HBA-DMD H.B. 1455 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1455 By: Goodman Civil Practices 3/14/1999 Introduced BACKGROUND AND PURPOSE Currently, the Residential Construction Liability Act (Section 27.001, Property Code) requires homeowners to provide notice of specific complaints to the builder, who has 45 days to inspect the alleged defects and make an offer of repair or settlement. If the parties proceed to suit without repairs, the amount of damages which are recoverable depend on the reasonableness of the builder's original offer. There are two damage measures, one which applies if the builder's offer was reasonable, and one which applies if the builder's offer was not reasonable. H.B. 1455 sets forth the scope of this chapter and establishes reasons for which a contractor is not liable for the cost of repairs. This bill provides penalties for filing a frivolous suit. This bill also requires the claimant to provide evidence of residential construction defects, and establishes a mediation process for resolving disputes. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 27.001(2) and (3), Property Code, to add to the existing definitions of "construction defect" and "contractor." Makes conforming and nonsubstantive changes. SECTION 2. Amends Section 27.002, Property Code, to establish that this chapter applies to any action to recover damages resulting in whole or in part from a construction defect, except a claim for personal injury, survival, or wrongful death or for damage to goods, and any subsequent purchaser of a residence who files a claim against a contractor. Redesignates portions of text from Subsection (a) to Subsection (b) and redesignates Subsection (b) to Subsection (c). Makes conforming changes. SECTION 3. Amends Section 27.003(a), Property Code, as follows: (a) Provides that a contractor is not liable in an action to recover damages resulting from a construction defect, if the claimant, an assignee of the claimant, or a person subrogated to the rights of a claimant (claimant or assignee) fails to provide the written notice to the contractor required by Section 27.004(a), for the cost of any repairs or any percentage of damages caused by repairs, made at the request of a claimant or assignee to a construction defect by a person other than the contractor or an agent, employee, or subcontractor of the contractor. SECTION 4. Amends Chapter 27, Property Code, by adding Section 27.0031, as follows: Sec. 27.0031. FRIVOLOUS SUIT; HARASSMENT. Establishes that a party is liable to the defendant for reasonable and necessary attorney's fees and court costs, if the party files a suit that is groundless under this chapter or brings a suit in bad faith or for the purposes of harassment. SECTION 5. Amends Sections 27.004(a), (d), (f), (g), (i), and (k), Property Code, as follows: (a) Requires a claimant who files suit in order to seek damages arising from a construction defect, to include with the notice 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 (Permissible Discovery: Forms and Scope; Work Product; Protective Orders: Definitions), Texas Rules of Civil Procedure, in a suit filed under this chapter. (d) Requires the court to abate a suit governed by this chapter, rather than section, provided that Subsection (c) does not apply and after a hearing, the court finds that the contractor is entitled to an abatement because the claimant failed to provide the notice or to give the contractor a reasonable opportunity to inspect the property, rather than because notice was not provided, as required by Subsection (a). Provides that a suit is automatically abated without the order of the court beginning 11 days after a plea in abatement is filed provided that the plea in abatement is verified and alleges that the person against whom the suit is pending was not given a reasonable opportunity to inspect the property as required by Subsection (a). (f) Prohibits a claimant who rejects a reasonable offer, rather than unreasonably rejects an offer, from recovering an amount greater than the reasonable cost of the offered repairs which are necessary to cure the construction defect and which are the responsibility of the contractor; or the amount of a reasonable monetary settlement offer made under Subsection (n). Makes conforming changes. (g) Specifies the subsections for limitations on damages and defenses to liability which do not apply, rather than shall not apply, if a contractor fails to make a reasonable offer under this section, or fails to make a reasonable attempt to complete the repairs specified in an accepted offer made under this section, or fails to complete, in a good and workmanlike manner, the repairs specified in an accepted offer made under this section. (i) Prohibits the total damages awarded in a suit subject to this chapter from exceeding the claimant's purchase price for the residence or the current fair market value of the residence without the construction defect, whichever is greater. (k) Requires the trier of fact to determine the reasonableness of an offer of settlement, rather than the reasonableness of a rejection of an offer, made under this section. SECTION 6. Amends Chapter 27, Property Code, by adding Section 27.0041, as follows: Sec. 27.0041. MEDIATION. (a) Authorizes a claimant who is seeking damages from a contractor, arising from a construction defect, in an amount greater than $7,500, or the contractor to file a motion to compel mediation of the dispute no later than 90 days after the suit is filed. (b) Requires the court, no later than 30 days after the motion is filed under Subsection (a), to order the parties to mediate the dispute and if the parties cannot agree on the appointment of a mediator, the court is required to appoint the mediator. (c) Requires the court to order the parties to begin mediation of the dispute no later than 30 days after the court enters its order under Subsection (b), unless the parties agree otherwise or the court determines additional time is required. Authorizes the court, upon determining that additional time is required, to order the parties to begin mediation of the dispute no later than 60 days after the court enters its order under Subsection (b). (d) Requires each party to participate in the mediation and contribute equally to the cost of the mediation, unless each party who has appeared in the suit filed under this chapter agrees otherwise. (e) Sets forth that Section 154.023 (Mediation), Civil Practice and Remedies Code, and Subchapters C (Impartial Third Parties) and D (Miscellaneous Provisions), Chapter 154 (Alternative Dispute Resolution Procedures), Civil Practice and Remedies Code, applies to a mediation under this section to the extent those laws do not conflict with this section. SECTION 7.Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 8.Emergency clause.