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Statement: Carole Keeton Strayhorn, Texas Comptroller - News Conference
Tuesday, 24 January 2006

Statement from Carole Keeton Strayhorn, Texas Comptroller Texas Residential Construction Commission News Conference, January 23, 2006.
Read the full comments of the News Conference.  "This agency imposes costly and bureaucratic roadblocks for homeowners left out in the cold by shabby construction and a commission dominated by builders," Strayhorn said... "It is clear that the Texas Residential Construction Commission functions as a builder protection agency." ..."if it were up to me personally, I would blast this Texas Residential Construction Commission builder-protection agency off the bureaucratic books."

Comptroller Strayhorn Reviews Texas Residential Construction Commission
Statement
News Release    
Letter to Represenative Todd Smith and Report
Full Audio (1.3 MB MP3)

Monday, January 23, 2006

 

Statement from Carole Keeton Strayhorn, Texas Comptroller Texas Residential Construction Commission News Conference January 23, 2006

Texans want unlimited opportunity and limited government --pave the roads, provide good schools, protect life and property.

And they insist on government giving them a fair shake.

Unfortunately, in this government, that doesn't always happen, and we are here today to talk about a situation where we can do dramatically better by the average Texan.

In a homeowner survey conducted by my office, I found that 86 percent of homeowners who responded said their builder failed to fix construction defects in their homes. And that was after going through the mandated State Sponsored Inspection and Dispute Resolution process that verified the defects.

In a climate of tort reform during the 78th Legislature, the Texas Residential Construction Commission was created to resolve disputes over construction defects quickly--and without the expense of costly litigation.

Last August, I received a legislative request to research, analyze and report on the impact of the Texas Residential Construction Commission on Texas homeowners and the economy.

Legislation creating the Texas Residential Construction Commission was passed in 2003, but building and performance standards that are tied to state-mandated limited warranties did not take effect until June 2005. So it's premature to determine the impact of the act and the agency's processes on the Texas economy.

I can say, however, that my research found no evidence the Texas Residential Construction Commission has had a favorable impact on the homeowner. It is clear that the Texas Residential Construction Commission functions as a builder protection agency.

If our standard is giving all Texans a fair shake, this agency has fallen far short of that goal.

The Texas Residential Construction Commission's authority, moreover, covers post-construction defects only and excludes contract disagreements, homes under construction, homes abandoned before completion and builders that go bankrupt.

Homeowners with construction defects are required by law to go through the Texas Residential Construction Commission's dispute resolution process before they can proceed to binding arbitration or court.

While the mission of the agency is to "resolve differences through a neutral dispute resolution process," there is no dispute resolution. The agency merely issues a report that either confirms or denies home construction defects. After the report is issued, the agency has absolutely no enforcement power to make the builders fix defects.

Homeowners living in defective homes are disappointed and angry that the costly bureaucratic Texas Residential Construction Commission's process does not get their construction defects fixed.

Since the Texas Residential Construction Commission has no statutory authority to hold builders accountable for shoddy building practices, the homeowners' only recourse is to go to binding arbitration, as required by most builder contracts, or go to court--precisely the outcome the Texas Residential Construction Commission was created to prevent.

This agency imposes costly and bureaucratic roadblocks for homeowners left out in the cold by shabby construction and a commission dominated by builders, where even the public members are beholden to the industry they are supposed to be regulating.

Builders are required to pay a fee to register each home. However, if the builder fails to pay the fee as required by law and register the home, the agency shifts this cost to the homeowner.

Not only do you have to pay $250 to have the Texas Residential Construction Commission inspect your home for defects, you also have to pay the homebuilder's fee for registering the home when the builder violates the law and fails to register it himself. This is another hidden tax.

If you just moved into a new $80,000 home, this fee amounts to about half of your first month's mortgage payment.

This just adds insult to injury--and it is wrong.

The Texas Residential Construction Commission requires builders to pay a fee to register as a homebuilder. Registration alone does not promote good building; in fact it may give homeowners a false sense of security.

Anyone can pay the fee and be a registered homebuilder. The statute and agency require no proof of experience, education or financial solvency.

The Texas Residential Construction Commission requires applicants to disclose whether they have pled guilty or no contest to any felony or misdemeanor charge for a crime involving moral turpitude and the applicant must be "honest, trustworthy, and have integrity."

However, Texas Residential Construction Commission files show that a currently registered builder was convicted of burglary of a vehicle, burglary of a building and attempted homicide. Another builder was that was convicted of a sex crime registered as a sex offender just months before he was allowed to register as a homebuilder.

Homebuilders play a critical and prominent role in our economy. Most are ethical business people who want to give people the home of their dreams.

But it isn't the role of government to throw up bureaucratic barriers to protect unethical or inept builders from their customers.

Caveat emptor--let the buyer beware--is the motto of the unscrupulous. It should not be the hallmark of state policy.

It is doubtful the Texas Residential Construction Commission's processes will significantly impact the Texas economy.

But the economic impact on the homeowner living in a defective home can be devastating.

The agency should be given the enforcement authority needed to make builders fix defects confirmed by the Texas Residential Construction Commission. Without this authority, the agency cannot give Texans the fair treatment they deserve in this critical area.

To balance the needs of both the homeowner and the homebuilder, the Texas Residential Construction Commission should at least have statutory authority to make builders fix defects confirmed through its process.

At the very least, the agency should not shift builder fees to the homeowner, should not allow public members of the commission to have ties to the construction industry and should enforce builder registration laws.

In fiscal 2005, the agency spent $3.7 million on its operations. That same year, the agency collected $6.6 million from builders and homeowners. As a result, the agency transferred $2.9 million to the general fund, effectively helping balance the general state budget on the backs of homeowners.

In the next two years, the agency is estimated to raise about $9.7 million a year from its fees and spend only $4.2 million a year, meaning that the agency will be putting more money in the general budget than it does into doing its job.

For these reasons, if it were up to me personally, I would blast this Texas Residential Construction Commission builder-protection agency off the bureaucratic books.

 
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