By William M. Coats

The 78th Texas legislative session has come and gone (at least for now), and it produced several changes to the construction law of Texas.

Residential construction law was changed in ways that are generally favorable to homebuilders. HB730 establishes a Texas Residential Construction Commission.
Before an aggrieved homeowner can bring suit against a homebuilder, the homeowner must go through an inspection and dispute-resolution process through the commission. This is a procedural step that must be taken before a lawsuit is ripe.
In addition, the commission is directed to adopt limited warranties and standards, which will replace warranties implied under the common law of Texas.

Homeowners will be assessed a $125 fee to the commission on each new home. The fee may seem like a slap in the face to homeowners who will now have to pay to have the right to a prompt suit and implied warranties taken away from them.

Public procurement changes, by SB1331, further extended the right to alternatives to competitive bidding to state agencies that build their project through the Texas Building and Procurement Commission. This is a continuation of a trend toward more procurement options, which we have seen in the last three sessions of the Legislature.

To the surprise of most construction law practitioners this year, the 5th Circuit ruled that Texas counties have sovereign immunity from claims on their construction contracts, which has not been waived by the statutes governing counties. SB1017 limited this holding by specifically providing limited rights to sue counties on construction contracts.

HB4, the general tort reform statute, contains a change that is specific to the construction industry. Whenever a plaintiff begins a professional malpractice claim against a design professional, the plaintiff must file a "Certificate of Merit" signed by a design professional actively engaged in architectural or engineering practice.

This certificate must be filed within 10 days of the institution of the suit. The cumbersome process will no doubt breed a new layer of consultants with a specialty in finding merit to claims. The bill does not address the dilemma of an owner who is sued by a contractor claiming that the design professional made professional mistakes that damaged the contractor.

If the contractor is right in his or her contentions, the owner has rights of contribution or indemnity against the design professional. However, under this bill it may be necessary to file a Certificate of Merit at the time the indemnity issues is raised, thereby giving credence to the plaintiff's claims.

This awkward possibility should have been addressed in the bill. An owner should not be forced to adopt the plaintiff's position in order to protect his or her contribution and indemnity rights.

Several things that didn't happen in Austin may be revisited in later sessions. First, a coalition of disparate elements of the construction industry put together a compromise on the issue of contingent payment clauses ("pay when paid"). The compromise was introduced as HB541.

However, on the road through the legislative process, there was a collapse in the unity of the industry on the issue, lead by Dallas insurgents, which doomed the bill. The matter may be revisited.

Second, SB1952 would have mandated owner controlled insurance policies for public building projects. In a session where saving money was king, there was a compelling (if simplistic) argument advanced that this would save money for the state.

OCIP's have their place on some projects (primarily large projects), but one size does not fit all. Instead of that sledgehammer approach, it would be better to develop a high level of sophistication in public bodies to determine on which projects, how and through whom, OCIPs can be in the public interest.

All in all, the interests of the Texas Construction industry were helped, not harmed, in this session of the Legislature.