Whether you are a homeowner or a contractor, Chapter 27 of the Texas Property Code, also known as the Residential Construction Liability Act (“RCLA”), applies to you if there is a dispute regarding alleged construction defects at your home or the home you built/performed construction work. Does not sound like something good, to have to learn about a whole chapter of the Texas Property Code, but hopefully the following summary will be helpful.
The RCLA is not an especially harsh law on its face, but regardless of which side you are on, you must follow the RCLA procedures. Generally, the RCLA is designed to promote settlement. If the RCLA notice, inspection and offer procedures are followed, it gives both sides ample opportunities to reach a resolution without the need for arbitration or a lawsuit in Court.
Many will argue that the RCLA is skewed somewhat in favor of the homeowner, but again, if following the RCLA procedures results in a settlement/repairs, it seems to be the best option for both sides. The RCLA certainly provides pre-lawsuit options that may reduce a contractor’s liability and damages if there truly is an issue with the construction of a home. If we look at it more simply, the RCLA provides a step-by-step framework for homeowners to initiate a claim against a homebuilder, as well as sets deadlines for a builder to respond.
The RCLA is very broad. It applies to “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.” So where to begin? The RCLA is more typically initiated by a homeowner. The initial step for a homeowner is as follows:
Does the RCLA apply?
First, is there a “construction defect” and how is that defined under the RCLA?
Texas law defines “construction defect” as “…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.”
Second, the RCLA mandates that a homeowner must follow specific notice provisions for a valid claim: The homeowner must provide the contractor with 60 days written notice of the alleged construction defects, delivered via Certified Mail Return Receipt Requested (“CMRRR”). [Note: This means notice could be considered invalid if not delivered by CMRRR.] The notice letter should provide some salient details about the alleged construction defects. You want to get the contractor’s attention, so provide some information that makes them take notice. It could help you down the line if for whatever reason the contractor is less than attentive.
If you are the homeowner, you are now in a waiting period for a response from your builder.
If I am a contractor and I receive a notice letter from a homeowner, what do I do?
Do not shred it and think “oh, the homeowner is crazy, this will all go away by itself.” It is highly likely the notice letter bears the name of an attorney at the top or was “ghost drafted” by an attorney for the homeowner. Take action as soon as possible after you receive a notice letter. If you have an attorney, you may want to get him/her involved at this stage. And frankly, if you already have or plan to hire an attorney, you need an attorney that is experienced in defending RCLA cases. This is not a job for your buddy down the street who is criminal defense lawyer. That would be like hiring a podiatrist to perform surgery on your brain. But, if you choose to proceed without an attorney, you need to at minimum, during the first week that you receive the notice letter, send a copy of it to your insurance carrier and to all of your subs or professionals (engineer & architect) who had anything to do with any part of the home at the areas/rooms where the homeowner has allege contain construction defects. A contractor’s notice to subs is not mandated by the RCLA, but as a home builder or general contractor, often you did not personally perform the construction work, so the subs need to be part of the solution if there is a possibility they could have caused the problem(s).
In addition, upon request of the contractor, the homeowner is required to provide “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 the Texas Rules of Civil Procedure. Therefore, another step to take as soon as possible after receipt of a notice letter is to formally request, in writing, that the homeowner produce all evidence.
Inspection of the Property.
The contractor has 35 days after receipt of the notice letter to submit a written request to inspect the property. The inspection provides an opportunity “to determine the nature and cause of the defect and the nature and extent of repairs necessary to remedy the defect.” The homeowner is required to provide a reasonable opportunity for the contractor to inspect the property.
However, keep in mind that under the RCLA, the contractor only has 45 days from the date the notice was given to make a written offer of settlement. Therefore, a contractor needs to be on top of sending notice to subs and requesting an inspection date. Ideally, an inspection should be completed within 21 days of receiving the homeowner’s notice letter, so that there is time to communicate with the subs, hire/coordinate with experts and consider any repairs that may be justified under the circumstances or whether repairs are not needed/not warranted, or if there are defenses to be considered (see below).
Written Offer of Settlement.
The written offer to make repairs or otherwise settle the claim should include an agreement by the contractor to repair the construction defect or to cover the expense of having another contractor correct the issue. The settlement offer must include information relating to the defect, its repair, and any consequences that might arise from either.
Once the homeowner receives the contractor’s offer, the homeowner must respond in writing within 25 days as to whether they accept the proposed terms or if not, the homeowner must send a written response that includes in reasonable detail of the reasons why the homeowner deems the repair offer unreasonable. If the homeowner rejects the settlement offer, the contractor is allowed to make a counteroffer within 10 days.
If the homeowner agrees to the terms of the proposed settlement offer, the repairs must be completed within 45 days of the homeowner’s acceptance of the settlement, unless there are factors outside the parties’ control. However, in the event of delays, the contractor should document the reasons and at least attempt to get the homeowner to confirm understanding via email. In other words, you need something in writing to show that you at least notified the homeowner about the reason for a delay in performing agreed repairs.
If No Agreement on Repairs/Settlement.
Depending on the terms of the contract between the homeowner and contractor, the next step may be mediation, arbitration or litigation.
Contractor’s Defenses to RCLA Claims.
It important for both the homeowner and contractor to understand that if a matter proceeds to arbitration or litigation, there are a number of defenses to RCLA claims that may serve to prevent a contractor from being liable for any percentage of damages:
- Normal wear, tear, or deterioration.
- Negligence of a person other than the contractor or an agent, employee, or subcontractor of the contractor.
- Failure of the homeowner to maintain the house/property.
- Failure of a person other than the contractor or an agent, employee, or subcontractor of the contractor to mitigate damages.
- Normal/seasonal shrinkage due to drying or settlement.
- The contractor’s reliance on written information relating to the residence obtained by official government records-if false or inaccurate.
- Frivolous suit brought in bad faith or for the purposes of harassment may make homeowner liable to pay the contractor’s reasonable and necessary attorney’s fees and court costs.
KMDA’s construction law attorneys have decades of experience both defending and prosecuting RCLA/construction defect claims. Please feel free to contact us.