TRCC Eulogy

The legislative battle of Homeowners of Texas (HOT) versus the Builder’s lobby was like Underdog versus Dr. Simon Bar Sinister, who put the “mad” in mad science (or “bad” in bad legislation). Evil forces wanted to save the builder-protection agency. They concocted a bill to extend the TRCC for 6 more years, adding provisions that “looked” like new consumer protections, but the bill was actually very bad for consumers. We hosted a mock funeral for the T.R.C.Comish to celebrate its passing on September 1, 2009. Here's the press release and obituary.

Underdog homeowners group overcomes
bully tactics of $35B industry

• HOT press release: a David v. Goliath story 
• TRCC Eulogy: Consolidated News Coverage 
• Vote to abolish TRCC: Consolidated News Coverage 
• Older HOT Release: Homeowners Group Helps Reform State Agency 
• Rep. Ruth McClendon's spin on her TRCC Sunset Bill 
• Home Builders' spin on McClendon's TRCC Sunset Bill 

How we Succeeded in Abolishing the TRCC. 

HOT alone walked the halls of the Capitol to visit legislators and make the substantive case for defeating HB 2295 and abolishing the TRCC. We alone lobbied the House Calendars Committee with reasons to defeat HB 2295 by keeping the bill from reaching the House Floor until one week before the deadline. We alone proposed a legislative alternative to the TRCC, proving that HB 2243 with mandatory builder licensing was a far superior alternative to the builder-backed HB 2295. We alone proved that the key to winning a legislative victory was not the “compromise” advocated by the Astroturf consumer groups but making the case for abolishing the agency. We alone drafted and proposed consumer-friendly amendments approved by legislative counsel (12 made it to the House floor, proposed by 4 different legislators) when no one else was.  We alone proposed two points of order that should have been sustained on the House Floor. We alone successfully explained to 12 key Senators what was wrong with HB 2295 and why it should be defeated. And we alone applied unrelenting pressure against HB 2295 and the TRCC throughout the 81st Legislative Session. In short, we set out to win the legislative battle, and we did.

HOT "Thank You" 

We sincerely thank the homeowners who shared their stories and the Texas lawmakers who prioritized their support of the public over that of industry and voted to disband the TRCC.  

As the underdog in a fight against overwhelming odds, HOT stood firm in opposing the TRCC Sunset bill. Rather than truly reform the state agency, HB 2295 was deceptively written to provide more protection for builders. It would have extended the abusive agency for six more years and caused even more harm to consumers. But thankfully HOT was able to analyze and expose the deception, draft key amendments adopted by the House to fix many of them, and garner enough Senate votes to prevent suspension of the rules that would have allowed a Senate floor vote. Instead of voting to pass a Sunset bill to keep the TRCC, the senators agreed to disband the agency by letting us enjoy a well deserved TRCC sunset.  

HOT took on the Texas Association of Builders and its allies and won, but it also had to battle two co-opted consumer groups that functioned as AstroTurf organizations. For whatever reason, these groups abandoned their history of TRCC opposition and supported the builder legislation early in the legislative process, even lobbying for the 6-year extension.  

HOT submitted an alternative bill (HB 2243) to abolish the TRCC “and” replace builder registration with licensing through the TDLR. The bill would have addressed the cause of construction disputes by preventing bad builders from operating in Texas and by keeping the foxes out of the regulatory hen house. HB 2243, however, never reached a floor vote due to a parliamentary error. HOT says this will again be a top priority next session. 28 states have already followed the approach that HOT proposed, by regulating the homebuilding industry with contractor licensing. 

The TRCC: Not Just Unintended Consequences

The Texas Residential Construction Commission was established in 2003 through the influence of big builders to oversee parts of the homebuilding industry and reduce lawsuits. The laws, however, were written without consumer representation; and Mr. John Krugh, senior VP and corporate counsel for Bob Perry Homes, drafted the bill establishing the commission. He was also appointed by Governor Rick Perry as the commission's first chairman.

Based on TRCC's own records, reports from two state agencies, and overwhelming public testimony, Texans were worse off with the TRCC, which superseded DTPA (Texas Deceptive Trade Practices-Consumer Protection Act of 1973) and RCLA (Residential Construction Liability Act of 1989). 

• The experimental $10.6 Million agency (2008 budget) failed to protect the public.  
• It failed to instill public confidence & trust (just 186 inspections in 1Q'09).  
• It failed to prevent the root causes of disputes (>29,000 calls in 1Q'09).  
• It misled the public by disguising registration as licensing and regulatory oversight. 
• It gave the public a false sense of security by establishing illusory warranty terms.  
• The State Inspection & Resolution Process (SIRP) blocked access to the legal system;
  SIRP was an expensive and time consuming (182 day avg. in 1Q'09) delay. 
• Homeowners still needed their own attorney and experts to balance those of builders.  
• Just 12% of closed cases had satisfactory outcomes;
  88% sought other legal remedies after added cost and delays.  
• The TRCC attracted bad builders to Texas by shielding them from lawsuits.  
• Its lack of enforcement & criminal penalty removed builder accountability.  
• Its staff made legally binding decisions without legal training.  
• Builders regularly disregarded the TRCC, and half of Dallas remodelers were not registered. 
• Builder delays in making repairs often extended past warranty expiration.  
• Because of the TRCC and the builders who relied on it,
  lives have been ruined and neighborhoods decimated, and
  property values, the tax base, and public service funding have been impacted.  
• The list goes on. 

The TRCC: An Ideal Candidate for a Final Sunset

CONTROVERSIAL - The TRCC was up for a Sunset Review in the 81^st Legislative session. A 12-member Commission periodically examines each state agency looking for waste, duplication, and inefficiency, but the TRCC was widely criticized for protecting the homebuilding industry more than the public. Two state reports, the Texas Comptroller Report in 2006 and the Sunset Advisory Commission Staff Report in 2008, recommended that it be abolished. The Comptroller report called it a “builder protection agency.” The Sunset Staff Report said it was “never meant to be a true regulatory agency with a clear mission of protecting the public” and it was "fundamentally flawed” and did “more harm than good." Homebuilder lobbyists swarmed the Capitol for months, spending millions and doing all they could to save the agency they created. They got the Commission to endorse a Sunset bill (HB 2295) that they wrote to extend TRCC operations for six years. But HOT convinced Texas lawmakers to vote against the bill and thus abolish the TRCC. HOT argued that the TRCC Sunset Bill did NOT create a true regulatory agency and actually made things worse.

UNPOPULAR - The people of Texas said loud and clear that they wanted the TRCC abolished. In hearings conducted by the Sunset Advisory Commission in September 2008 and before two House Committees in March, not one consumer testified in favor of keeping this agency. In fact, the public registered its preference for abolishing this agency before the Sunset Advisory Commission by a vote of 246 to 14, including votes from several builders. All 14 opposing testimonials came from builders and their allies.   

UNFAIR & MISLEADING - The TRCC’s dispute resolution process was grossly unjust for homeowners as documented by a 12% complaint resolution rate for the past 5 years. HB 2295 was 70 pages long and so horribly convoluted, confusing and vague that it was an invitation to litigation and abuse. It failed to provide regulatory oversight of either the homebuilding industry or the TRCC itself. It failed to ensure the competence of Texas builders or prevent unqualified persons from entering the field. It failed to require performance bonds to protect homeowners. And it failed to fulfill the stated promise of the bill’s sponsor.

THE PROMISE - Rep. Ruth McClendon, the sponsor of HB 2295, said in the January/February 2009 issue of Texas Builder magazine: “My predictions for the TRCC…would include an opportunity for mediation rather than arbitration, and a choice of whether to follow agency complaint and inspection procedures or to take the matter to court.” Unfortunately this bill only created the illusion of homeowner access to voluntary mediation. The homeowner would ONLY entitled to mediation if the builder requested a third party inspection, which would never happen. Sections 426.005 and 426.006 of the Texas Property Code still mandated TRCC compliance with TRCC third party inspection procedures.

THE REALITY - Rep. McClendon’s bill did not reflect her promise. That is why HOT endorsed HB 2243 to give Texas homeowners true regulatory oversight of the $35B Texas homebuilding industry and direct access to legal remedies. This alternative would have provided for licensing of Texas homebuilders by TDLR. Texas Department of Licensing and Regulation has a solid reputation and 100 years of regulatory experience. TDLR licensing of builders would have enhanced the professionalism of the homebuilding industry, prevented unqualified persons from entering the field, improved the quality of new homes built in Texas, and contributed to economic development.

TRCC announces its Sunset plan 

The State's sunset provisions allow for a 1-year shutdown process before all assets must be returned, offices vacated, data archived, and employees dismissed or reassigned. At its 6/11/09 meeting, the TRCC announced a general timeline and action plan related to the implementation of the sunset. Here's their FAQ and our summary:

• HOT Advice: How homeowners can protect themselves without the TRCC.  
• HOT Advice: How builders can protect themselves without the TRCC. 
• The commission no longer accepts home & builder registrations or inspection requests. 
• The commission no longer shares builder registration information. This is good, because registration can be confused with licensing and give consumers a false sense of security. 
• Existing inspection requests will be handled as quickly as possible following commission rules, and ombudsmen will process post-inspection actions through 8/31/10. 
• The commission no longer accepts contractor complaints, so direct your complaints to your local District Attorney, the Texas Attorney General (www.oag.texas.state.us) or the Federal Trade Commission (www.ftc.gov). 
• Homeowners who can't get contractors to fix warranty items can now opt-out of the SIRP inspection process and pursue arbitration or a civil suit. 
• Without the TRCC, we revert to RCLA (see reform plans, below) and DTPA. 

Without the TRCC, we revert to RCLA and DTPA

By disbanding the TRCC, Texas lawmakers removed a costly and time consuming state inspection process (SIRP) that stood between homeowners and dispute resolution. After the agency sunsets, homeowners who can't get contractors to fix warranty items can take them into arbitration or a civil suit. The choice of arbitration or civil suit depends on restrictions in contracts and warranty agreements, but consumers are usually forced into binding arbitration, which almost always favors the builders. 

Previous laws governing construction disputes will remain in effect after the TRCC sunset. They include  RCLA (Residential Construction Liability Act) and DTPA (Deceptive Trade Practices Act). That means the legal deck is still stacked in favor of builders, and homeowners will still face significant obstacles trying to be made whole. It also means our fight for Texas homeowners will continue with your support. 

This paper by Cheryl Turner explains the complex history of RCLA, which insulates contractors and warranty companies from the consumer protections of DTPA. According to Turner, the special interest RCLA legislation was proposed "to encourage the resolution of construction disputes and protect and reward responsive contractors who timely fixed their mistakes." Its objectives, however,  "sometimes come at an extraordinary cost to the homeowner." RCLA gives contractors an opportunity to cure construction defects before litigation, caps the amount of damages, and limits the classes of damages that can be awarded. Because of amendments added between 1989 and 2003, these builder protections now apply even if they "don't make an offer to repair, fail to make a reasonable offer, or fail to perform the agreed-upon repairs in a good and workmanlike manner." 

TRCC Reference Material

TRCC Act (Title 16 of the Texas Property Code, abolished by 81^st legislature) 

TRCC Sunset Bill (HB-2295) 

Bill Analysis (HB-2295) 

HOT Analysis (HB-2295) 

Legislative Flyer 0 (TRCC: The ideal candidate for Sunset) 

Legislative Flyer 1 (TRCC: A Top Priority and the Decision Options) 

Legislative Flyer 2 (Licensing vs. Regulation and protections buying New homes vs. Existing) 

Legislative Flyer 3 (Texas Homebuilding and the Global Economic Collapse, 1-pager) 

Legislative Archive (supporting information we provided to lawmakers) 

Blueprint for TRCC Reforms (HOT did the analysis and submitted workable alternatives) 

Texas Comptroller Report (Carole Keeton Strayhorn called TRCC a “builder protection agency”) 

Sunset Staff Report (“Anything short of true regulation does more harm than good.”) 

TRCC Supporters(Identifies who testified in support or opposition to the TRCC) 

Written Testimony (Written testimony in support or opposition to the TRCC) 

Oral Testimony (summary of oral testimony, from HOT notes) 

2-part NPR report (How Houston homebuilder Bob Perry Created the TRCC, funds campaigns) 

Misrepresentations (Texas misleads homeowners by confusing Registration vs. Licensing.)

SoilIssues.pdf (White paper relating expansive clay soils to foundation failures)

The Mandatory TRCC Sunset Decision

A decision had to be made in the 81st Legislative Session on what to do with the controversial $10.5M agency. Options include: (1) kill it, (2) amend it, (3) reform it, or (4) replace it. 

Option 1 - KILL IT: HB-1635 follows the advice of the Sunset Advisory Committee Staff Report, which recommends abolishing the agency. The report says the TRCC “fails to provide meaningful oversight and public protection … is fundamentally flawed … and does more harm than good.” Overwhelmingly, the public agreed. 246 public responses during the sunset review said kill it, versus just 14 to keep it. In a 2006 report, Texas Comptroller Carole Keeton Streyhorn, said, "If it were up to me personally, I would blast this TRCC builder-protection agency off the bureaucratic books." Comments from Strayhorn's homeowner survey are especially damning. Afterwards, a law was passed to prevent similar surveys by blocking open records requests of homeowner data. 

Option 2 - AMEND IT: The Sunset Committee ignored their staff's recommendations and submitted a bill (HB-2295) to once again fix problems with the agency. But the agency has not used additional enforcement authority that was granted last session, and the minor changes proposed this time amount to "window dressing.” The TRCC can’t fairly mitigate disputes or effectively regulate the homebuilding industry with window dressing. Major reforms are needed. 

Option 3 - REFORM IT: HB-2095 adds insurance requirements and stronger enforcement, and other bills address other TRCC shortcomings. Even together, they don't go far enough. The State Inspection Process must be optional, rather than serving as a mandatory roadblock to the legal system. And registration must be replaced with licensing and accountability with criminal penalties. 

Option 4 - REPLACE IT: Our licensing bill (HB-2243) replaces TRCC “registration” with licensing, administered by TDLR, and restores the right to voluntary dispute resolution by abolishing the TRCC. General residential contractors will be required to carry general liability insurance, provide a surety bond for each home, and pass a test to prove competency. TDLR is better equipped than TRCC to regulate residential construction. They already administer licensing programs for other professions, including electricians, and they don't suffer from the TRCC's builder bias. 

Related Bills - Here's a compilation of more than 50 bills regarding homebuilding, organized, formatted and highlighted for easier reading. They address issues such as: 

• Abolishing, amending or reforming the TRCC;    
• Replacing the TRCC with licensing and regulatory oversight that requires education and insurance;    
• Stronger engineering requirements and building codes;    
• Fire sprinkler systems, energy efficiency and air quality;    
• Texas lien laws for contractors and subcontractors;    
• Construction trust funds;    
• Binding arbitration; and    
• Home warranties. 

Avoid Four More Years of Homeowner Abuse

February 2nd was Groundhog Day and an opportunity for us to poke fun at Texas and its builder-friendly laws. We quietly distributed a Media Alert that questioned whether legislators would wake up to the light of constituents, or hide behind the shadow of big builders. The alert introduced a "spoof bill” to show what it would be like if all Texas professions, including doctors, nurses and lawyers were "regulated" like the homebuilding industry is. 

Our spoof takes Governor Rick Perry’s small-government, low-tax, limited lawsuits and “light touch” regulatory policies to new heights. It (1) rescinds licensing and removes barriers for entering once-restricted professions, (2) eliminates business risks by preventing lawsuits, and (3) returns Texas to the “Wild West Land of the Free and Home of the Brave.” 

If passed, the bill would have promised to lower the unemployment rate by making it easier for unemployed workers to start new careers without first investing the time and money once required for prerequisite education. It would have also lowered the cost of critical services like medical and dental care and legal representation. 

The Media Alert pointed to eight light-hearted posters to promote the Texas Business Relief and Economic Development Act of 2009.

Groundhogs Don't Build in Expansive Soil

Soil Issues for Residential Construction in Texas is a new white paper that alerts builders, homeowners and policy makers to two concerns about building homes on reclaimed farm and ranch land. The first relates to expansive soils that are unsuitable for building and can cause foundation problems that threaten the structural integrity of homes. The second is residual contamination from industrial waste or toxic pesticides that can cause serious health problems. Read this if your district is in the Blacklands Prairie region where cotton farms are being urbanized into neighborhoods.

HOT Bill Analysis: HB 2295 (TRCC Sunset bill)

Rep. Ruth McClendon's Bill Analysis is inaccurate and misleading, as shown in this marked-up version. HOT provides its own analysis below.

This bill is clearly written by attorneys representing builders and their interests. It's disguised as "consumer-friendly" but is far from it. At first glance, the bill seems to have new provisions for homeowners. But in-depth study reveals a more sinister side. Rather than improve the TRCC, the bill would make the agency far worse than it was before. Here's why:

The 62-page bill is horribly deceptive and intentionally convoluted and misleading, constantly linking to different sections of the bill or to different statutes entirely. The only reason for doing that is to hide its true intent, and only an experienced construction law attorney would even notice after days of study.

• Abolishes local arbitration. The bill is written in such a way as to hide the fact that it does this.     
• No judicial review. The bill prohibits a judge from overturning an arbitration award that is in clear violation of Texas law.     
• Voluntary mediation. The bill includes a section titled, VOLUNTARY MEDIATION, but it's an illusion. Hidden in what is actually said, and not said, is the truth.     
• Regulatory oversight. The bill replaces the term builder "registration" with "licensing," but registered builders are automatically granted a license. There's nothing to get rid of bad builders or prevent unqualified persons from entering the field. And homeowners will unwittingly think the State is regulating the industry and protecting them.     
• Bonding. Rather than require a performance bond for each home, builders only need a $25K surety bond. For a company building 30K homes per year, that's less than $1 per home.     

Our detailed analysis follows, but we're sure that there are more land mines that we've not yet discovered. Better than trying to fix this bill and this agency, or trusting anything with builder lobbyist fingerprints on it, is to let the TRCC sunset. Better still is to replace ALL of the language of this bill with the language that Representative Leibowitz introduced in HB 2243. That would abolish the TRCC and replace builder registration with licensing administered by the Texas Department of Licensing and Regulation (TDLR).

ARBITRATION

Under Section 66(6), this bill abolishes Subtitle E, Title 16 of the Texas Property Code that mandates local arbitration of residential construction disputes in Texas and authorizes a Texas judge to overturn an arbitration award that is in clear violation of Texas law. Under this provision a property owner would lose the right to have an arbitration proceeding in a residential construction dispute heard in the county where the property is located. The homeowner could be forced to attend an arbitration proceeding anywhere in Texas or the United States, and would have absolutely no right of appeal under any circumstances of an arbitration award that was clearly in violation of Texas law. If the homeowner is forced to travel to another state for the arbitration proceeding such as Michigan or New York, the law of that state could be applied to govern the outcome of the dispute even though the property is located in Texas.   

FROM CSHB 2295, PAGE 60:

SECTION 66.  The following provisions of the Property Code are repealed:

(1) Section 401.002(12);

(2) Section 416.011;

(3) Section 416.012(b);

(4) Section 418.002(d);

(5) Section 428.001(c); and

(6)  Subtitle E, Title 16.

THIS CURRENT LAW IS AFFECTED:

TITLE 16. TEXAS RESIDENTIAL CONSTRUCTION COMMISSION ACT

…

SUBTITLE E. RESIDENTIAL CONSTRUCTION ARBITRATION

CHAPTER 436. GENERAL PROVISIONS

…

Sec. 436.003. VENUE. (a) An arbitration of a dispute involving a construction defect shall be conducted in the county in which the home alleged to contain the defect is located.

(b) The requirements of this section may not be waived by contract.

MEDIATION

Under Sections 55(a) and 428A.004, voluntary mediation is an illusion because it is subject to a builder requesting a third party inspection, which virtually never happens.  This bill also contains no requirement for local mediation, which means that the builder can demand that mediation occur anywhere in Texas or the U.S. The lack of local mediation creates the same problems identified with arbitration above including the potential application of another state’s law to a Texas property dispute.   

FROM CSHB 2295, PAGE 44:

SECTION 55. Section 428.001(a), Property Code, is amended to read as follows:

(a) 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 under this subtitle [and dispute resolution]. If the builder files a request under this section, the homeowner may submit a request for mediation as provided by Section 428A.004.

"If the builder..." is the legal condition that allows the homeowner to request voluntary SIP, but this condition will virtually never happen. The only reason it's there is to prevent truly voluntary mediation. What's important inSection 428A.004 that follows is what it does NOT say. It does NOT say the homeowner has the right to request mediation, only that the commission shall establish procedures.

FROM CSHB 2295, SECTION 428A.004:

CHAPTER 428A. OFFICE OF OMBUDSMAN; VOLUNTARY MEDIATION

…

Sec. 428A.004. VOLUNTARY MEDIATION. (a) The commission by rule shall establish procedures for a builder and homeowner to engage in a third-party mediation, as described by Section 154.023, Civil Practice and Remedies Code, performed by a third-party mediator not employed by the commission, of a dispute involving a construction defect as an alternative to the inspection process under this subtitle, if the homeowner, before the expiration of the time to submit a request for inspection under Section 426.006, and before a third-party inspection has been performed, submits a statement to the commission and the builder, in the form prescribed by the commission, that the homeowner is requesting mediation as an alternative to the state inspection process. If a homeowner requests mediation under this section, a builder is required to participate in mediation in good faith, as determined by the mediator.

(b) Notwithstanding any other law, if the homeowner requests mediation under this section, an action described by Section 426.005(a):

      (1)  may not be filed before the expiration of the mediation period unless an agreement is executed as a result of the mediation that is breached before the end of the mediation period; and

      (2)  must be filed on or before the later of:

           (A)  the expiration of any applicable statute of limitations; or

           (B)  the 45th day after the earlier of:

                 (i)  the expiration of the mediation period; or

                 (ii)  the execution of an agreement as a result of the mediation.

(c) For the purposes of this section, the mediation period expires on the 90th day after the date the homeowner submits a statement of intent to engage in mediation under this section. A homeowner or builder may, in accordance with Subsection (b), file an action described by Section 426.005(a) if no agreement is reached before the expiration of the mediation period.

(d) A builder's failure to comply with an agreement executed by the parties as a result of a mediation under this section is grounds for disciplinary action under Chapter 418, including the imposition of an administrative penalty under Chapter 419.

(e) The parties to a mediation under this section shall split the fees of the third-party mediator equally.

(f) For purposes of Chapter 27, good faith participation in mediation under this section, as determined by the mediator, for the mediation period established by this section constitutes a final, nonappealable determination under this subtitle and completion of the state inspection process, and a written agreement to mediate submitted by the parties under this section constitutes a request under Section 428.001. For the purposes of Section 27.004(l), if the builder makes a repair pursuant to an offer under Section 27.004(b), the builder may engage any third-party inspector to inspect the repair and determine whether the residence, as repaired, complies with the applicable limited statutory warranty and building and performance standards.

BIASED PROCEEDINGS

TRCC proceedings are inherently biased and unfair, resulting in a 12% complaint resolution rate. Not a single consumer has testified in favor of retaining this agency during the Sunset Advisory Commission Hearings in September 2008 and two House committee hearings in March 2009.

This bill does not modify the intent of Sections 426.005(a) and 426.006(a) of the Texas Property Code which mandate TRCC jurisdiction of residential construction disputes and implement a 1-year statute of limitations and warranty on workmanship construction defects.

FROM CSHB 2295:

Sec. 426.005. PREREQUISITE TO ACTION. (a) A homeowner or builder must comply with this subtitle before initiating an action for damages or other relief arising from an alleged construction defect. 

… 

Sec. 426.006.TIME FOR REQUESTING INSPECTION [AND DISPUTE RESOLUTION].(a)For an alleged defect discovered during an applicable warranty period,an  [the state-sponsored] inspectionthrough the state inspection program [and dispute resolution process] must be requested on or before the second anniversary of the date of discovery of the conditions claimed to be evidence of the construction defect but not later than the 90th day after the date the applicable warranty period expires.

NON-APPEALABLE

Section 428A.004(f) of the bill introduces “final, non-appealable determination” language describing mediation, and like most of the bill, is so horribly convoluted, confusing, vague, and open to interpretation that it is an invitation to litigation and abuse.

FROM CSHB 2295, PAGE 44:

CHAPTER 428A.OFFICE OF OMBUDSMAN; VOLUNTARY MEDIATION

…

Sec. 428A.004.VOLUNTARY MEDIATION.

(f)For purposes of Chapter 27, good faith participation in mediation under this section,as determined by the mediator, for the mediation period established by this sectionconstitutes a final, nonappealable determination under this subtitle and completion of the state inspection process, and a written agreement to mediate submitted by the parties under this section constitutes a request under Section 428.001. For the purposes of Section 27.004(l), if the builder makes a repair pursuant to an offer under Section 27.004(b), the builder may engage any third-party inspector to inspect the repair and determine whether the residence, as repaired, complies with the applicable limited statutory warranty and building and performance standards.

OVERSIGHT

This bill provides no effective regulatory oversight of the $35,000,000,000 Texas homebuilding industry or the TRCC itself, which has the dubious distinction of being recommended for abolition by two different state reports:  the Strayhorn Report in 2006 and the TRCC Sunset Staff Report in 2008.  The latter report observed:  “The TRCC was never meant to be a true regulatory agency with a clear mission of protecting the public.”  

LICENSING

Texas is the only major homebuilding state in the nation that does not license homebuilders. As the TRCC Sunset Staff observed in its August 2008 Report recommending abolition of the TRCC: “By not ensuring the competence and financial responsibility of builders in Texas, the regulations do not prevent unqualified persons from entering the field and thus are not designed to prevent problems from occurring.”

This bill does nothing to ensure the competence and financial responsibility of builders in Texas, nor does it prevent unqualified persons from entering the field. This bill contains licensing requirements that are a sham. Virtually all builders who are currently registered are automatically licensed without having to take an exam, provide any proof of knowledge or proficiency in construction science or demonstrate financial viability.

In short, this bill does NOTHING to weed out bad builders and is simply an attempt to "artificially" classify Texas as a state that licenses homebuilders. Under this bill builders have to complete (not pass) an 8-hour course. Two hours of the course must be devoted to the following subjects: (1) limited statutory warranties, (2) building and performance standards, (3) requirements of the International Residential Code; and(4) other statutes and rules that apply to builders under the TRCC Act. A requirement to spend 30 minutes on each of these subjects in an audited course is an absolute mockery.

BONDING

This bill requires the license holder to secure a $25K surety bond, but it does not require homebuilders to purchase performance bonds on the homes they build. This leaves homeowners with no protection against a builder absconding with their money, abandoning projects, or building homes that are clearly in violation of the plans and specifications.

WARRANTY

This bill implements a 2-year workmanship warranty for most construction defects, compared to new car warranties that range from 3 to 10 years. The car warranty matches well with a typical car loan of 3 to 6 years. A 2-year home warranty, however, does not match well with a 30-year home mortgage and leaves both the homeowner and the lender at risk afterwards.

A 2-year home warranty with its resulting statute of limitations is contrary to the typical 4-year statute of limitations that applies to most other contract actions in Texas. It's half of the minimum 4-year warranty that should be in effect.

What's the justification for the State of Texas allowing builders to get away with only offering a two year warranty for a home? When you buy a new pair of shoes or a new jacket and later find that they don’t fit right or don’t match your wardrobe, you can return them for an exchange or full refund. Home Depot lets you return a defective cordless drill with no questions asked. Target lets you return a DVD player. Shouldn't something approaching this standard practice also apply to homes?

BUILDING CODE STANDARDS

This bill deletes provisions in the Texas Property Code that apply building code standards in unincorporated areas identical to those applicable in the county seat. This change would allow the TRCC to establish building code standards in unincorporated areas - standards that would inevitably reflect the minimal code standards advocated by homebuilders.

FROM CSHB 2295, PAGES 56-57:

SECTION 62. Sections 430.001(b), (d), and (e), Property Code, are amended to read as follows:

(b) The warranty periods shall be:

     (1) two years [one year] for workmanship and materials;

     (2) four [two] years for plumbing, electrical, heating, and air-conditioning delivery systems; and

     (3) 10 years for major structural components of the home.

(d) The International Residential Code for One- and Two-Family Dwellings that applies to nonelectrical aspects of residential construction for the purposes of the limited statutory warranties and building and performance standards adopted under this section is:

     (1) for residential construction located in a municipality or the extraterritorial jurisdiction of a municipality, the version of the International Residential Code applicable to nonelectrical aspects of residential construction in the municipality under Section 214.212, Local Government Code; and

     (2) for residential construction located in an unincorporated area not in the extraterritorial jurisdiction of a municipality, the version of the International Residential Code adopted by the commission by rule [applicable to nonelectrical aspects of residential construction in the municipality that is the county seat of the county in which the construction is located; and

     [(3) for residential construction located in an unincorporated area in a county that does not contain an incorporated area, the version of the International Residential Code that existed on May 1, 2001].