As of September 1, 2019, all bills enacted in the 2019 Texas legislative session are now in effect. Several of the newly enacted laws impact the construction industry in Texas, and are summarized below.
To address increased construction defect litigation by governmental entities, including school districts, the Legislature passed several bills to increase oversight of such litigation and provide a path for repairs to damages without protracted litigation. H.B. 1999 requires governmental entities to give contractors notice and an opportunity to make repairs before filing claims for construction defects. H.B. 2899 clarifies that a contractor who contracts with a governmental entity on a transportation project is not liable for defects, or consequences of defects, in plans and specifications provided by the governmental entity.
The Legislature also cracked down on the state and local governments’ ability to mandate the use of expensive and exclusive building products, materials, or methods. H.B. 2439 prohibits governmental entities from adopting or enforcing any rule, charter provision, ordinance, order, or other regulation that prohibits the use of a building product, material, or method in the construction of a commercial or residential structure if the building product, material, or method is approved for use by a national code.
Further, in an effort to encourage dismissal of frivolous claims, H.B. 3300 amends the Texas Civil Practice and Remedies Code to allow, rather than require, a court to award costs and attorney’s fees to the prevailing party when granting or denying a motion to dismiss a baseless cause of action.
Local governmental entities, such as school districts often sue architects, engineers, and construction contractors involved in public, commercial building projects for alleged construction defects before they are made aware of any alleged defects or offered a chance to inspect or correct them.
H.B. 1999 seeks to remedy this situation by requiring applicable governmental entities to notify each party with whom the entity contracted for the design or construction of a building with an alleged defect and to provide a chance to correct any defect before bringing any claim for damages.
Before the governmental entity files suit, a licensed engineer must inspect the improvement and draft a report identifying the defect, the current physical condition of the affected improvements, and descriptions of any modifications made by the governmental entity. Not later than the fifth day after the date a contractor receives the report, the contractor must provide a copy of the report to each subcontractor whose work is subject to the defect claim.
All contractors will then have 30 days to inspect the alleged defect and damages. After the inspection, the contractor has at least 120 days to correct any defect or enter into a separate agreement with the governmental entity to correct the defect. Any suit brought by a governmental entity who fails to follow the notice and opportunity to repair requirements will be dismissed. H.B. 1999 became effective on June 14, 2019.
H.B. 2439 was enacted in an effort to reduce and prevent burdensome regulations that affect housing affordability. H.B. 2439 amends the Texas Government Code and prohibits state and local governmental entities from requiring standards for building products, materials, and methods used in construction or renovation that were stricter than those set by a national model code. National model codes include the International Residential Code, the National Electrical Code, and the International Building Code.
The bill voids rules, charter provisions, ordinances, orders, building codes, and other regulations adopted by governmental entities that conflict with the bill's provisions. If a building product or material is approved for use by a model code, a governmental entity is no longer allowed to prohibit or limit it. The bill does allow a governmental entity that adopted a building code to amend it to conform to local concerns if the amendment does not conflict with the bill’s prohibition on limiting or restricting a product otherwise allowed under the bill.
H.B. 2439 does not apply to, among other things: (1) state or federal housing programs or other programs that require particular standards, incentives, or financing arrangements; (2) requirements considered necessary for a building to be eligible for windstorm and hail insurance coverage; (3) buildings designated as historic landmarks; or (4) municipal ordinances or rules relating to the installation of fire sprinkler protection systems.
The bill authorizes the attorney general or an aggrieved party to file an action in district court to enjoin a violation or threatened violation of the bill. The bill authorizes the court to grant appropriate relief and award the recovery of reasonable attorney’s fees and costs. H.B. 2439 waives sovereign and governmental immunity to the extent necessary to enforce the bill. H.B. 2439 became effective September 1, 2019.
For more than a century, Texas law has held that a contractor warrants the adequacy of design as to the owner of a construction project. The Texas Supreme Court has held that unless contractual language states otherwise, a contractor could be liable to the owner for defects in the design prepared by the owner’s designer. Further, in 2014, a Texas Supreme Court ruling denied contractors the ability to seek a recovery from the designer.
H.B. 2899 seeks to prevent contractors from being held responsible for design deficiencies, errors, or omissions if they were not responsible for preparing the design. The legislation provides that contractors on highway construction projects are not civilly liable or responsible for any damage to the extent caused by design defects in specifications prepared by certain governmental entities or their designers. Under the bill, the contractor is also not liable for any damage caused by negligent acts of a governmental entity or contracted third party entity in the rendition or conduct of professional duties related to the specifications. Any contractual provision that conflicts with the statutory language is void and unenforceable. H.B. 2899 became effective on June 2, 2019.
Texas law previously required a trial court in a civil proceeding to award costs and attorney’s fees to the prevailing party when granting or denying, in whole or in part, a motion to dismiss a baseless cause of action. The mandatory award of costs and attorney’s fees to the prevailing party discourages potential motions to dismiss, as both parties are reluctant to expose themselves to such costs and fees. H.B. 3300 seeks to encourage the dismissal of baseless causes of action and reduce court backlog by amending the Civil Practice and Remedies Code and making the award of costs and fees discretionary. H.B. 3300 became effective on September 1, 2019.