What rights do contractors have to inspect and repair alleged defects in projects?  How are those rights exercised and preserved? Recent events have breathed newfound urgency into these questions. The unparalleled construction activity in the State over the past decade combined with the rapid deceleration of the national economy due the novel coronavirus pandemic promises to bring an uptick in claims relating to construction defects, alleged or real.   

The answers depend, in part, on the nature of the project.  For residential construction, which includes pools and condominiums, at least one and possibly two statutes give contractors limited rights to inspect and offer repairs.   Understanding your rights under these statutes may assist in reducing the severity or longevity of claims. 

A.     The Texas Residential Construction Liability Act (RCLA)

One right-to-repair statute that affects many residential projects, including condominiums, is the RCLA.  Found in Chapter 27 of the Texas Property Code, the RCLA provides a framework for a contractor to inspect and offer repairs for alleged defects. 

The scope of the RCLA is broad.  It applies to any action to recover damages or other relief arising from construction defects.  Subsequent purchasers of residences are also subject to the statute.  Construction defects, a defined term under the statute, include “matters arising from” design, construction or repair of a new of existing residence or an appurtenance, such as a swimming pool.  Residences, another defined term, includes single-family houses, duplexes up to quadruplexes, and units and common elements of condominium or cooperative projects.

The RCLA provides a back-and-forth volleyball-like procedure for the claimant and contractor to attempt to resolve the claim.  To exercise the inspection and right-to-repair provisions of the RCLA, the claimant, typically an owner or the association responsible for maintaining the common elements of a condominium, and the contractor have to adhere to certain requirements.    Most of those requirements must be met within relatively tight deadlines, though the deadlines may be extended by agreement of the parties.

1. Volley 1—Notice by Claimant: A claimant is required to provide written notice to the contractor of the alleged construction defects.   The notice must provide “reasonable detail” of the alleged defects and, except in unusual situations, must be sent 60 days before the claimant files suit against the contractor. The notice must be sent via certified mail, return receipt requested. 

2. Inspection by Contractor: Within 35 days of receiving notice, a contractor has a right to inspect the property.  The intended purpose of the inspection is to allow the contractor to determine the nature and cause of the alleged defects and the extent of repairs necessary to remedy them.  The contractor must request an inspection to trigger the right. 

3. Offer by Contractor: Within 45 days of receiving the pre-suit notice, the contractor may make a written offer of settlement to the claimant. The contractor may offer to make repairs itself or retain an independent contractor to do so.  The contractor may offer to partially or totally pay for the repairs or to charge the claimant at a reduced rate for them.  The offer to repair must describe in reasonable detail the kind of repairs the contractor is offering to make.   As an alternative to offering repairs, the contractor may also make a monetary offer of settlement to claimant or under more limited circumstances, offer to purchase claimant’s residence or property. 

4. Volley 2—Response by Claimant: If the claimant considers the contractor’s offer unreasonable, the claimant must advise the contractor in writing and in reasonable detail of the reasons why.  The claimant has 25 days to send the response.  If the claimant does not respond at all, the RCLA deems that the claimant has rejected the contractor’s offer. 

5. Supplemental Offer by Contractor: After receipt of the claimant’s response, the contractor may make a supplemental written offer to claimant.  The supplemental offer must be made within 10 days of receipt of the contractor’s rejection. 

Aside from allowing the contractor to resolve claims before they go into suit, the offer-and-response process of the RCLA may also allow a contractor to limit the types and amounts of damages a claimant may recover if the case proceeds to suit.  For instance, if a claimant rejects the contractor’s reasonable repair offer, the claimant’s recovery is limited to the fair market value of the contractor’s last offer. Of equal importance, under the same circumstances, a claimant would only be allowed to recover its attorney’s fees and costs incurred before the offer was rejected.  Since attorney’s fees in construction disputes can be significant, limiting a claimant’s recovery of them may provide powerful incentive to resolve the claim pre-suit.

B.    Uniform Condominium Act (UCA)

A second statute that provides a right-to-repair to contractors is the UCA.  The UCA, contained in Chapter 82 of the Texas Property Code, applies to all commercial, industrial, residential, and other types of condominiums for which the condominium declaration is recorded on or after January 1, 1994. If the condominium contains 8 or more units, the UCA requires the condominium association follow certain procedures before filing suit for alleged design or construction defects.  The UCA’s procedure is not as detailed or contractor-friendly as the RCLA.  

1. Association’s Inspection: In addition to any preconditions in the declaration, an association must obtain an inspection and written independent third-party report from a licensed professional engineer that:

• • • • Identifies the specific units or common elements subject to the claim; 
      • Describes the present physical condition of the units or common elements subject to the claim; and 
      • Describes any modifications, maintenance, or repairs performed by the unit owners or the association.

The association must also obtain approval from unit owners holding more than 50% of the total votes allocated under the declaration at a regular, annual, or special meeting to file suit. 

2. Notice of Inspection by Association: The association must provide written notice 10 days before the date of the inspection. The notice must be sent to each party subject to a claim for the alleged defect.  In addition, the notice must identify the licensed professional engineer engaged to prepare the report, the specific units or common elements to be inspected, and the date and time the inspection will occur.

3. Contractor’s Attendance at Association’s Inspection: Each party subject to a claim may attend the association’s inspection.

4. Contractor’s Opportunity to Inspect and Repair: The association must provide a copy of the professional engineer’s report to the parties subject to a claim.  Those parties have at least 90 days after the date of completion of the professional engineer’s report to inspect and correct any condition identified in the report.  The professional engineer’s report and the contractor’s offer of repair must be provided to each unit owner in advance of a meeting at which the unit owners vote on whether to authorize the association to file suit for alleged defects. 

C.     Declarations

As the UCA mentions, the association is required to follow any pre-suit conditions and procedures that may be contained in the condominium declaration. The declaration may contain risk shifting provisions that limit or altogether prohibit the association from filing suit.  It is advisable that, if you have a claim involving a condominium project, you carefully read the declaration and any amendments that may have been filed. 

As with all issues involving the interpretation of legal rights and remedies, consulting qualified legal counsel is always recommended.  The attorneys in our Austin and Dallas offices are available to answer any questions you may have.  You may contact us at info@gstexlaw.com with any questions you may have.

 

Legal Disclaimers

This blog is made available by Gerstle Snelson, LLP for educational purposes and to provide general information about the law, only.  Neither this document nor the information contained in it is intended to constitute legal advice on any specific matter or of a general nature.  Use of the blog does not create an attorney-client relationship with Gerstle Snelson, LLP where one does not already exist with the firm.  This blog should not be used a substitute for competent legal advice from a licensed attorney.   

©Gerstle Snelson, LLP 2020.  All rights reserved.  Any authorized reprint or use of this material is prohibited.  No part of this blog may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system without the express written permission of Gerstle Snelson, LLP.