The 2025 Texas Legislative session is in full swing. What bills are the Texas Senate or House currently considering that potentially impact the construction industry? We discuss a few.

 Securing Reserved Funds/Retainage.  S.B. 1612 by Sen. Nathan Johnson/H.B. 3287 by Rep. Keith Bell.   Under Texas’ lien laws, Chapter 53 of the Texas Property Code, non-public property owners are required to reserve 10 percent of the contract price until the completion of a construction project. Known as reserved funds (previously known as retainage), each payment application submitted by a contractor includes this 10 percent reduction. The reserved funds are withheld to guarantee compensation for subcontractors in the event a general contractor fails to remit payment.  This bill Increases the security of reserved funds by amending the Texas Construction Trust Fund Act, Chapter 162 of the Texas Property Code, to statutorily classify reserved funds as trust funds.  Under the lien laws, contractors may file a mechanic’s and materialman’s lien against the property if they are not paid. The Construction Trust Fund Act provides protections for construction funds outside of lien rights. It sets standards and practices for how owners, contractors, subcontractors, and suppliers manage project funds, and any misapplication or misappropriation of funds may be subject to civil liability and/or criminal penalties for the business and the individuals within the business responsible for paying the invoices. The Act currently does not include reserved funds, therefore, only 90 percent of the funds for any given project are protected by the Act.

Release of Reserved Funds/Retainage.  S.B. 1530 by Sen. Juan Hinojosa/H.B. 3290 by Rep. Keith Bell.  Amend the Property Code to increase objectivity and certainty around the timeline for release of reserved funds.  The bill would state that funds must be retained for the following time periods:

(a-1)  After the completion of work under an original contract for which a mechanic’s lien may be claimed, the owner shall reserve the funds described by Subsection (a) for a period ending the earlier of:

(1)  the 31st day after the date the work under the contract is completed; or

(2)  the 61st day after the date:

(A)  a certificate of occupancy is issued for the improvement; or

(B)  the improvement is first used for its intended purpose.

Documents Incorporated by Reference into Construction Contract.  S.B. 1040 by Sen. Tan Parker/H.B. 3874 by Rep. Richard Hayes.  These bills would amend the Business & Commerce Code to require the disclosure of documents incorporated by reference in a construction contract.  This will prevent a contractor from being bound by the terms of the contract which they were never given an opportunity to review. This bill requires all parties must know what is in the contract, including those items incorporated by reference. Since most contracts have flow-down provisions or expansive definitions of “contract documents” that incorporate upstream contracts, if passed, these bills will increase the administrative burden for most general contractors and subcontractors who retain lower tier subcontractors.

Cross-Default/Offset Clauses.  S.B. 1614 by Sen. Nathan Johnson/H.B. 3289 by Rep. Keith Bell. The purpose of these bills is to amend the private Prompt Pay Act to clarify that each construction contract stands on its own. A “good faith dispute” under the Act does not include a dispute on a separate contract. Under this bill, a party cannot refuse an amount owed because of a default under another contract.  The amendment  of the Construction Trust Fund Act will clarify contract clauses that allow the withholding of funds due to a dispute on a separate contract are contrary to Texas law and public policy.

Out of State Venue/Laws.  H.B. 2960 by Rep. Richard Hayes. The purpose of this bill is to protect contractors from being forced to litigate disputes out of state, ensuring that businesses do not have to bear the cost of long-distance legal battles or be subjected to laws not aligned with Texas industry standards. The bill is intended to protect Texas contractors, particularly smaller businesses that lack the resources to pursue or defend claims in distant jurisdictions from being bound by contract to be required to seek a judicial remedy in another state even though the project is located in Texas. The Fourteenth Court of Appeals in Houston, in the case In re MVP Terminaling, LLC, recently determined that these longstanding protections could be waived. H.B. 2960 seeks to address this issue by changing the voidable nature of construction contract provisions relating to out-of-state venues and requiring an action arising out of such a contract, to the extent a venue provision is void, to be brought only in the Texas county in which the applicable property is located, unless the parties stipulate to another venue after the dispute arises. This may have a profound impact on construction material manufacturers,, many of whom require disputes be conducted in distant jurisdictions in which they have outsized influence.

Curb Nuclear Verdicts.  S.B. 30 by Sen. Charles Schwertner/H.B. 4806 by Rep. Greg Bonnen. The purpose of these bills is to address the perception that jury verdicts in personal injury cases are becoming excessive and need to have limits places upon the amount of medical bills and intangible damages such as mental anguish which can be awarded by a jury.  The proposed limitation is:

Sec. 41.104. LIMITATIONS ON AMOUNT OF RECOVERY. (a) Provides that, in addition to any other limitation provided by law, the economic damages authorized to be awarded to a claimant for health care services provided in the past to an injured individual are limited to the sum of:

(1) amounts third-party payors paid to providers for health care services provided to the injured individual;

(2) amounts paid by the injured individual or paid on behalf of the injured individual by non-third-party payors to providers for health care services provided to the injured individual, but not to purchase an account receivable, if paid without a formal or informal agreement for the provider to refund, rebate, or remit money to the payor, injured individual, claimant, or claimant’s attorney or anyone associated with the payor, injured individual, claimant, or claimant’s attorney; and

(3)  if Subdivisions (1) and (2) do not apply, an amount that does not exceed 150 percent of the median amount paid by nongovernmental third-party payors to health care providers for the same types of services provided to the injured individual during the month in which the services were provided, as drawn from the database for the geozip in which the services were provided, if the services were provided in this state or in which The University of Texas Health Science Center at Houston is located, if the services were provided outside of this state.

SUBCHAPTER D. NONECONOMIC DAMAGES

Sec. 41.151. STANDARDS FOR RECOVERY OF CERTAIN NONECONOMIC DAMAGES. (a) Provides that damages for physical pain and suffering or for mental or emotional pain or anguish are authorized to be awarded only if the trier of fact is unanimous in finding the amount of money that will fairly and reasonably compensate the claimant for those injuries.

(b) Provides that an award of damages for physical pain and suffering or mental or emotional pain or anguish is:

(1) required to provide fair and reasonable compensation to a claimant for the claimant’s injury for the period of time the pain, suffering, or anguish has persisted or reasonably can be expected to persist in the future;

(2) required to be based on evidence of the nature, duration, and severity of the injury and reflect a rational connection, grounded in the evidence, between the injury suffered and the dollar amount necessary to provide fair and reasonable compensation to a claimant;

(3) prohibited from being used to penalize or punish a defendant, make an example to others, or serve a social good; and

(4) prohibited from including amounts that are properly considered economic losses, such as lost earnings caused by physical impairment or medical expenses incurred for emotional or psychological care.

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