In residential construction, the recent legislative amendments to Chapter 27 of the Texas Property Code (the Residential Construction Liability Act or the “RCLA”) have garnered significant attention in the industry, and understandably so as there were many important tweaks for Texas homebuilders made by the Texas Legislature. Often overlooked are the Texas Legislature’s amendments to Chapter 16 of the Texas Civil Practice and Remedies Code, which shortened the statue of repose on residential construction projects from ten years to six years. Residential homebuilders should take note of these changes to the statute of repose because they could significantly limit your exposure on warranty and construction defect claims moving forward.
Prior to HB 2024, which was passed and became effective on June 9, 2023, it was well settled in Texas that there was a 10-year statute of repose on all construction projects. For residential home builders, this meant that a home buyer and any subsequent purchaser had 10 years from the date of substantial completion to file a lawsuit for latent construction defects discovered in their home. This is no longer the case. HB 2024 shortens the statute of repose from ten years to six years for residential homebuilders[1] so long as the homebuilder provides a warranty that includes a one-year warranty for workmanship and materials, two years warranty for plumbing, electrical, heating and air-conditioning delivery systems, and a six-year warranty for major structural components.
Considering these changes to the statute of repose, residential homebuilders should re-examine their express limited warranty language – with specific attention on whether they still wish or need to provide their buyers a ten-year warranty on major structural components. It has been standard in the industry since the inception of the Texas Residential Construction Commission Act (“TRCCA”) in September of 2003 for residential homebuilders to provide a ten-year warranty on major structural components. The TRCCA, will however, sunset on September 1, 2009. This sunsetting paired with HB 2024 will make providing such a lengthy warranty more of a business decision than legal, and only a matter of time before they are likely reduced in length uniformly by Texas homebuilders.
As always before implementing any significant changes to your contract or warranty, it is prudent to discuss with a lawyer with experience in the construction industry.
[1] Per the statute, residential homebuilders are limited to those providing improvements to a detached one-family or two-family dwelling or a townhouse not more than three stories above grade in height with a separate means of egress or an accessory structure not more than three stories above grade plane in height.
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