Many complex laws and rules regulate a builder’s business. One such area concerns notices that a builder is required to provide. Texas law requires that residential construction contracts include specific notices and disclosures. Below we’ll review some of these and the consequences of failing to include them.
Texas Property Code Section 53.255 provides a list of thirteen required disclosure statements for residential construction contracts.[1] These disclosures include statements such as “Get It In Writing,” “Read Before You Sign,” and “Monitor the Work.” Unlike other statutorily required disclosures and notices, there is no penalty for failing to provide this set of disclosures. However, listing these disclosures in the construction contract can benefit the builder in the event of a dispute because the disclosures set out the homeowner’s responsibilities.
Before construction begins, Texas Property Code Section 53.256 requires that the builder provide the name, address, and telephone number of each subcontractor and supplier the builder intends to use on the project. If subcontractors and suppliers change as construction progresses, the builder must amend or supplement this list within 15 days of such changes. Additionally, the notice must be boldface and typed in at least 10-point font. To make this task simpler, it is wise to keep a running list of subcontractors and suppliers throughout the project and revise that list as subcontractors and suppliers are replaced and added. In lieu of providing this list, the builder can obtain a waiver from the homeowner, which must also be boldface and typed in at least 10-point font. Texas Property Code Section 53.256(d) provides the applicable waiver language.
The Texas Residential Construction Liability Act (RCLA) is found in Chapter 27 of the Texas Property Code. As discussed in prior articles, the RCLA applies to claims in which there is physical damage to residential property (including a residence, real property, or an improvement) that arises from a construction defect. A homeowner making an RCLA claim against a builder must follow the procedures outlined in Texas Property Code § 27.001 to § 27.006. Therefore, contracts for work on residences with four units or less must include the RCLA notice provided in Texas Property Code § 27.007. If a builder fails to include the RCLA notice in the construction contract, the statute gives a homeowner the right to recover a $500 penalty.
If work is completed on a homeowner’s property and the contract is signed and negotiated somewhere other than at the contractor’s place of business, Texas Business & Commercial Code § 601.001 to § 601.205 gives the homeowner a three-day right to cancel in the contract. A builder must mention the right to cancel at the time the contract is signed. The sales notice is in addition to the Regulation Z three-day right to cancel notice required by federal law. Regulation Z is part of the federal Truth In Lending Act and applies to individuals or businesses that offer or extend credit to a consumer. Thus, builders should only provide a Regulation Z disclosure if the builder is providing financing for the homeowner.
If a builder is working on a property that qualifies as a homestead—and most homes do qualify—liens are not automatic. A builder can file a valid mechanic’s and materialman’s lien on the homestead property, but only if the correct legal process for doing so is followed. As a preliminary matter, the underlying contract used as the basis to assert the lien must be (1) written; (2) signed before work is done or materials delivered; (3) signed by both spouses; and (4) a copy has to be filed with the clerk of the county where the homestead is located. Builders should always comply with each of these requirements, but it is commonplace to overlook having just one of the spouses sign the contract. In such instances, a builder may only be left with a breach of contract claim, which is less desirable than a lien claim.
A prudent residential builder needs to be aware of the foregoing requirements and include all applicable provisions in its contracts. If you need assistance drafting your residential construction contracts or updating your existing contracts to include the mandatory provisions, let Brackett & Ellis, P.C. help you. Give us a call at 817-338-1700.
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[1] The length and amount of the required notices for residential construction contracts discussed herein are too extensive for this article. For full copies of the statutorily required notices, please visit https://ftworthconstruction.lawyer/be-in-the-know/
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