Articles Posted in Construction

Construction workers.jpgIf you hire a contractor to do improvements to real property or you are a subcontractor hired to work on real property, you should be aware that the contractor and the subcontractor is entitled to prompt payment for their services. Prompt payment to contractors is required by law in Chapter 28 of the Texas Property Code.

Chapter 28 provides that if an owner or a person authorized to act on behalf of the owner receives a written payment request from a contractor for an amount that is allowed to the contractor under the contract for properly performed work or suitably stored or specially fabricated materials, the owner must pay the amount to the contractor, less any amount withheld as authorized by law, not later than the 35th day after the date the owner receives the request for payment.

Additionally, a contractor who receives a payment from an owner in connection with a contract to improve real property must pay each of its subcontractors the portion of the owner’s payment, including interest, if any, that is attributable to work properly performed or materials suitably stored or specially fabricated as provided under the contract by that subcontractor, to the extent of that subcontractor’s interest in the owner’s payment. This payment required must be made not later than the seventh day after the date the contractor receives the owner’s payment.

index.jpegIf you hire a contractor to build a home or make repairs or alterations to an existing home you may be asked by the contractor to make construction payments up front before the contractor begins the work. While most contractors are generally honest, you frequently see stories in the news about a dishonest contractor who has taken money from the trusting property owner and failed to complete the work required by the contract. Many times victims of such scams feel they are left with no relief. That is not the case in Texas. Chapter 162 of the Texas Property Code governs contractor liability for misuse of construction payments. Unfortunately, Chapter 162 of the Texas Property Code does not provide the injured victim with any civil remedies against the contractor. However, it does provide for criminal penalties that can be imposed against a contractor who misapplies construction payments.

Under Chapter 162 of the Texas Property Code a contractor, subcontractor, or owner or an officer, director, or agent of a contractor, subcontractor, or owner, who receives “trust funds” or who has control or direction of “trust funds”, is a trustee of the “trust funds”.

Construction payments are considered trust funds if the payments are made to a contractor or subcontractor or to an officer, director, or agent of a contractor or subcontractor, under a construction contract for the improvement of real property.

175166_on_top_of_the_roof.jpgUnder Chapter 27 of the Texas Property Code, Contractors can limit their liability to Homeowners for construction defects. This Chapter of the Texas Property Code applies to any suit to recover damages resulting from a construction defect, except claims arising from personal injury, wrongful death or damage to goods.

A construction defect means any matter concerning the design, construction, or repair of a new residence or the alteration, repair or addition to an existing residence which a Homeowner has a complaint against a Contractor. A construction defect may also include physical damage to the residence or the real property on which the residence is affixed which is caused by the construction defect.

In order to be regulated by this statute, the Contractor must give the Homeowner notice that the contract is subject to Chapter 27 of the Texas Property Code. If the contract does not contain this notice, the Homeowner may recover a civil penalty of $500 from the Contractor in addition to other damages.

In suit by a Homeowner to recover damages resulting from a construction defect, a Contractor is not liable for damages which are caused by:

  • the negligence of a person other than the Contractor or an agent, employee, or subcontractor of the Contractor;
  • the failure of a person other than the Contractor to take reasonable action to mitigate their damages or to maintain the residence;
  • normal wear, tear, or deterioration;
  • normal shrinkage due to drying or settlement of construction components; or
  • the Contractor ‘s reliance on written information relating to the residence or the real property on which the residence is affixed that was obtained from official government records.

In order to assert a claim against the Contractor, the Homeowner must give the Contractor notice of the claim 60 days before the Homeowner initiates a lawsuit against the Contractor. The notice must specify in detail the construction defects that are the subject of the Homeowner’s complaint. On the request of the Contractor, the Homeowner may be required to provide the Contractor with evidence that depicts the nature of the defect and the extent of repairs necessary to remedy the defect. During the 35-day period after the date the Contractor receives the notice from the Homeowner, the Contractor is entitled to inspect the property to determine the cause of the defect and the nature and extent of any repairs necessary to remedy the defect.

The Contractor has 45 days after it receives the notice of the Homeowner’s claim to make a written offer of settlement to the Homeowner. The offer may include an agreement by the Contractor to repair or to have repaired by an independent contractor at the Contractor ‘s expense any construction defect described in the notice. The offer should also describe in reasonable detail the kind of repairs which will be made. The repairs must be made within 45 days after the Contractor receives written notice of the Homeowner’s acceptance of the settlement offer, unless completion or the repairs is delayed by the Homeowner or by events beyond the control of the Contractor.

If a Homeowner rejects the settlement offer made by the Contractor or does not permit the Contractor a reasonable opportunity to inspect or repair the defect pursuant to an accepted offer of settlement and proceeds with a lawsuit, in certain circumstances, the Homeowner may not be permitted to recover an amount in excess of the fair market value of the Contractor’s last settlement offer and may recover only the amount of costs and attorney’s fees the Homeowner incurred before the offer was rejected.

In a lawsuit against the Contractor, the Homeowner may only recover the following types of damages caused by the construction defect:

  • the cost of repairs necessary to fix the construction defect;
  • the cost of the replacement or repair of any damaged goods in the residence;
  • engineering and consulting fees;
  • expenses for temporary housing during the repair period;
  • the reduction in current market value of the residence, if any, after the construction defect is repaired if the construction defect is a structural failure; and
  • attorney’s fees.

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