit their monetary liability, which could otherwise be waived if the contractor fails to abide by the statutory process. On the other hand, homeowners are presented with several pitfalls that can endanger their suit before it is even filed, if the homeowner fails to follow the requirements of the RCLA.

It is due to these potential issues that anyone involved in a construction defect issue should seek advice from an attorney familiar with the RCLA as soon as the issue arises. As you will see below, determining whether the RCLA even applies to a given situation can be a complicated process that is highly dependent on complex statutory law and the specific facts of the situation.

When Does The Residential Construction Liability Act Apply?

In general, the RCLA applies to “any action to recover damages resulting from a construction defect.” TEX. PROP. CODE ANN. § 27.002(a). It is important to keep in mind that the RCLA is not limited to new construction, and can even extend to remodels, repairs, additions, or other alterations to a residential structure.

While this certainly seems to apply to a broad range of circumstances, additional definitions within the statute present specific problems for those not familiar with the RCLA. The key term “Construction defect” is defined as “a matter concerning the design, construction or repair of a new residence … on which a person has a complaint against a contractor“. Id. at § 27.001(2) (emphasis added). However, the term “contractor” contained in that definition raises difficulties in applying the statute. This is due to the fact that the definition that the RCLA relies upon to determine who a “contractor” is partially incorporates the term “builder” as used in a completely different statutue, the Texas Residential Construction Commission Act (the “TRCCA”). And as if defining this term wasn’t complicated enough, the TRCCA was not extended by the state legislature by its “sunset” deadline, leaving us with a situation where the RCLA refers to a completely different act that is no longer current law.

While courts have found ways to cope with the fact that a vital legal definition in the RCLA relies on a definition in another statute that is no longer current law, this should give one an idea of how procedurally complex residential construction matters can become. However, determining the applicability of the process to a particular situation is only the first step in a lengthy process, which could significantly impact the case before a lawsuit is even filed.

Deadlines, Notices & Processes

If the RCLA applies to a dispute, a claimant or potential plaintiff is required to give the contractor notice by certified mail sixty days before filing suit. This notice must specify in reasonable detail the defects that the claimant is alleging. If proper notice is not provided before the claimant files suit, the lawsuit can be suspended (via a process known as “abatement”) until proper notice is given.

During the 60-day period prior to the initiation of litigation, a contractor may request that the claimant provide evidence that illustrates the nature and cause of the defect and the nature and extent of repairs necessary to remedy the defect. A claimant must then respond with documentary evidence, which could include expert reports, photographs, and video.

The contractor may also make a written request for an inspection of the premises to determine the nature and cause of the defects and to determine the scope of necessary repairs. Specific deadlines apply to any request by the contractor. Thus, it is important that a contractor seek legal advice from an attorney familiar with the RCLA and its deadlines as soon as possible to avoid inadvertent waiver of the protections afforded to them under the RCLA.

In addition to the clarification and inspection opportunities, upon receiving an RCLA notice letter, a contractor may also make a written offer of settlement to the claimant. The settlement offer can be for monetary consideration, or the contractor may offer to purchase the residence. The offer may instead include an agreement by the contractor to repair the problem, or an offer to have the defect repaired by an independent contractor partially or totally at the contractor’s expense, or at a reduced rate to the claimant.

Regardless, such a settlement offer must be made within a certain time frame, and must describe in reasonable detail the kind of repairs that will be made. The settlement offer must also be sent by certified mail, return receipt requested, to the claimant’s attorney or the claimant’s last known address. Further deadlines apply subsequent to any offer. These deadlines may include a deadline for the claimant to accept the offer, a deadline for the claimant to respond to the offer considering it as “unreasonable”, or a deadline for the contractor to make a supplemental written offer of settlement to any response by the claimant.

The intention of this complex (and often lengthy) process is to encourage early analysis and settlement discussions between the parties. Indeed, there are some incentives should a contractor or builder elect to participate in the notice and offer process. If the matter proceeds to litigation and it is shown that the contractor made a timely and reasonable settlement offer of settlement, which was then rejected by the claimant (or the claimant did not permit the contractor a reasonable opportunity to inspect or repair the defect) the claimant is limited in the types and amounts of damages they may recover.

This limitation on available damages can prove key to a favorable resolution for a defendant, and can prove fatal to the case for a plaintiff. Thus, it is key that a party on either side of a construction dispute follows the RCLA process in order to protect their rights and ensure that their case isn’t over before it even begins. Again, an attorney familiar with the RCLA can prove instrumental to navigating this process towards a positive outcome.

A Skilled Attorney Can Help Navigate The Residential Construction Liability Act

The information outlined above is merely a basic summary of the statutory process governing residential construction defects in Texas. Unfortunately, it barely scratches of the surface of what can be involved in a construction dispute and doesn’t begin to explore all applicable laws and relevant procedural aspects governing construction disputes and litigation in Texas.

Once again, if you have a construction law issue, I would recommend consulting an experienced attorney as soon as possible. A skilled lawyer can help you or your business navigate every aspect of your construction dispute and help protect your rights.

Please feel free to make a call today to schedule a free consultation with me to discuss your construction law needs.

– Thomason

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