In June 2023, Texas made a change to a long-standing law regarding the rights of residence owners to make claims for design or construction defects against persons who construct, alter, or repair residential property. Residential builders are not required to provide homeowners with warranties guaranteeing their work – though many choose to do so.
Instead, the Texas Legislature has given homeowners ten years from the substantial completion of a construction project to bring claims for deficiency, defect, or unsafe condition. The new law encourages contractors to include particular warranties in their construction contracts. If they choose to comply, they can limit the length of time they may be liable for defect claims. Below, our leading construction lawyers discuss how this may affect clients in Texas.
Construction Defect Claims in Texas
Chapter 27 of the Texas Property Code governs construction defect claims. Contractors are liable to residence owners for deficiencies in the design, construction, addition, alteration, or repair of new or existing residences, as well as any appurtenances to residential property (other permanent improvements).
The time periods homeowners have to sue persons for harms caused by faulty construction work are governed by Chapter 16 of the Texas Civil Practice and Remedies Code. There are three relevant time periods. Section 16.009 contains the first applicable time period. It is called a statute of repose rather than a statute of limitations because it terminates the right to make a claim whether or not any harm has been detected.
How the Statute of Repose Could Be Affected
The statute of repose is the maximum amount of time a contractor can be on the hook after the construction work is completed. The current statute of repose gives homeowners ten years from the date the work is substantially completed to bring a lawsuit for defective construction. The date harm occurs or is discovered is only relevant if it happens within the 10-year period.
If a claimant submits a written construction defect claim to a contractor during the applicable period, the statute of repose is extended for one year from the date the claim is presented. If the damage occurs during the last year of the applicable repose period, a claimant has two years from the date of damage to bring a lawsuit.
The Statute of Limitations Operates Within the Statute of Repose
If a defect or deficiency is discovered within the applicable statutory period, a statute of limitations then limits the amount of time a claimant has to file a lawsuit. In Texas, a lawsuit for construction defect and damage to property must usually be filed within two years from the time the homeowner discovered the harm. However, for claims based on breach of contract, there is a four-year statute of limitations.
The statutes of repose and limitations work together in an attempt to limit a contractor’s exposure for defect liability to those circumstances where it’s reasonable to hold the builder responsible.
Recent Changes in the Statute of Repose Made by House Bill 2024
In HB 2024, the Texas Legislature created an exception to the 10-year statute of repose for contractors who expressly include particular warranties in construction contracts.
The statute of repose is lowered to six years if a contractor’s written contract provides the following warranties:
- Minimum one year for workmanship and materials
- Minimum two years for plumbing, electrical, heating, and air conditioning
- Minimum six years for major structural components
The legislature’s statutory minimums have long been the accepted standards in the self–regulated construction industry but have not been and still are not mandated by law. For contractors who choose not to extend the suggested warranties, the 10-year statute of repose still applies.
House Bill 2022 Establishes Standards for Construction Defect Liability
In September of 2023, the Texas Legislature also made some changes to the Residential Construction Liability Act (RCLA). RCLA describes the mandatory dispute resolution process governing construction defect claims. The changes made by HB 2022 clarify when a contractor may be held liable in a construction defect case.
The new law added the following language regarding the type of harm a homeowner must prove to establish damage liability in a construction defect claim. A contractor is liable only to the extent a defect proximately causes:
- Physical damage to the residence
- Failure of a building component to perform as intended
- A verifiable danger to the safety of residents
A contractor is not liable for the damage caused by a known defect that is not reported to the contractor in a timely manner. In addition, if a construction defect claim involves a breach of the implied warranty of habitability, a claimant must prove the defect was concealed at the time the residence was completed and that it has made the residence unfit for use as a home.
What the Recent Changes Likely Mean for Builder Warranty and Defect Claims
The Texas Legislature is trying to ensure residential contractors are not sidelined by defect claims that may not be legitimate or that allege claims builders should not be found liable for. The recent change in the laws regarding construction defect lawsuits can help lower the exposure of builders to defect claims long after the work has been completed while still giving homeowners a fair opportunity to discover legitimate defects and get claims resolved.
Contractors who include the prescribed warranties in building contracts will be able to reduce the length of time they remain liable for potential construction defect claims by four years. Builders who already include express warranties in construction contracts will want to review their contracts and make appropriate changes incorporating the new laws.
Texas Construction Defect Attorneys at Fee, Smith & Sharp LLP
The business litigation attorneys at Fee, Smith & Sharp LLP have extensive knowledge about construction law in Texas and counsel our industry-leading clients with legal and business advice designed to protect their interests and further their professional goals. Our legal team defends construction companies, contractors, construction managers, and design and engineering professionals against allegations of defective design or workmanship as well as construction accident liability.
Contact us to discuss these changes to the statute of repose or any other construction-related legal concerns you have.
