Within no less than 60 days prior to filing a lawsuit or initiating binding arbitration against a Builder or Contractor to recover damages arising out of defective workmanship, Homeowners must first satisfy the mandatory requirements set forth in Chapter 27 of the Texas Property Code .  Chapter 27, also referred to as the Residential Construction Liability Act (“RCLA”) was enacted in 1987, and has been amended five times since, to include the most recent amendments which came into effect on September 1, 2023.  Chapter 27 was enacted to promote settlement discussions between Homeowners and Builders/Contractors, and to provide the parties with one last opportunity to resolve their dispute before initiating formal litigation.  This is an important step in the claim process and as such, either consulting with or engaging a qualified construction attorney to assist is advisable if the size of the claim warrants.  Chapter 27 applies to both new home construction and residential remodel Projects, and defects relating to every component of the main structure, and detached structures, driveways, sidewalks, pools, landscaping, outdoor living features, and fences.  A new home Contract or remodel Contract is required to contain a Notice in at least 10 bold font print generally outlining the steps for asserting a claim against a Builder/Contractor under Chapter 27.  Failure to include this notice in the Contract subjects the Builder/Contractor to a civil penalty of $500.00. 

A Builder/Contractor is liable to a Homeowner for any damages proximately caused by a construction defect that result in: (1) actual physical damage to the residence; (2) an actual failure or lack of capability of a building component to perform its intended function or purpose; or (3) a verifiable danger to the safety of the occupants of the residence.  Chapter 27 expressly defines “construction defect” as “a deficiency in the design, construction, or repair of a new residence, of an alteration of or repair or addition to an existing residence, or appurtenance (e.g., detached structure, retaining wall, pool, outdoor living area, fence or recreational area) to a residence.”     

In addition to being a mandatory process for asserting a claim for defective workmanship against a Builder/Contractor, Chapter 27 also limits the nature and type of damages Homeowners can recover from a Builder/Contractor for damages arising from a construction defect to: (1) the reasonable cost to repair the construction defect; (2) the reasonable cost to repair or replace any damaged personal property caused by the construction defect; (3) reasonable and necessary engineering and consulting fees if and only if the Contract allows reimbursement for these costs; (4) reasonable expense for temporary housing during the repairs if the house cannot reasonably be occupied during the repairs; (5) the reduction in current market value, if any, valued after the construction defects have been repaired if the defects are structural in nature; (6) reimbursement of reasonable attorneys’ fees and litigation costs if supported by the contract or a statute; and (7) reimbursement of reasonable and necessary arbitration filing fees and arbitrator fees.  Consequently, if another statute or cause of action allows for the potential recovery of additional damages not listed above, e.g., mental anguish, delay damages, or treble damages, then Chapter 27 bars the recovery of those damages if they arise out of or are in any way related to the construction defects. 

If the cost to correct the construction defects is greater than $7,500.00, the Court may, upon the filing of a motion, compel the parties to mediate the dispute at the outset of litigation.