Texas Real Estate Construction Commission Sunset Guidelines

The Following information is directly from the Texas Residential Real Estate Construction Commission website:

For more information, visit:

http://www.texasrcc.org/Publications/NewsReleases/09_20_09_Sunset_FAQs.asp

What does it mean that the agency has “sunsetted?”

The Sunset Act, which is chapter 325 of the Government Code, requires that the legislature review each state agency periodically to determine whether the functions of that agency should continue. In the 2009 regular session of the Texas Legislature, the legislature allowed the provisions of Title 16 to expire under Property Code section 401.006 as of September 1, 2009.

The Government Code says that “A state agency that is abolished in an odd-numbered year may continue in existence until September 1 of the following year to conclude its business. Unless the law provides otherwise, abolishment does not reduce or otherwise limit the powers and authority of the state agency during the concluding year…” (emphasis added.)

What does this mean for builders and consumers until September 1, 2009?

This means that from now until August 31, 2009, the commission will continue to function as it has under Title 16. The commission will accept complaints about builders and will accept requests for state inspections on residential construction projects and new homes subject to Title 16 requirements.  The commission will accept builder registrations and renewal applications for a prorated fee. (The fee schedule can be viewed by clicking here).  The statutory warranties and performance standards are still in effect and will apply to contracts for construction executed before, or titles for new homes transferred before September 1, 2009. If there is no contract for construction and no title transfer, then the statutory warranties and performance standards will apply to residential construction that commenced before September 1, 2009. Furthermore, new homes and residential construction projects to which Title 16 applies still must be registered with the commission.

What happens on September 1, 2009, and thereafter?

The commission will continue to accept home registrations for new homes and residential construction projects until September 15, 2009, to allow those builders and remodelers that transferred title to a new home or substantially completed a construction project in August to complete the home registration for that property.

The commission will no longer accept new complaints or requests for inspection. However, staff will continue to work on those complaints and requests that were received on or before August 31, 2009.


What happens to the statutory warranties and the commission-adopted performance standards on September 1, 2009?

The question about the continuation of these provisions is debatable. Although the commission believes that Title 16 expires on September 1, 2009, except to the degree that the commission maintains its powers (including its enforcement powers) to complete all preexisting business; it could be argued that the statutory warranties and the commission-adopted performance standards continue until August 31, 2010.

The safest course of action is for a builder or remodeler to issue warranties and performance standards that are more restrictive than those in Title 16. You can download a word version of the document here and then increase a coverage period or tighten a performance standard to place into your agreements for the next year.

If it is finally held that the law that created the statutory warranties and supported the commission’s adoption of performance standards will no longer be in effect, the law will revert to what it was before the enactment of Title 16.  Prior to the enactment of Title 16, the courts recognized the implied warranty of good workmanship in construction and the implied warranty of habitability. The courts also recognized that the parties to a written contract could create an express warranty in lieu of the common-law implied warranties if the implied warranties are properly disclaimed and replaced with a suitable express warranty terms.

Will a court recognize the statutory warranties and commission-adopted performance standards, even if the commission no longer exists?

For contracts executed before September 1, 2009, or work commenced before that date, courts will consider the law in effect at that time. So, if Title 16 was still in effect when the parties signed a contract for new home construction or transferred title on new home construction, the statutory warranties created by Title 16 and the commission–adopted performance standards still apply.

Furthermore, if the parties agree in their contract to the terms of the applicable warranties and performance standards, a court will rely on the terms of the contract to determine if those warranties and performance standards apply, including if the parties have agreed to apply the statutory warranties and commission-adopted performance standards.

Please note that Texas courts have not had a chance to review the legal effect of the Sunset Act on Title 16.  Therefore, a court may decide that the language in the Government Code Section 325.017 does not cause the statutory warranties and commission-adopted performance standards to expire until August 31, 2010.  Therefore, the safest course of action is for the parties to agree to written warranties and performance standards that are at least as stringent as the statutory warranties and commission-adopted performance standards until August 31, 2010.  That way, if a court should decide that Title 16 provisions are still in effect until August 31, 2010, the contract will be in compliance with the law.

What happens if I discover a defect on or after September 1, 2009, and the commission no longer accepts inspection requests?

Contact your builder.  If your builder does not respond satisfactorily, you may want to contact an attorney to discuss your legal options.  You can also complain to the Attorney General’s Consumer Complaint Division, Federal Trade Commission, your local County or District Attorney or to your local Better Business Bureau.

What is the effect of the abolishment of the commission on cities and lending institutions that use the commission’s Web site to check on a builder or remodeler’s registration?

The commission will not process new or renewal builder/remodeler registration application forms received after August 31, 2009.  Until that time, cities and lending institutions can continue to use the commission’s Web site to determine if a builder/remodeler is registered and in good standing with the commission.  After that date, the commission’s Web site will reflect the status of builder/remodeler registrations as of August 31, 2009.

The Property Code requires builders and remodelers to include certain language in their contracts with homeowners about the commission, the builder/remodeler’s registration number, and the commission’s toll-free number. It also requires any arbitration provision included to be set out conspicuously.  Do builder and remodeler contracts need to have that information in their contracts after August 31, 2009?

Now until August 31, 2009:  the statutory provisions that require those contract provisions are still in effect and will apply to residential construction contracts signed before September 1, 2009.

On or after September 1, 2009, to August 31, 2010:  nothing in the law prohibits a builder or remodeler from complying with the Property Code chapter 420 as it relates to certain contract provisions and also providing information to the homeowner that the agency has been abolished pursuant to the Sunset Act and will not available after August 31, 2010.  However, parties to a construction contract may want to consult legal counsel to determine their best course of action.

What happens if I sign a contract for a new home before August 31, 2009, and it is finished in November 2009, but I find a construction defect in March of 2010? What warranties apply? What performance standards apply?

The limited statutory warranties and commission-adopted performance standards apply unless the parties have an express written agreement for a greater warranty and/or more stringent performance standards.

What happens if I sign a contract for a new home on or before August 31, 2009, and it is finished in November 2009, but I find a construction defect in the plumbing in March of 2011? What warranties apply? What performance standards apply? Where will I find copies of those documents?

The limited statutory warranties and commission-adopted performance standards apply unless the parties have an express written agreement for a greater warranty and/or more stringent performance standards.  The statutory language of Title 16 will be available from the Texas Legislature’s Web site: www.legis.state.tx.us or from a law library. The performance standards will be available from the Texas Register, which is published by the Secretary of State’s office. The commission rules are found in Title 10, chapter 304 of the Texas Administrative Code, which can be viewed on the Secretary of State’s Web site: www.sos.state.tx.us/tac/index.shtml

Rhino Design Build, LLC
3510 N St Marys Street San AntonioTX78212 USA 
 • 210-413-8789
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