07. Construction & Liens
How to Sue a Home Builder
Residential construction defects are common and builders/contractors are notorious for failing to respond to customer complaints, honor warranties, and correct defective work. To initiate a formal claim against your builder/contractor, you must follow the statutory procedures outlined in Chapter 27 of the Texas Property Code. In 1989, the Texas Legislature enacted Chapter 27 “to promote settlement between homeowners and contractors, and to afford contractors the opportunity to repair their work in the face of dissatisfaction.” Chapter 27 is a mandatory statute and must be followed to make a valid claim against a builder/contractor. Chapter 27 applies to both new home construction and residential remodel projects, and is applicable to both the original homeowner and any subsequent home purchaser. A new home contract or remodel contract subject to Chapter 27 must contain a disclosure statement in at least 10 bold font outlining the Chapter 27 requirements. Failure to include this notice in the contract subjects the builder/contractor to a penalty of $500.00.
A chapter 27 claim is initiated by preparing and sending a formal notice to the builder/contractor by certified mail at the builder/contractor’s last known address, specifying in reasonable detail the construction defects and cost to repair, if known. If available, the notice should be supported by evidence, such as inspection reports, photographs, video recordings, and repair estimates.
In response to the notice, the builder/contractor, upon written request, has the right to inspect, test, and document the defects. Within no later than 45 days after the builder/contractor receives the notice, the builder/contractor may make a written offer of settlement to the homeowner. The offer may include either an agreement by the builder/contractor to repair the defects or have the defects repaired by an independent contractor at the builder/contractor’s expense. The repairs shall be made within 45 days from when the builder/contractor receives notice of acceptance of the offer by the homeowner. If the builder/contractor makes a written offer of which the homeowner deems unreasonable, the homeowner has 25 days to respond in writing to the builder/contractor outlining the basis for the rejection, thereby giving the builder/contractor an additional 10 days to present a counter-offer. If the homeowner rejects a reasonable offer, or does not allow the builder/contractor an opportunity to inspect/repair the defects, the homeowner’s potential recovery through a lawsuit and/or arbitration will be limited to the original offer and the homeowner’s attorney’s fees will be limited to those incurred before the reasonable offer was made.
Chapter 27 limits the nature and type of damages a homeowner may recover against a builder/contractor to the following: (1) the reasonable cost to repair the construction defects; (2) the reasonable cost to repair or replace any damaged personal property caused by the construction defects; (3) reasonable and necessary engineering and consulting fees; (4) reasonable expense for temporary housing incurred during the repairs; (5) the reduction in current market value, if any, after the construction defects are repaired if the defects are structural in nature; and; (6) reasonable attorneys’ fees and litigation costs. If the construction defects are greater than $7,500.00, the court may, upon filing a motion, compel the parties to mediate the dispute at the outset of litigation.
The Chapter 27 Demand is a very important step in the claim process and should be prepared by an experienced construction lawyer. Most notices can be prepared within three-five hours. To further discuss your home defects and the Chapter 27 process, please either call us at the number below or fill out the applicable questions in the form below. We represent homeowners throughout the entire state of Texas and are Board Certified in Construction law by the Texas Board of Legal Specialization.
Construction & Real Estate
The new home construction market in Texas has experienced a significant increase over the past several years, resulting in new neighborhoods popping up all over our great State. While this has been a great boost for our economy, it has also resulted in buyers being dissatisfied with their home after they moved in. These construction defects vary from improper installation, poor workmanship, improper materials to significant problems that will require expensive repairs and remodeling.
Suing a developer is different from filing a small lawsuit against a home contractor, for example, which can often be handled without an attorney in Texas's Small Claims Court. This type of action is ideal for a small dispute with a painter who, for example, fails to complete a specific task. A lawsuit against a developer is a larger project, one that generally requires an attorney's assistance.
Claims of Breach of Contract Against a Texas Builder
Ultimately, your lawsuit against your developer is about its breach of a promise: to deliver you a home as it was designed and described to you. Buying a newly constructed house is a process that generates lots of paperwork, particularly if the house is within a new planned community. Your builder or developer in all likelihood gave you extensive materials describing your new property. You (and the builder) would have needed to sign a written contract outlining your payment and the builder's promise to construct the home.
If you end up having to file a lawsuit against your Texas builder, part of your claim will be that it breached this agreement – did not give you what it promised it would. Here, all of the materials the builder gave you, including photos, descriptions of the home inside and out, plans and drawings, and emails describing the work, will be useful to establishing your expectations at the time you entered into the contract.
For example, if the various documents clearly show that you thought you were getting a home with a stucco exterior, and the finished exterior is cheap vinyl siding, this demonstrates the builder's breach.
One law you'll need to watch out for, however, is Texas's a four-year statute of limitations for breach of contract, under Tex. Civ. Prac. & Rem. Code § 16.004(a)(3). This means that claims based on a contract with the builder must be brought within this period, or they are barred.
However, discovery of the defect can toll (delay) the limitation period in some situations. When a homeowner could not have reasonably discovered the existence of the breach until after the three-year period – for example, if the lights go out after four years because the builder used low-quality wiring and the homeowner couldn't have reasonably known about it (especially likely, with wires being hidden behind walls) – a court might allow the action to proceed.
Claims of Negligence Against a Texas Builder
Breach of contract isn't the only basis upon which you might sue your homebuilder. Another useful legal theory is that of ordinary negligence. In this context, the relevant negligence would be the builder's failure to exercise the correct standard of care in building your home.
To establish a claim for home-construction negligence in Texas, the person filing suit must establish that 1) a particular duty was imposed on the builder or developer by law; 2) the builder failed to conform to that legally imposed standard; 3) there was a causal link between the failure to meet the standard of care and the resulting construction defect; and 4) you suffered actual economic damages as a result of the injury to your Texas home.
Note that Texas has a two-year statute of limitations (a deadline on when you can file suit) for property damage caused by negligence under Tex. Civ. Prac. & Rem. Code § 16.003(a).
Beware of the Statute of Repose in Texas
Under Tex. Civ. Prac. & Rem. Code § 16.008, a homeowner has a maximum of six years from written acceptance or actual occupancy for design or construction of improvement to real property.
This means that even if you can extend the three-year statutes of limitations on breach of contract or negligence through the doctrine of discovery – that is, when you reasonably could have discovered the problem with your home – six years is the "ultimate" limit. As a homeowner, therefore, you must be diligent in discovering any potential defects.
Check Your Contract for Mediation, Arbitration, and Shortened Claim Periods
You and your attorney should carefully read the language of your sales contract. There are a few clauses to watch out for before filing your lawsuit. First, it is common in construction contracts in Texas and elsewhere to find a dispute resolution clause.
A dispute resolution clause may say that you were required to go to mediation with your builder or developer before filing your lawsuit. In this context, mediation is a facilitated negotiation for settlement, led by a third-party neutral individual. Often, that individual will have some relevant experience, most likely with construction law, engineering, or building development.
Your contract may also contain an arbitration clause. This clause would require that you go to arbitration against the builder or developer instead of litigation in a court of law. In arbitration, either one or three individuals – again, typically with experience in construction – will render a final determination on your dispute. The advantage of arbitration is that it is typically quicker than litigation, saving you money on legal fees. A potential disadvantage, however, is that the arbitrator's decisions generally cannot be appealed.
Finally, take note of any aspects of the contract that shorten your statute of limitations or ability to make claims. It is not uncommon that construction contracts will shorten the amount of time that you have in which to file a legal claim against your builder.
An attorney with experience in construction defect litigation in Texas will be able to carefully review the document for these sorts of limitations and help strategize how to best seek compensation from your builder or developer.