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Unregulated Texas Homebuilding Industry Fact Sheet and Proposed State Limited Warranties/Standards
Wednesday, 28 June 2006

The Unregulated Texas Homebuilding Industry 
CreateThe Texas Residential Construction Commission 
August 08, 2004 
Fact Sheet – HB730 and TRCC 

1. To build and sell new homes in Texas there is no requirement to show proof of professional building skills, knowledge of current codes or to show any historical proof of financial responsibility or even proof of a current bank account.

2. The 2003 Texas legislature passed a Homebuilding Industry sponsored law (HB730) that created the Texas Residential Construction Commission (TRCC) to limit homebuilders’ liability, which essentially regulates “homebuyers” instead of “builders.” 

3.  Under the new law HB730/TRCCA, to be a Texas homebuilder in good standing, one need only provide a social security number and pay a $125.00 registration assessment fee to TRCC. 

4.  No state law exists nor does TRCC have any authority to require state inspections of new home construction to assure that a new home comply with even minimum building standards. 

5.  Noncompliance with Texas law became a trademark of HB730/TRCC from the inception of the commission appointments.  Despite provisions in the law for the appointment of 3 “General Public Members” to the commission, Governor Rick Perry appointed the current 9 member TRCC commissioners all with DIRECT ties to the building industry.  Note the “bios” of the 9 commissioners “Who Are We” on the TRCC website. 
http://www.trcc.state.tx.us/who_we_are/commission_members.htm 
http://www.texasbuildingstandards.org/comnews.html 
http://tx-taca.org/GOV/sept2003/residentialconstruct.htm

        The following Bush & Motts website information is no longer available
                     SEE:
Copy of Archived Bush & Motts Build Industry Law Firm Website
  TRCC Commissioners officially declared the HB730 law to be retroactive.
 Section 3.01 of the Texas Residential Construction Commission Act (TRCCA) mandates all homes built after September 1, 2003 are subject to the Act.  However, on March 24, 2004 Commissioners voted unanimously to change the law by interpreting the Act to be retroactive for all homes still under warranty, built since  September 1, 1993 .  The commissions’ decision was based on testimony by Robert Bush, legal council for the Texas Association of Builders who had participated in the drafting of the legislation and his interpretation a year after the passage of the Act.    

Building Industry Law Firm: On March 24, 2004 Robert Bush testified at the TRCC Meeting as follows:   “…I had some involvement in - - in the drafting of the statute…it is my opinion …the process does apply to construction defects in a house built prior to September 1, 2003…applicable warranties for houses built prior to the effective date of the Act…does apply to a house built before September 1, 2003 if there is a construction defect cause of action occurring after that date.”  

 6.   A review of the TRCC State Limited Warranty/Standards draft is proof of The Commission’s intent to limit homebuilder responsibility. The warranty contains catch-all-exclusions such as; “Unless reported during walk-through, Builder has no responsibility to repair…” The fact is the warranty expressly excludes homes that become uninhabitable and/or become a health risk.   

 TRCC Warranty/Standards Working Draft – General Conditions  

400.3.19 “Any condition which does not result in actual physical damage to the Home, including, but not limited to, inhabitability or health risk due to the presence or consequence of radon gas, formaldehyde or other pollutants or contaminants, or the presence or effect of mold, mildew, toxic material, or volatile organic compound, unless such condition is a direct result of a Construction defect.   

 See TRCC State Limited Warranty/Standards Proposal  Unreasonable Exclusions  

7.   The historic account of the intent of the building industry is recorded on the website of the law firm of Bush and Motes, legal council for the Texas Association of Builders who helped author HB730.  Rather than concentrate on better-built homes with a legitimate homebuyers warranty, the industry concentrated on legislation intended to limit liability and eliminate the “state implied warranty,” through the passage of HB730.  

http://bushmorrisonlaw.lawoffice.com/CM/Articles/Articles58.asp Site no longer available SEE: Copy of Archived Bush & Motts Website
   “..
. Builders were exposed to undefined and uninsured liability for implied warranties that were difficult, if not impossible, to contractually disclaim.  On top of this, most insurance carriers that wrote general liability insurance for builders quit writing builder insurance in Texas and those that stayed raised their premiums significantly and increased their coverage exclusions.  Recognizing the potential impact of all this on housing prices and availability, the Texas Association of Builders created a Building Standards Task Force to study the problems and draft legislation to help address them.  After over a year of work by scores of dedicated people, House Bill 730, the Texas Residential Construction Commission Act, Tex. Prop. Code, § 401.001 et seq. (“TRCCA”), was passed by the Texas Legislature and became effective on September 1, 2003

Mush & Motes website: UPDATE September, 2006
http://www.bushandmotes.com/clients.htm
Representative
 client types of the Firm include:
  • Local and National Home Builders
  • Custom Home Builders
  • Remodelers
  • Developers
  • Commercial Contractors
  • Subcontractors & Suppliers
  • Architects
  • Professional Engineers
  • Trade Associations
  • Home Owners Associations
  • Home Builder Associations
  • Home Warranty Companies
  • Title Insurance Companies

Site no longer available SEE: Copy of Archived Bush & Motts Website
http://bushmorrisonlaw.lawoffice.com/FSL5CS/Custom/TOCClients.asp
Older Website:

Representative clients of the Bush & Motes firm include: 
·   Ryland Homes 
·   First American Title Insurance Company 
·   National Home Insurance Company (A Risk Retention   Group) 
·   Home Buyers Warranty Corporation
·   Continental Homes of Dallas , L.P. 
·   George Lewis Custom Homes
·   Home Builders Association of Greater Dallas  
·   Greater Fort Worth Builders Association, Inc. 
·   Coleman Homes 
·   Mercedes Homes
·   Choice Homes 
·   Certified Master Builders 

   8.  The Bush and Motes website highlights the list of builder benefits and their explanation of how the creation of TRCC has indeed limited homebuilder’s liability. The site points out that HB730 abolishes the Texas State Implied Warranty and that a breach of warranty is not a violation of the Deceptive Trade Practice Act (DTPA) thus nullifying state law for the protection of consumers/homebuyers with defective new homes.  
Bush & Motes website: http://bushmorrisonlaw.lawoffice.com/CM/Articles/Articles58.asp Site no longer available SEE: Copy of Archived Bush & Motts Website

The following is a quotation from Building and Performance Standards on the website:  
 

            “The new TRCCA abolishes all implied warranties relating to residential construction…     The TRCCA does create a specific statutory warranty of habitability, but also says that a breach of    this  warranty by itself is not a violation of the Deceptive Trade Practices Act (DTPA). 

 9.  The Bush & Motes site continues the list of builder benefits of limited liability provisions created by the TRCCA legislation, which includes homeowner’s inability to recover more than the value of the builder’s offer to settle any dispute!  “…damages in a RCLA case are now limited to defined economic damages with mental anguish or punitive damages being expressly excluded… homeowner cannot recover more than the value of the offer.” 

Bush & Motes website: http://bushmorrisonlaw.lawoffice.com/CM/Articles/Articles58.asp  Site no longer available SEE: Copy of Archived Bush & Motts Website
 “The TRCCA contains several amendments to the Texas Residential Construction Liability Act found at Chapter 27 of the TexasProperty Code (“RCLA”) that close loopholes created over the past ten years.  For example, damages in a RCLA case are now limited to defined economic damages with mental anguish or punitive damages being expressly excluded.  Also, if a builder’s RCLA offer is now found to be unreasonable, RCLA still controls the types of damages for which the builder can be liable.  The TRCCA also provides that if a builder makes a reasonable offer of settlement, which is rejected by the homeowner, then the homeowner cannot recover more than the value of the offer.”  

10.  Builders create disputes to avoid warranty issues:  As predicted, homebuilders have begun to compel homeowners to use the costly TRCC State-Sponsored Inspection and Dispute Resolution Process (SIRP) as a tool to frustrate homeowners and to delay resolution of defectively constructed homes when homeowners call for warranty issues to be addressed.  

The Texas Residential Construction Commission Act Sec. 428.001. REQUEST FOR RESOLUTION, reads as follows: “If a dispute between a homeowner and a builder arises out of an alleged construction defect, the homeowner or the builder may submit to the commission a written request for state-sponsored inspection and dispute resolution.”

11.   A lack of “governmental authority having jurisdiction,” fails to protect Texas homebuyer’s while assuring builders the ability to build homes that are noncompliant with minimum standards.  Despite adoption by the state of the International Residential Code, neither the State nor TRCC has enforcement powers to assure compliance with the adopted International Residential Code. 

      ·  Unincorporated areas such as counties have no governmental authority for adoption or enforcement of building codes and standards. 
·  City officials throughout Texas have adopted policies that the city will not hold homebuilders accountable for code violations discovered after the final inspection is approved and the home has been sold.  
 

  12.  The TRCC Act has a provision for the establishment of an Arbitration Task Force to study the arbitration process and investigate abuses of arbitration.  Despite numerous requests for appointments to the TRCC Arbitration Task Force from consumer groups having interest and knowledge on arbitration issues, TRCC commissioners have made 12 appointments, 11 of which have direct ties to the arbitration and homebuilding industries.  Additionally, the one lowly Consumer Representative Member appointed has no history of experience on arbitration issues or association with any consumer group.
 

The eleven arbitration and homebuilding industry related members are as follows:  

      ·         Senior Vice-President of the American Arbitration Assoc. 
·         Assistant Vice President of the American Arbitration Assoc. 
·         President of the  Texas Association of Builders

      ·         Arbitration Attorney, Law firm of  Jenkens & Gilchrist, P.C.
·         Construction Attorney, Law firm of  Collins & Basinger, P.C 
·         Construction representative from the law firm of Coats Rose, Houston 
·         Arbitrator/Former state appellate court justice
·         General   Counsel US Homes, a Division of Lennar Corp. 
·         Project/Construction Management Services of Herndon, Stauch & Associates 
·         Lending/Banking Industry Representative, First Savings Bank, Arlington
·         Chair, Better Business Bureau

Warning Signs: The outcome of TRCC is predictable considering the structure of the commission and that HB730 was written by the building industry itself.  The Texas Association of Builders crafted the HB730 after the New Jersey law which has the only state-adopted limited warranty in the nation.  Recently, New Jersey state officials have referred to the state program as corrupted and a failure.  For the past year officials have conducted hearings, intensive investigations, indicted and prosecuted state and local officials.  Additionally the state of New Jersey is in the process of discontinuing the state warranty program and is aggressively considering new legislation to protect new homebuyers.

 
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