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  H.B. No. 1038
 
 
 
 
AN ACT
  relating to the operation of the Texas Residential Construction
  Commission; providing penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter A, Chapter 5, Property Code, is
  amended by adding Section 5.016 to read as follows:
         Sec. 5.016.  DISCLOSURE OF ABSENCE OF CERTAIN WARRANTIES.
  (a)  A seller of residential real property that is exempt from
  Title 16 under Section 401.005 shall give to the purchaser of the
  property a written notice that reads substantially similar to the
  following:
  NOTICE OF NONAPPLICABILITY OF CERTAIN WARRANTIES
  AND BUILDING AND PERFORMANCE STANDARDS
         The property that is subject to this contract is exempt from
  Title 16, Property Code, including the provisions of that title
  that provide statutory warranties and building and performance
  standards.
         (b)  A notice required by this section shall be delivered by
  the seller to the purchaser on or before the effective date of an
  executory contract binding the purchaser to purchase the property.
  If a contract is entered into without the seller providing the
  notice, the purchaser may terminate the contract for any reason on
  or before the seventh day after the date the purchaser receives the
  notice.
         (c)  This section does not apply to a transfer:
               (1)  under a court order or foreclosure sale;
               (2)  by a trustee in bankruptcy;
               (3)  to a mortgagee by a mortgagor or successor in
  interest or to a beneficiary of a deed of trust by a trustor or
  successor in interest;
               (4)  by a mortgagee or a beneficiary under a deed of
  trust who has acquired the land at a sale conducted under a power of
  sale under a deed of trust or a sale under a court-ordered
  foreclosure or has acquired the land by a deed in lieu of
  foreclosure;
               (5)  by a fiduciary in the course of the administration
  of a decedent's estate, guardianship, conservatorship, or trust;
               (6)  from one co-owner to another co-owner of an
  undivided interest in the real property;
               (7)  to a spouse or a person in the lineal line of
  consanguinity of the seller;
               (8)  to or from a governmental entity; or
               (9)  of only a mineral interest, leasehold interest, or
  security interest.
         SECTION 2.  Section 27.002(b), Property Code, is amended to
  read as follows:
         (b)  Except as provided by this subsection, to [To] the
  extent of conflict between this chapter and any other law,
  including the Deceptive Trade Practices-Consumer Protection Act
  (Subchapter E, Chapter 17, Business & Commerce Code) or a common law
  cause of action, this chapter prevails. To the extent of conflict
  between this chapter and Title 16, Title 16 prevails.
         SECTION 3.  Section 27.004(d), Property Code, is amended to
  read as follows:
         (d)  The court or arbitration tribunal shall abate [dismiss]
  an action governed by this chapter if Subsection (c) does not apply
  and the court or tribunal, after a hearing, finds that the
  contractor is entitled to abatement [dismissal] because the
  claimant failed to comply with the requirements of Subtitle D,
  Title 16, if applicable, failed to provide the notice or failed to
  give the contractor a reasonable opportunity to inspect the
  property as required by Subsection (a), or failed to follow the
  procedures specified by Subsection (b). An action is automatically
  abated [dismissed] without the order of the court or tribunal
  beginning on the 11th day after the date a motion to abate [dismiss]
  is filed if the motion:
               (1)  is verified and alleges that the person against
  whom the action is pending did not receive the written notice
  required by Subsection (a), the person against whom the action is
  pending was not given a reasonable opportunity to inspect the
  property as required by Subsection (a), or the claimant failed to
  follow the procedures specified by Subsection (b) or Subtitle D,
  Title 16; and
               (2)  is not controverted by an affidavit filed by the
  claimant before the 11th day after the date on which the motion to
  abate [dismiss] is filed.
         SECTION 4.  Section 27.007, Property Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  This section does not apply to a contract relating to a
  home required to be registered under Section 426.003.
         SECTION 5.  Section 41.007, Property Code, is amended by
  amending Subsection (a) and adding Subsections (c) and (d) to read
  as follows:
         (a)  A contract for improvements to an existing residence
  described by Section 41.001(b)(3) must contain:
               (1)  the contractor's certificate of registration
  number from the Texas Residential Construction Commission if the
  contractor is required to register as a builder with the
  commission;
               (2)  the address and telephone number at which the
  owner may file a complaint with the Texas Residential Construction
  Commission about the conduct of the contractor if the contractor is
  required to register as a builder with the commission; and
               (3)  the following warning conspicuously printed,
  stamped, or typed in a size equal to at least 10-point bold type or
  computer equivalent[, next to the owner's signature line on the
  contract]:
         "IMPORTANT NOTICE: You and your contractor are responsible
  for meeting the terms and conditions of this contract. If you sign
  this contract and you fail to meet the terms and conditions of this
  contract, you may lose your legal ownership rights in your home.
  KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW."
         (c)  A provision of a contract for improvements to an
  existing residence described by Section 41.001(b)(3) that requires
  the parties to submit a dispute arising under the contract to
  binding arbitration must be conspicuously printed or typed in a
  size equal to at least 10-point bold type or the computer
  equivalent.
         (d)  A provision described by Subsection (c) is not
  enforceable against the owner unless the requirements of Subsection
  (c) are met.
         SECTION 6.  Section 401.002, Property Code, is amended by
  adding Subdivisions (7-a) and (8-a) to read as follows:
               (7-a)  "Improvement to the interior of an existing
  home" means any modification to the interior living space of a home,
  which includes the addition or installation of permanent fixtures
  inside the home. An improvement to the interior of an existing home
  does not include improvements to an existing home if the
  improvements are designed primarily to repair or replace the home's
  component parts.
               (8-a)  "Material improvement" means a modification to
  an existing home that either increases or decreases the home's
  total square footage of living space that also modifies the home's
  foundation, perimeter walls, or roof. A material improvement does
  not include modifications to an existing home if the modifications
  are designed primarily to repair or replace the home's component
  parts.
         SECTION 7.  Section 401.003, Property Code, is amended to
  read as follows:
         Sec. 401.003.  DEFINITION OF BUILDER. (a)  In this title,
  "builder" means any person [business entity or individual] who, for
  a fixed price, commission, fee, wage, or other compensation, sells,
  constructs, or supervises or manages the construction of, or
  contracts for the construction of or the supervision or management
  of the construction of:
               (1)  a new home;
               (2)  a material improvement to a home, other than an
  improvement solely to replace or repair a roof of an existing home;
  or
               (3)  an improvement to the interior of an existing home
  when the cost of the work exceeds $10,000 [$20,000].
         (b)  The term includes:
               (1)  an owner, officer, director, shareholder,
  partner, affiliate, subsidiary, or employee of the builder;
               (2)  a risk retention group governed by Article 21.54,
  Insurance Code, that insures all or any part of a builder's
  liability for the cost to repair a residential construction defect;
  and
               (3)  a third-party warranty company and its
  administrator.
         (c)  The term does not include any person [business entity or
  individual] who:
               (1)  has been issued a license by this state or an
  agency [or political subdivision] of this state to practice a trade
  or profession related to or affiliated with residential
  construction if the work being done by the entity or individual to
  the home is solely for the purpose for which the license was issued;
  or
               (2)  sells a new home and:
                     (A)  does not construct or supervise or manage the
  construction of the home; and
                     (B)  holds a license issued under Chapter 1101,
  Occupations Code, or is exempt from that chapter under Section
  1101.005, Occupations Code.
         SECTION 8.  Section 401.005, Property Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  This title does not apply to a homeowner or to a
  homeowner's real estate broker, agent, interior designer
  registered under Chapter 1053, Occupations Code, interior
  decorator, or property manager who supervises or arranges for the
  construction of an improvement to a home owned by the homeowner.
         (c)  An individual who builds a home or a material
  improvement to a home and sells the home immediately following
  completion of the building or remodeling and does not live in the
  home for at least one year following completion of the building or
  remodeling is responsible as a builder under the warranty
  obligation created by this title for work completed by the
  individual. Responsibility under this subsection does not
  automatically require an individual to register under Section
  416.001.
         SECTION 9.  Chapter 401, Property Code, is amended by adding
  Section 401.007 to read as follows:
         Sec. 401.007.  INJUNCTION; APPEAL. (a)  If the commission
  has reasonable cause to believe that a person is violating a statute
  to which this chapter applies, the commission, in addition to any
  other authorized action, may issue an order to cease and desist from
  the violation or an order to take affirmative action, or both, to
  enforce compliance. A person may appeal the order directly to
  district court in accordance with Chapter 2001, Government Code.
         (b)  Before issuing an order under this section, the
  commission shall set and give notice of a hearing before a hearings
  officer. The hearing is governed by Chapter 2001, Government Code.
  Based on the findings of fact, conclusions of law, and
  recommendations of the hearings officer, the commission by order
  may find whether a violation has occurred.
         (c)  The commission, after providing notice and an
  opportunity to appear for a hearing, may impose against a person who
  violates a cease and desist order an administrative penalty in an
  amount not to exceed $1,000 for each day of violation. In addition
  to any other remedy provided by law, the attorney general or the
  commission may institute in district court a suit for injunctive
  relief and to collect an administrative penalty. A bond is not
  required of the commission with respect to injunctive relief
  granted under this section. In the action, the court may enter as
  proper an order awarding a preliminary or final injunction.
         (d)  A suit by the attorney general under this section must
  be brought in Travis County.
         (e)  The attorney general and the commission may recover
  reasonable expenses incurred in obtaining injunctive relief under
  this section, including court costs, reasonable attorney's fees,
  investigative costs, witness fees, and deposition costs.
         (f)  If a party seeks review of the order by the commission,
  the party shall file a petition initiating judicial review not
  later than the 30th day after the date of the issuance of the
  decision.
         SECTION 10.  Section 406.001, Property Code, is amended by
  adding Subsections (a-1) and (c) to read as follows:
         (a-1)  In making appointments under Subsection (a)(2), the
  governor shall consider individuals who can represent the interests
  of homeowners, including individuals who have experience
  representing consumer or homeowner interests.
         (c)  A person may not be a public member of the commission if
  the person or the person's spouse:
               (1)  is a builder registered with the commission, or is
  otherwise registered, certified, or licensed by a regulatory agency
  in the field of residential construction;
               (2)  is employed by or participates in the management
  of a business entity or other organization regulated by or
  receiving money from the commission;
               (3)  owns or controls, directly or indirectly, more
  than a 10 percent interest in a business entity or other
  organization regulated by or receiving money from the commission;
  or
               (4)  uses or receives a substantial amount of tangible
  goods, services, or money from the commission other than
  compensation or reimbursement authorized by law for commission
  membership, attendance, or expenses.
         SECTION 11.  Sections 406.004(b) and (c), Property Code, are
  amended to read as follows:
         (b)  A person may not be a member of the commission and may
  not be a commission employee employed in a "bona fide executive,
  administrative, or professional capacity," as that phrase is used
  for purposes of establishing an exemption to the overtime
  provisions of the federal Fair Labor Standards Act of 1938 (29
  U.S.C. Section 201 et seq.) and its subsequent amendments, if:
               (1)  the person is an officer, employee, manager, or
  paid consultant of a Texas trade association or consumer
  association in the field of residential construction; or
               (2)  the person's spouse is an officer, [a] manager, or
  paid consultant of a Texas trade association or consumer
  association in the field of residential construction.
         (c)  A person may not be a member of the commission or act as
  the general counsel to the commission if the person is required to
  register as a lobbyist under Chapter 305, Government Code[, because
  of the person's activities for compensation on behalf of a
  profession related to the operation of the commission].
         SECTION 12.  Section 408.002, Property Code, is amended to
  read as follows:
         Sec. 408.002.  FEES. (a)  The commission shall adopt fees
  as required by this title in amounts that are reasonable and
  necessary to provide sufficient revenue to cover the costs of
  administering this title.
         (b)  The commission may charge a late fee for late payment of
  any fee due to the commission. The late fee may be any amount that
  does not exceed the amount of the fee due.
         (c)  The commission may charge a reasonable fee for:
               (1)  a homeowner to submit a request for
  state-sponsored inspection under Subtitle D;
               (2)  providing public information requested under
  Chapter 552, Government Code, excluding information requested from
  the commission under Section 409.001; or
               (3)  producing, mailing, and distributing special
  printed materials and publications generated in bulk by the
  commission for use and distribution by builders.
         (d)  The commission may waive or reduce the fee for an
  inspection under Subtitle D for a homeowner who demonstrates an
  inability to pay the fee.
         SECTION 13.  Section 408.003, Property Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The commission may procure and distribute to consumers
  informational materials and promotional items that contain
  commission contact details and outreach information.
         SECTION 14.  Chapter 408, Property Code, is amended by
  adding Section 408.005 to read as follows:
         Sec. 408.005.  COLLECTION OF AMOUNTS DUE. The commission
  may seek reimbursement of any amounts due to the commission and
  restitution for any dishonored payment instrument presented for
  payment to the commission.
         SECTION 15.  Chapter 409, Property Code, is amended by
  adding Section 409.0011 to read as follows:
         Sec. 409.0011.  BUILDER LIST. (a)  In this section, "volume
  builder" means a builder who registers at least 100 homes each year
  as provided by Section 426.003.
         (b)  The commission shall create and make accessible to the
  public an electronic list and a hard-copy list of builders who:
               (1)  are registered with the commission; and
               (2)  provide in this state building services, including
  accessible floor plans, to persons with mobility-related special
  needs.
         (c)  The electronic list required under Subsection (b) shall
  provide, if available, the following information with respect to
  each listed builder:
               (1)  a link to the builder's website; and
               (2)  contact information for the builder, including the
  municipalities where the builder provides building services
  described by Subsection (b)(2).
         (d)  The commission shall contact all volume builders in this
  state and encourage those builders to develop floor plans that are
  designed to be accessible for persons with mobility-related special
  needs.
         (e)  The Veterans' Land Board shall make accessible to the
  public on its Internet website and in hard-copy format the
  electronic list required under Subsection (b).
         SECTION 16.  Section 409.003, Property Code, is amended by
  adding Subsections (d), (e), and (f) to read as follows:
         (d)  The commission shall make available to the public
  information about each complaint that resulted in disciplinary
  action by the commission.
         (e)  The commission may not disclose the address of any
  individual home registered with the commission when making
  information available to the public under this title, except as
  necessary to implement this title.
         (f)  Notwithstanding Subsections (d) and (e), the commission
  may not disclose the address of an individual home registered with
  the commission:
               (1)  on the commission's Internet website; or
               (2)  in connection with an open records request under
  Chapter 552, Government Code.
         SECTION 17.  Chapter 409, Property Code, is amended by
  adding Section 409.004 to read as follows:
         Sec. 409.004.  DIRECTORY OF BUILDERS.  The commission shall
  make available to the public a list of each builder who holds a
  certificate of registration issued under Chapter 416.
         SECTION 18.  Section 416.002, Property Code, is amended by
  adding Subsection (e) to read as follows:
         (e)  Based on a commission investigation of an alleged
  violation of Sections 418.001(a)(14)-(20), the commission may
  require an applicant for renewal of a certificate of registration
  to disclose to the commission every person with an ownership
  interest in the applicant's business as a builder. This subsection
  does not apply to a publicly traded company.
         SECTION 19.  Section 416.004, Property Code, is amended by
  amending Subsection (a) and adding Subsection (c) to read as
  follows:
         (a)  The commission shall charge and collect:
               (1)  a filing fee for an application for an original
  certificate of registration that does not exceed $500; [and]
               (2)  a fee for renewal of a certificate of registration
  that does not exceed $300; and
               (3)  a late fee that does not exceed the amount of the
  fee due if payment of a registration application or renewal fee due
  under this title is late.
         (c)  All fees paid to the commission under this section are
  nonrefundable.
         SECTION 20.  Sections 416.008(d) and (e), Property Code, are
  amended to read as follows:
         (d)  The hearings officer may grant a motion for continuance
  of the hearing on the request of the commission or either party
  [hearing may be continued from time to time with the consent of the
  applicant].
         (e)  The hearing shall be held before a hearings officer
  appointed by the commission. After the hearing, the hearings
  officer shall enter an appropriate order. [The order of the
  hearings officer under this subsection is a final decision.]
         SECTION 21.  Section 416.010, Property Code, is amended by
  adding Subsection (e) to read as follows:
         (e)  A builder may designate a United States Postal Service
  postal box for use in correspondence. The builder may not use the
  box as the builder's principal place of business for purposes of
  this section.
         SECTION 22.  Section 416.011(d), Property Code, is amended
  to read as follows:
         (d)  The certification issued by the commission as a "Texas
  Star Builder" is valid for at most one year and renewable on a date
  to be determined at the commission's discretion [shall be for the
  same period of time as the builder's registration under this
  chapter].
         SECTION 23.  Chapter 416, Property Code, is amended by
  adding Section 416.012 to read as follows:
         Sec. 416.012.  CONTINUING EDUCATION PROGRAMS. (a)  The
  commission shall recognize or administer continuing education
  programs for builders registered by the commission. A registered
  builder must participate in the programs to the extent required by
  this section to maintain the builder's registration.
         (b)  A builder who registers for the first time on or after
  September 1, 2007, must complete, during the first year the builder
  is registered with the commission, five hours of continuing
  education, one hour of which must address ethics.
         (c)  A builder who is registered before September 1, 2007,
  and all other builders who register for the first time on or after
  September 1, 2007, and satisfy the requirements of Subsection (b),
  must complete five hours of continuing education every five years,
  one hour of which must address ethics.
         (d)  The commission shall permit a registered builder to
  receive continuing education credit for educational, technical,
  ethical, or professional management activities related to the
  practice of residential construction, including:
               (1)  successfully completing or auditing a course
  sponsored by an institution of higher education;
               (2)  successfully completing a course certified by a
  professional or trade organization;
               (3)  attending a seminar, tutorial, short course,
  correspondence course, videotaped course, or televised course on
  the practice of residential construction;
               (4)  participating in an in-house course sponsored by a
  corporation or other business entity;
               (5)  teaching a course described by Subdivisions
  (1)-(4);
               (6)  publishing an article, paper, or book on the
  practice of residential construction;
               (7)  making or attending a presentation at a meeting of
  a residential or builder association or organization or writing a
  paper presented at the meeting;
               (8)  participating in the activities of a residential
  or builder association, including serving on a committee of the
  organization; and
               (9)  engaging in self-directed study on the practice of
  residential construction.
         (e)  A registered builder may not receive more than two
  continuing education credit hours during each five-year period for
  engaging in self-directed study.
         (f)  At least two hours of the continuing education
  requirement under this section must address:
               (1)  limited statutory warranties;
               (2)  building and performance standards; and
               (3)  requirements of the International Residential
  Code as adopted under Section 430.001 and other statutes and rules
  that apply to builders under this title.
         (g)  A builder's agent or other designated individual may
  satisfy the requirements of this section for the builder if the
  builder is a corporation or other business entity.
         SECTION 24.  Section 417.003, Property Code, is amended to
  read as follows:
         Sec. 417.003.  FEES. (a)  The commission shall charge and
  collect:
               (1)  a filing fee for an application for certification
  under this chapter that does not exceed $100; [and]
               (2)  a fee for renewal of a certification under this
  chapter that does not exceed $50; and
               (3)  a late fee that does not exceed the amount of the
  fee due if payment of a registration or application fee due under
  this title is late.
         (b)  All fees paid to the commission under this section are
  nonrefundable.
         SECTION 25.  Sections 418.001 and 418.002, Property Code,
  are amended to read as follows:
         Sec. 418.001.  GROUNDS FOR DISCIPLINARY ACTION. A person,
  including a builder or a person who is designated as a builder's
  agent under Section 416.006, or a person who owns or controls a
  majority ownership interest in the builder is subject to
  disciplinary action under this chapter for:
               (1)  fraud or deceit in obtaining a registration or
  certification under this subtitle;
               (2)  misappropriation or misapplication of trust funds
  in the practice of residential construction, including a violation
  of Chapter 32, Penal Code, or Chapter 162, if found by a final
  nonappealable court judgment;
               (3)  naming false consideration in a contract to sell a
  new home or in a construction contract;
               (4)  discriminating on the basis of race, color,
  religion, sex, national origin, or ancestry;
               (5)  publishing a false or misleading advertisement;
               (6)  failure to honor, within a reasonable time, a
  check issued to the commission, or any other instrument of payment,
  including a credit or debit card or electronic funds transfer,
  after the commission has sent by certified mail a request for
  payment to the person's last known business address, according to
  commission records;
               (7)  failure to pay an administrative penalty assessed
  by the commission under Chapter 419 or a fee due under Chapter 426;
               (8)  failure to pay [nonpayment of] a final
  nonappealable court judgment arising from a construction defect or
  other transaction between the person and a homeowner;
               (9)  failure to register a home as required by Section
  426.003;
               (10)  failure to remit the fee for registration of a
  home under Section 426.003; [or]
               (11)  failure to reimburse a homeowner the amount
  ordered by the commission as provided by [in] Section 428.004(d);
               (12)  engaging in statutory or common-law fraud or
  misappropriation of funds, as determined by the commission after a
  hearing under Section 418.003;
               (13)  a repeated failure to participate in the
  state-sponsored inspection and dispute resolution process if
  required by this title;
               (14)  failure to register as a builder as required
  under Chapter 416;
               (15)  using or attempting to use a certificate of
  registration that has expired or that has been revoked;
               (16)  falsely representing that the person holds a
  certificate of registration issued under Chapter 416;
               (17)  acting as a builder using a name other than the
  name or names disclosed to the commission;
               (18)  aiding, abetting, or conspiring with a person who
  does not hold a certificate of registration to evade the provisions
  of this title or rules adopted under this title, if found by a final
  nonappealable court judgment;
               (19)  allowing the person's certificate of registration
  to be used by another person;
               (20)  acting as an agent, partner, or associate of a
  person who does not hold a certificate of registration with the
  intent to evade the provisions of this title or rules adopted under
  this title;
               (21)  a failure to reasonably perform on an accepted
  offer to repair or a repeated failure to make an offer to repair
  based on:
                     (A)  the recommendation of a third-party
  inspector under Section 428.004; or
                     (B)  the final holding of an appeal under Chapter
  429;
               (22)  a repeated failure to respond to a commission
  request for information;
               (23)  a failure to obtain a building permit required by
  a political subdivision before constructing a new home or an
  improvement to an existing home;
               (24)  abandoning, without justification, any home
  improvement contract or new home construction project engaged in or
  undertaken by the person, if found to have done so by a final,
  nonappealable court judgment;
               (25)  a repeated failure to comply with the
  requirements of Subtitle F; or
               (26)  otherwise violating this title or a commission
  rule adopted under this title.
         Sec. 418.002.  DISCIPLINARY POWERS OF COMMISSION. (a)  On a
  determination that a ground for disciplinary action under Section
  418.001 exists, the commission may:
               (1)  revoke or suspend a registration or certification
  in the event of repeated prior violations that have resulted in
  disciplinary action;
               (2)  probate the suspension of a registration or
  certification; [or]
               (3)  formally or informally reprimand a registered or
  certified person; or
               (4)  impose an administrative penalty under Chapter
  419.
         (b)  The commission must consider the factors described by
  Section 419.002(b) before taking disciplinary action under this
  chapter.
         (c)  For purposes of Section 418.001(12), the commission may
  not conduct a hearing or revoke or suspend a registration or
  certification unless the determination of statutory or common-law
  fraud or misappropriation of funds has been made in a final
  nonappealable judgment by a court.
         (d)  Prior to imposing disciplinary action under Subsection
  (a)(1) based upon grounds that involve a transaction between a
  builder and a homeowner, there must be repeated prior violations
  that have resulted in disciplinary action that involve the greater
  of:
               (1)  at least three homes registered by the builder
  under Section 426.003; or
               (2)  at least one percent of the homes registered by the
  builder under Section 426.003 during the preceding 12 months.
         (e)  When the commission has information that a matter may be
  criminal in nature, the commission may refer the matter to a local
  district attorney or county attorney for investigation.
         SECTION 26.  Section 418.004, Property Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  An appeal to a district court of a final decision of the
  commission under this section regarding a revocation or suspension
  of a registration or certification is determined by substantial
  evidence.
         SECTION 27.  Chapter 418, Property Code, is amended by
  adding Section 418.005 to read as follows:
         Sec. 418.005.  RESPONSIBILITY FOR ADMINISTRATIVE ACTIONS.  
  (a)  The commission may simultaneously take administrative action
  under this chapter against:
               (1)  a builder; and
               (2)  a person who owns or controls a majority ownership
  interest in the builder.
         (b)  A builder and a person who owns or controls a majority
  ownership interest in the builder are jointly and severally liable
  for any amounts due to the commission under this title.
         SECTION 28.  Section 419.001, Property Code, is amended to
  read as follows:
         Sec. 419.001.  IMPOSITION OF ADMINISTRATIVE PENALTY. The
  [In a contested case involving disciplinary action, the] commission
  may[, as part of the commission's order,] impose an administrative
  penalty on a [registered or certified] person who violates this
  title or a rule adopted or order issued by the commission under this
  title.
         SECTION 29.  Section 419.002, Property Code, is amended by
  amending Subsection (a) and adding Subsection (c) to read as
  follows:
         (a)  Except as provided by Subsection (c), an [An]
  administrative penalty imposed under this chapter may not exceed
  $10,000 [$5,000] for each violation.
         (c)  A violation of Section 418.001(2) or (12) is punishable
  by a penalty not to exceed $100,000.
         SECTION 30.  Subtitle C, Title 16, Property Code, is amended
  by adding Chapter 420 to read as follows:
  CHAPTER 420. BUILDING CONTRACT PROVISIONS
         Sec. 420.001.  REQUIRED WRITTEN DISCLOSURE. In a contract
  for the construction of a new home or an improvement to an existing
  home required to be registered under Section 426.003, the contract
  must contain a notice to the consumer in at least 10-point bold type
  or the computer equivalent that gives the telephone number of the
  commission and states:
         STATE LAW REQUIRES THAT A PERSON HOLD A CERTIFICATE OF
  REGISTRATION FROM THE TEXAS RESIDENTIAL CONSTRUCTION COMMISSION IF
  THE PERSON CONTRACTS TO CONSTRUCT A NEW HOME OR IF THE PERSON
  CONTRACTS TO CONSTRUCT A MATERIAL IMPROVEMENT TO AN EXISTING HOME
  OR CERTAIN IMPROVEMENTS TO THE INTERIOR OF AN EXISTING HOME AND THE
  TOTAL COST OF THE IMPROVEMENT IS $10,000 OR MORE (INCLUDING LABOR
  AND MATERIALS).
         YOU MAY CONTACT THE COMMISSION AT [insert commission's
  telephone number] TO FIND OUT WHETHER THE BUILDER HAS A VALID
  CERTIFICATE OF REGISTRATION. THE COMMISSION HAS INFORMATION
  AVAILABLE ON THE HISTORY OF BUILDERS, INCLUDING SUSPENSIONS,
  REVOCATIONS, COMPLAINTS, AND RESOLUTION OF COMPLAINTS.
         THIS CONTRACT IS SUBJECT TO CHAPTER 426, PROPERTY CODE.  THE
  PROVISIONS OF THAT CHAPTER GOVERN THE PROCESS THAT MUST BE FOLLOWED
  IN THE EVENT A DISPUTE ARISES OUT OF AN ALLEGED CONSTRUCTION
  DEFECT.  IF YOU HAVE A COMPLAINT CONCERNING A CONSTRUCTION DEFECT
  YOU MAY CONTACT THE COMMISSION AT THE TOLL-FREE TELEPHONE NUMBER TO
  LEARN HOW TO PROCEED UNDER THE STATE-SPONSORED INSPECTION AND
  DISPUTE RESOLUTION PROCESS.
         Sec. 420.002.  REQUIRED CONTRACT PROVISIONS.  In a contract
  for the construction of a new home or an improvement to an existing
  home required to be registered under Section 426.003, the contract
  is not enforceable against a homeowner unless the contract:
               (1)  contains the builder's name and certificate of
  registration number; and
               (2)  contains the notice required by Section 420.001.
         Sec. 420.003.  BINDING ARBITRATION CONTRACT PROVISION.
  (a)  In a contract for the construction of a new home or the
  improvement of an existing home required to be registered under
  Section 426.003 and that contains a provision requiring the parties
  to submit a dispute arising under the contract to binding
  arbitration, the provision must be conspicuously printed or typed
  in a size equal to at least 10-point bold type or the computer
  equivalent.
         (b)  A provision described by Subsection (a) is not
  enforceable against the homeowner unless the requirements of
  Subsection (a) are met.
         SECTION 31.  Section 426.003(b), Property Code, is amended
  to read as follows:
         (b)  A builder who enters [into] a transaction governed by
  this title, other than the transfer of title of a new home from the
  builder to the seller, shall register the home involved in the
  transaction with the commission. The registration must:
               (1)  include the information required by the commission
  by rule;
               (2)  be accompanied by the fee required by Subsection
  (c); and
               (3)  be delivered to the commission not later than the
  15th day after the earlier of:
                     (A)  the date of the substantial completion of the
  home or other residential construction project [of the agreement
  that describes the transaction between the homeowner and the
  builder]; [or]
                     (B)  the date the new home is occupied; or
                     (C)  the date of issuance of a certificate of
  occupancy or a certificate of completion [commencement of the work
  on the home].
         SECTION 32.  Section 426.001(a), Property Code, is amended
  to read as follows:
         (a)  This subtitle applies to a dispute between a builder and
  a homeowner if:
               (1)  the dispute arises out of an alleged construction
  defect, other than a claim solely for:
                     (A)  personal injury, survival, or wrongful
  death; or
                     (B)  damage to goods; and
               (2)  a request is submitted to the commission not later
  than the 30th day after [on or before] the 10th anniversary of:
                     (A)  the date of the initial transfer of title
  from the builder to the initial owner of the home or the improvement
  that is the subject of the dispute; or
                     (B)[,]  if there is not a closing in which title is
  transferred, the date on which the [contract for] construction of
  the improvement was substantially completed [entered into].
         SECTION 33.  Section 426.004, Property Code, is amended by
  amending Subsection (c) and adding Subsection (d) to read as
  follows:
         (c)  If the transfer of the title of the home from the builder
  to the initial homeowner occurred before January 1, 2004, or if the
  contract for improvements or additions between the builder and
  homeowner was entered into before January 1, 2004, the commission
  shall register the home and the builder [the person who submits a
  request involving the home] shall pay[, in addition to the
  inspection expenses required by this section,] the registration fee
  required by Section 426.003.
         (d)  The commission may reimburse an inspector for travel
  expenses incurred to complete an inspection regardless of whether
  the expenses exceed the amount collected under this section.
         SECTION 34.  Section 426.005, Property Code, is amended by
  amending Subsection (a) and adding Subsection (f) to read as
  follows:
         (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.
         (f)  A homeowner is not required to comply with this subtitle
  if:
               (1)  at the time a homeowner and a builder enter into a
  contract covered by this title the builder was not registered; or
               (2)  the certificate of registration of the builder has
  been revoked.
         SECTION 35.  Section 426.006, Property Code, is amended to
  read as follows:
         Sec. 426.006.  TIME FOR REQUESTING INSPECTION AND DISPUTE
  RESOLUTION. (a)  For an alleged defect discovered during an
  applicable warranty period, the [The] state-sponsored inspection
  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 [30th] day after the date the applicable warranty period
  expires.
         (b)  If the alleged defect would violate the statutory
  warranty of habitability and was not discoverable by a reasonable,
  prudent inspection or examination of the home or improvement within
  the applicable warranty period, the state-sponsored inspection and
  dispute resolution process must be requested:
               (1)  on or before the second anniversary of the date of
  discovery of the conditions claimed to be evidence of the
  construction defect; and
               (2)  not later than the 10th anniversary of the date of
  the initial transfer of title from the builder to the initial owner
  of the home or improvement that is the subject of the dispute or, if
  there is not a closing, the date on which the contract for
  construction of the improvement is entered into.
         SECTION 36.  Section 426.007, Property Code, is amended to
  read as follows:
         Sec. 426.007.  ADMISSIBILITY OF CERTAIN EVIDENCE. A person
  who submits a request for state-sponsored inspection and dispute
  resolution or responds to a request under Chapter 428 must disclose
  in the request or response the name of any expert [person] who,
  before the request is submitted, inspected the home on behalf of the
  requestor or respondent in connection with the construction defect
  alleged in the request or response. If an expert's [a person's]
  name is known to the requestor or respondent at the time of the
  request or response and is not disclosed as required by this
  section, the requestor or respondent may not designate the person
  as an expert or use materials prepared by that person in:
               (1)  the state-sponsored inspection and dispute
  resolution process arising out of the request; or
               (2)  any action arising out of the construction defect
  that is the subject of the request or response.
         SECTION 37.  Section 426.008, Property Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  For the purposes of admissibility of a third-party
  inspector's recommendation or a ruling by a panel of state
  inspectors, the recommendation or ruling shall be considered a
  business record under Rule 902, Texas Rules of Evidence.
         SECTION 38.  Section 427.001, Property Code, is amended by
  amending Subsections (b), (c), and (d) and adding Subsection (c-1)
  to read as follows:
         (b)  A third-party inspector who inspects an issue involving
  workmanship and materials must:
               (1)  have a minimum of three [five] years' experience in
  the residential construction industry; and
               (2)  be certified as a residential combination
  inspector by the International Code Council.
         (c)  A third-party inspector who inspects an issue involving
  a structural matter or involving workmanship, materials, and a
  structural matter must:
               (1)  be an approved structural engineer or approved
  architect; and
               (2)  have a minimum of five [10] years' experience in
  residential construction.
         (c-1)  A third-party inspector who inspects an issue
  involving a structural matter and an unrelated issue involving
  workmanship and materials matters must meet the requirements of
  Subsections (b) and (c).
         (d)  Each third-party inspector [who inspects an issue
  involving a structural matter] must receive, in accordance with
  commission rules:
               (1)  initial training regarding the state-sponsored
  inspection and dispute resolution process and this subtitle; and
               (2)  annual continuing education in the inspector's
  area of practice.
         SECTION 39.  Chapter 427, Property Code, is amended by
  adding Section 427.003 to read as follows:
         Sec. 427.003.  NO CIVIL LIABILITY. (a)  A person who
  performs services for the commission as a third-party inspector or
  a state inspector who does not act with wanton and wilful disregard
  for the rights, safety, or property of another is not liable for
  civil damages for any act or omission within the course and scope of
  carrying out the person's duties or functions as a third-party
  inspector or state inspector.
         (b)  This section does not apply to an intentional act of
  misconduct or gross negligence.
         SECTION 40.  Sections 428.001(d) and (g), Property Code, are
  amended to read as follows:
         (d)  At the time a [A] person [who] submits a request under
  this section, the person must send by certified mail, return
  receipt requested, a copy of the request, including evidence
  submitted with the request, to each other party involved in the
  dispute.
         (g)  The commission by rule shall establish a standard form
  for submitting a request under this section [and provide a means to
  submit a request electronically].
         SECTION 41.  Section 428.003(a), Property Code, is amended
  to read as follows:
         (a)  On or before the 30th [15th] day after the date the
  commission receives a request, the commission shall appoint the
  next available third-party inspector from the applicable lists of
  third-party inspectors maintained by the commission under
  Subsection (c).
         SECTION 42.  Section 428.004, Property Code, is amended by
  amending Subsection (a) and adding Subsections (e) and (f) to read
  as follows:
         (a)  If the dispute involves workmanship and materials in the
  home of a nonstructural matter, the third-party inspector shall
  issue a recommendation not later than the 30th [15th] day after the
  date the third-party inspector receives the appointment from the
  commission.
         (e)  The commission may not require a builder to reimburse
  fees or inspection expenses under this section if, before the
  inspection, the builder offered to make repairs or have repairs
  made substantially equivalent to those required by the findings of
  the final report confirming the defect requiring repair.
         (f)  If, before the inspection, the builder has made or
  offered to make repairs substantially equivalent to those required
  by the findings of the final report confirming the defect, the
  agency may not list the finding on the commission's Internet
  website.
         SECTION 43.  Section 429.001(c), Property Code, is amended
  to read as follows:
         (c)  The panel shall:
               (1)  review the recommendation for compliance with this
  title as [without a hearing unless a hearing is otherwise] required
  by rules adopted by the commission;
               (2)  approve, reject, or modify the recommendation of
  the third-party inspector or remand the dispute for further action
  by the third-party inspector; and
               (3)  issue written findings of fact and a ruling on the
  appeal not later than the 30th day after the date the notice of
  appeal is filed with the commission.
         SECTION 44.  Section 430.005, Property Code, is amended to
  read as follows:
         Sec. 430.005.  ALTERNATIVE STANDARDS FOR CERTAIN
  CONSTRUCTION. (a)  For the purpose of this title, the only
  statutory warranty and building and performance standards that
  apply to residential construction in unincorporated areas of
  counties that are considered economically distressed areas as
  defined by Section 15.001(11) of the Water Code and located within
  50 miles of an international border are the standards established
  for colonia housing programs administered by the Texas Department
  of Housing and Community Affairs, unless a county commissioners
  court has adopted other building and performance standards
  authorized by statute.
         (b)  This section does not exempt a builder in an area
  described by Subsection (a) from the registration requirements
  imposed by this title, including the requirements of Sections
  416.001 and 426.003.
         (c)  An allegation of a postconstruction defect in a
  construction project in an area described by Subsection (a) is
  subject to the state-sponsored inspection and dispute resolution
  process described by this subtitle.
         SECTION 45.  Section 430.006, Property Code, is amended to
  read as follows:
         Sec. 430.006.  STATUTORY WARRANTIES EXCLUSIVE. The
  warranties established under this chapter supersede all implied
  warranties. The only warranties that exist for residential
  construction or residential improvements are:
               (1)  warranties created by this chapter;
               (2)  warranties created [or] by other statutes
  expressly referring to residential construction or residential
  improvements;
               (3)  [, or] any express, written warranty acknowledged
  by the homeowner and the builder; and
               (4)  warranties that apply to an area described by
  Section 430.005(a) as described by that section.
         SECTION 46.  Subtitle D, Title 16, Property Code, is amended
  by adding Chapter 431 to read as follows:
  CHAPTER 431.  ENERGY-EFFICIENT BUILDING ACCREDITATION PROGRAM
         Sec. 431.001.  ENERGY-EFFICIENT BUILDING ACCREDITATION
  PROGRAM.  (a)  In this section, "National Housing Act" means
  Section 203(b), (i), or (k) of the National Housing Act (12 U.S.C.
  Sections 1709(b), (i), and (k)).
         (b)  The commission, in consultation with the Energy Systems
  Laboratory at the Texas Engineering Experiment Station of The Texas
  A&M University System, the Texas Commission on Environmental
  Quality, and an advisory committee appointed by the commission, may
  establish an energy-efficient building accreditation program for
  buildings that exceed the building energy performance standards
  under Section 388.003, Health and Safety Code, by 15 percent or
  more.
         (c)  If the commission establishes a program under this
  chapter, the commission, in consultation with the Energy Systems
  Laboratory, shall update the program on or before December 1 of each
  even-numbered year using the best available energy-efficient
  building practices.
         (d)  If the commission establishes a program under this
  chapter, the program must include a checklist system to produce an
  energy-efficient building scorecard to help:
               (1)  home buyers compare potential homes and, by
  providing a copy of the completed scorecard to a mortgage lender,
  qualify for energy-efficient mortgages under the National Housing
  Act; and
               (2)  communities qualify for emissions reduction
  credits by adopting codes that meet or exceed the energy-efficient
  building or energy performance standards established under Chapter
  388, Health and Safety Code.
         Sec. 431.002.  PUBLIC INFORMATION PROGRAM.  The commission
  may establish a public information program to inform homeowners,
  sellers, buyers, and others regarding energy-efficient building
  ratings.
         Sec. 431.003.  MEASUREMENT SYSTEM FOR REDUCTION IN ENERGY
  AND EMISSIONS.  If the commission establishes a program under this
  chapter, the Energy Systems Laboratory shall establish a system to
  measure the reduction in energy and emissions produced under the
  energy-efficient building program and report those savings to the
  commission.
         Sec. 431.004.  CERTIFICATION FEE.  If the commission
  establishes a program under this chapter, the commission may set a
  certification fee sufficient to cover the cost of administering the
  program and pay for any education efforts conducted under this
  chapter.
         SECTION 47.  Title 16, Property Code, is amended by adding
  Subtitle F to read as follows:
  SUBTITLE F. INSPECTION OF NEW RESIDENTIAL CONSTRUCTION
  CHAPTER 446. RESIDENTIAL CONSTRUCTION IN UNINCORPORATED AREAS AND
  OTHER AREAS NOT SUBJECT TO MUNICIPAL INSPECTIONS
         Sec. 446.001.  APPLICABILITY OF CHAPTER. This chapter
  applies to residential construction described by Sections
  401.003(a)(1), (2), and (3) in an unincorporated area and to other
  areas not subject to municipal inspections.
         Sec. 446.002.  INSPECTION REQUIRED. (a) A builder shall
  have a new home or other improvement to which this chapter applies
  inspected by a fee inspector.
         (b)  For new construction subject to this chapter, there
  shall be a minimum of three inspections performed during the
  project to ensure code compliance, as applicable, at the following
  stages of construction:
               (1)  foundation, prior to the placement of concrete;
               (2)  framing and mechanical systems prior to being
  covered with sheetrock or other interior wall covering; and
               (3)  final inspection when the home is completed.
         (c)  For improvements other than new construction, the
  inspections described in Subsection (b) shall occur as necessary
  based upon the scope of work of the project.
         (d)  The builder shall be responsible for contracting with a
  fee inspector authorized by this chapter to perform the inspections
  required by this section.
         (e)  The commission may establish fees necessary to
  administer this subtitle. Such fees may be included in the home
  registration fee required by and described in Section 426.003(c).
         Sec. 446.003.  ELECTRONIC REPORTING SYSTEM. (a) The
  commission shall establish an Internet-based process to implement
  this subtitle. The process shall be password protected.
  Inspectors will use the Internet-based process to report the
  satisfactory completion of the inspections required by Section
  446.002 to the commission. Upon reporting of satisfactory
  completion of the inspections, the commission shall issue a
  certificate of completion which shall be forwarded to the homeowner
  within 30 days following the registration of a home, as required by
  Section 426.003.
         (b)  The commission shall allow for an alternative reporting
  system for persons who demonstrate to the commission an inability
  to comply with the electronic reporting requirements of Subsection
  (a).
         Sec. 446.004.  FEE INSPECTOR.  A fee inspector must be either
  a licensed engineer, a registered architect, a professional
  inspector licensed by the Texas Real Estate Commission, or a
  third-party inspector qualified under Section 427.001(b). A
  builder may use the same or a different fee inspector for
  inspections required under this chapter.
         Sec. 446.005.  ELEMENTS OF INSPECTION. The commission by
  rule shall:
               (1)  establish the elements of the construction that
  must be inspected under this chapter in accordance with Section
  446.002 to ensure compliance with the applicable code provisions as
  required by Section 430.001(d); and
               (2)  prescribe the form and the manner in which the
  results of the inspection will be reported in writing.
         Sec. 446.006.  CONSTRUCTION IN CERTAIN AREAS: ELIGIBILITY
  FOR CERTAIN WINDSTORM AND HAIL INSURANCE. (a) This section applies
  only to construction in an unincorporated area in which windstorm
  and hail insurance coverage is available under Chapter 2210,
  Insurance Code.
         (b)  In addition to an inspection required pursuant to
  Section 446.002, the builder must, if required by statute, obtain a
  certificate of compliance for the structure in the manner provided
  under Section 2210.251, Insurance Code.
         SECTION 48.  Subchapter Z, Chapter 214, Local Government
  Code, is amended by adding Section 214.906 to read as follows:
         Sec. 214.906.  VERIFICATION OF BUILDER REGISTRATION. A
  municipality may not issue a building permit to a builder, as
  defined by Section 401.003, Property Code, for construction
  described by Section 401.003(a), Property Code, unless the
  municipality has verified that the builder is registered with the
  Texas Residential Construction Commission under Chapter 416,
  Property Code, or is exempt from registration under Section
  401.005, Property Code.
         SECTION 49.  Section 388.009, Health and Safety Code, is
  repealed.
         SECTION 50.  On or before June 1, 2008, the Texas Residential
  Construction Commission shall adopt all rules necessary to
  implement Subtitle F, Title 16, Property Code, as added by this Act.
         SECTION 51.   Subtitle F, Title 16, Property Code, as added
  by this Act, applies only to construction commenced on or after
  September 1, 2008. For the purposes of Subtitle F, Title 16,
  Property Code, as added by this Act, construction commenced before
  September 1, 2008, is governed by the law in effect immediately
  before the effective date of this Act and the former law is
  continued in effect for such construction.
         SECTION 52.  (a)  The House Committee on State Affairs shall
  conduct an interim study regarding the feasibility of creating a
  fund designed to reimburse aggrieved persons who experience actual
  damages from a builder's actions in violation of Title 16, Property
  Code. The speaker of the house of representatives shall appoint two
  additional members of the house of representatives who have
  expressed an interest in this issue as voting adjunct members of the
  committee for the purpose of participating in the study.
         (b)  The committee shall investigate:
               (1)  potential methods for payments into the fund,
  procedures for managing the fund, and methods for making claims to
  the fund; and
               (2)  similar funds created by other states and
  jurisdictions of the United States and the relative successes or
  failures of those funds.
         (c)  Not later than September 1, 2008, the committee shall
  submit to the speaker of the house of representatives and the
  members of the house of representatives:
               (1)  the results of the study; and
               (2)  any recommendations for statutory changes
  resulting from the findings of the study.
         (d)  This section expires October 1, 2008.
         SECTION 53.  (a)  This Act applies only to the following
  that are filed on or after September 1, 2007:
               (1)  an application for a building permit or
  certification as a builder or a Texas Star Builder; or
               (2)  a request for state-sponsored inspection and
  dispute resolution.
         (b)  An application for a building permit or for
  certification as a builder or a Texas Star Builder or a request for
  state-sponsored inspection and dispute resolution that was filed
  before September 1, 2007, is governed by the law as it existed
  immediately before September 1, 2007, and that law is continued in
  effect for that purpose.
         SECTION 54.  Section 5.016, Property Code, as added by this
  Act, applies only to a transfer of residential property in which the
  improvements to the property commenced on or after September 1,
  2007. A transfer of residential property in which the improvements
  commenced before September 1, 2007, is governed by the law in effect
  at the time the improvements were commenced, and the former law is
  continued in effect for that purpose.
         SECTION 55.  Section 416.012, Property Code, as added by
  this Act, applies only to work performed by a builder on or after
  September 1, 2007. Work performed by a builder before that date is
  governed by the law in effect when the work is performed, and the
  former law is continued in effect for that purpose.
         SECTION 56.  The changes in law made by this Act by the
  amendment of Section 418.001, Property Code, apply only to conduct
  that occurs on or after September 1, 2007. Conduct that occurs
  before that date is governed by the law in effect when the conduct
  occurs, and the former law is continued in effect for that purpose.
         SECTION 57.  This Act takes effect September 1, 2007.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 1038 was passed by the House on April
  25, 2007, by the following vote:  Yeas 135, Nays 1, 1 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 1038 on May 24, 2007, by the following vote:  Yeas 136, Nays 2,
  3 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 1038 was passed by the Senate, with
  amendments, on May 21, 2007, by the following vote:  Yeas 31, Nays
  0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor