A Dallas jury recently awarded over $6 million to a homeowner’s association for repairs to its property.  Whether the verdict stands or falls will depend in part on how the Judge interprets the pre-suit notice and offer provisions of Texas Residential Construction Liability Act (RCLA), a Texas statute governing construction defects in residential construction and the Texas Deceptive Trade Practices—Consumer Protection Act (DTPA).

In Avalon Square Homeowners Association v. K. Hovnanian Homes – DFW, LLC, the Avalon Square Homeowners Association (Association) filed a lawsuit against the builders that constructed the Avalon Square Townhomes. In its lawsuit, the Association alleged that construction defects in the roofing, foundations, balconies, windows, brick and stone veneer, retaining walls, grading and drainage resulted in water intrusion, cracking, and structural movement, and related damage. The Association asserted claims against Ashton Dallas Residential, LLC (Ashton) and K Hovnanian Homes – DFW, LLC (KHH) for negligence, breach of fiduciary duties, breach of implied warranties, negligent misrepresentation, and violations of the DTPA.

The Association’s claims against Ashton were subject to arbitration, whereas the claims against KHH were subject to litigation. Ashton moved to compel arbitration and the claims against it were resolved no later than February 2021.

The remaining claims against KHH were tried to a jury.  On October 12, 2022, the Dallas County jury awarded the Association $6,394.632 in repair damages, $150,000 in consultants’ costs, and $500,000 for knowing violations of the DTPA. Notably, the negligence cause of action included the definition of construction defect, which is not normally included in jury charges. The term “construction defect” was defined as “a matter on which a person has a complaint against a contractor concerning the design or construction of a part of a new townhome that Avalon Square Homeowners Association is responsible to maintain, including foundations, masonry veneer and lintels, and grading and drainage. The term may include any physical damage proximately caused by a construction defect.”

Whether the verdict stands of falls will largely rest on the other jury finding that KHH made reasonable offers of repair to the Association in January and February 2019. Under both the RCLA and DTPA, a claimant is required to provide a written pre-suit notice of the alleged defects. Once the written notice is made, the contractor may make a reasonable offer of repair within a the statutorily prescribed time frames. If the contractor makes a reasonable offer to repair, the claimant’s recovery is limited to the fair market value of the contractor’s last offer. In addition, a contractor’s recovery of attorney’s fees is limited to the attorney’s fees incurred before the reasonable repair offer was rejected. KHH’s offer of repair made in 2019, an offer the jury found was reasonable, may ultimately reduce and limit the damages the Association can recover.

Avalon is a great reminder of the opportunities the RCLA and DTPA offer to limit jury verdicts and arbitration awards. Contractors working in the residential market should pay close attention to demand letters and carefully consider whether to make a reasonable offer of repair.  While many residential contractors may believe that a pre-suit offer of repair will never be accepted, the offer, even if rejected, can provide a potent defense in future litigation.

The attorneys in our Austin and Dallas office have considerable experience in negotiating contracts regarding residential construction and handling residential construction disputes.  If you should have any questions about the Avalon matter, arbitration, the RCLA or DTPA, or residential construction matters, please do not hesitate to contact us at info@gstexlaw.com.

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