“The best investment on Earth is earth.” – Louis Glickman
Real estate is one of the most valuable types of property a person or business will own. Any impairment of value in your property due to a construction defect or shoddy repair work can be extraordinarily harmful. Shady contractors and their insurers (if insured at all) do not often admit mistakes, making litigation necessary to recover the financial losses caused by a poor design, use of substandard material, or lousy workmanship.
Discuss Your Construction Defect with a Dallas-Fort Worth Attorney
Resolving a construction defect dispute in Texas can be a challenging process due to numerous procedural hurdles that must be navigated to perfect a claim. An experienced construction defect litigation attorney can help make sure you check the boxes and fight for your rights to full compensation.
If you are involved in a construction defect dispute, Wright Commercial Litigation is here to help. The firm understands how serious, costly, and disruptive the situation can be for any client—whether a business owner, real estate investor, or individual homeowner—and works proactively to diligently obtain the most favorable outcome soon as possible, and can often offer to do it on a contingency or hybrid basis depending on the circumstances.
Types of Construction Defects
Wright Commercial Litigation has the knowledge to help with a wide range of issues that may occur in construction-related disputes, including:
- Breach of express warranty
- Breach of the implied duty to provide good and workmanlike services
- Use of substandard or defective materials
- Negligence on the part of contractors, subcontractors, and other professionals
- Architect or engineering malpractice
- Safety defects and code violations
- Electrical and other fire hazards
- HVAC, plumbing, and insulation failures
- Soil settling, run-off, erosion, drainage, and foundation problems
- Leaking roofs, windows, or doors that allow water intrusion
- Collapses, leaning walls, or other structurally unsafe conditions
- Water damage and toxic mold
- Breach of habitability claims
- Breach of contract due to unreasonable delays in construction, repair, or remodeling
- Improper change orders and cost overruns
- Abandoned projects (typically after payment has been made)
- Invalid or fraudulent mechanic’s liens
Why Should I Hire an Attorney for My Construction Defect Claim?
Construction defects routinely cost tens or hundreds of thousands of dollars for a homeowner to fix (and millions if involving a larger commercial building or project). If not discovered in time, it can result in catastrophic damage to the property itself, valuable personal items and equipment inside, and possibly even personal injury or death. Property owners are often unsure how to proceed once suspecting or discovering a problem. One prudent course of action to consider is contacting an experienced litigation attorney who can help determine your rights, get the right experts and other professionals to inspect the problem and assess damages, and chart a path towards obtaining a full recovery.
Wright Commercial Litigation assists clients in Texas with all kinds of commercial claims and property damage, including construction defects and home repair issues, and can often do so on a contingency or hybrid basis depending on the circumstances.
Common Reasons for a Construction Dispute in Texas
In some cases, it can be difficult to pinpoint what caused a defect or other problem you are facing with your property. Industry experts routinely are needed to investigate and determine the root cause and how to repair. The reasons for a construction defect or other dispute usually fall into one of the following categories though:
1. Flawed Design
The first stage of any major construction or remodeling project involves architects, engineers, and other professionals designing the plans or blueprints, who must ensure those meet all safety standards and building codes. Numerous details must be addressed in that process, such as proper structural support, foundation, and drainage, sufficient ventilation, and the location of electrical, plumbing, and more inside the building. When a design is unsafe or defective, or the materials chosen are inappropriate, numerous problems can arise during construction and may not become obvious even for years to come. Construction defect claims against an architect, engineer, or other design professional for malpractice or professional negligence must be supported by the written report of an expert in the same field explaining how their services fell below the standard of care. This is called a “Certificate of Merit,” which is addressed further below. A new law enacted in 2021 (Chapter 59 of the Texas Business and Commerce Code) limits the liability of contractors in Texas for defective designs provided by an owner or unrelated third party, but contractors have an obligation to inform the owner if they discover (or should in ordinary prudence have discovered) a defect or inaccuracy.
2. Poor Workmanship
Service providers who offer to build, remodel, repair, or construct property inherently warrant that they know what they are doing. If not expressly setting forth a warranty, there is an implied duty of good and workmanlike services in all such dealings. This comes into play for many construction or remodeling projects. Substandard work in installing the plumbing, heating, ventilation, or air conditioning (HVAC), and other common components of improvements to real property can cause leaks or condensation that allow toxic mold, oxidation (rust), and dry or wet rot to form. Faulty wiring can create fire hazards or risk of electrocution. Poorly constructed roofs may leak or collapse during a relatively mild storm. Even non-specialized types of construction labor—such as painting, drywall, laying tile or bricks, landscape work, and more—gives rise to a general duty of competency. The implied duty can be disclaimed by an express warranty agreed to in writing though, which makes it important to closely review a written contract even for a small project, and otherwise the duty focuses on how work was done as opposed to its results, such that repeated unsuccessful attempts is not in and of itself necessarily proof of poor workmanship. The good news is that failure to honor a warranty is also a breach of the Deceptive Trade Practices Act (DTPA), which can give an owner additional leverage against inferior work. Most claims will eventually require expert testimony from another professional in the same or similar field, although that is not always the case if something within the common knowledge of a layperson. The importance of hiring contractors who have sufficient insurance to address inferior work cannot be understated. Saving costs by hiring a fly-by-night construction company should be avoided unless you are prepared to be left holding the proverbial bag, since those types of companies often have no real assets to pay a judgment. They may take your money and run, leaving you with little or no recourse for an “epic fail.”
3. Defective Materials
There are numerous laws, regulations, and standards related to the types of materials considered “up to code” and that should (or should not) be used for a home or commercial project. Some contractors—especially those smaller ones that sometimes you are tempted to directly hire yourself—will use completely substandard (or unsafe) materials that may fail to hold up to the test of time and even ordinary use, or create health problems, in order to make their bid lower than others to secure the work or save on their own costs and make more profit. Some of the more famous incidents of defective material include asbestos and Chinese drywall. Outside of those wide scale product issues, defective material claims can involve a design professional (architect, interior designer, or otherwise) selecting the wrong material for the job, or else an installer unilaterally substituting a cheaper knock-off to save money or for other reasons. Depending on what it involves, defective materials can affect structural integrity, cause problems to other areas of a home or its appliances due to things like water intrusion, and eventually create health problems for occupants as well.
4. Unreasonable Construction Delays
Delays in all but the simplest construction project are the rule more often than the exception. They can occur for any number of legitimate or illegitimate reasons: bad weather, industry-wide supply shortages, and changes in the scope of work by an owner or their architect can cause delays not the fault of others. But there may also be errors that then require time spent on correction or failures in project management (such as not properly scheduling or coordinating subcontractors and other laborers, not having materials ordered or delivered to be there when needed, a failure to obtain permits or pass inspections, and many others). Construction contracts often attempt to address delays given they are inevitable. It is important to review the contract to understand how delays are meant to be handled, which may have onerous notice procedures and broad cure rights or even waive consequential damages for delays. If not waived, the damages that result from a delay may include not only the increased construction costs but also rental or storage fees, interest continuing to accrue and other greater financing changes, and possibly the loss of business or lost profits in the appropriate circumstances.
5. Increased Costs, Cost Overruns, and Improper Change Orders
Large construction contracts also contain provisions addressing how changes or increased costs are to be handled, but many others do not. This is an area that can result in much dispute and litigation either way since, even when a contract addresses how change orders or cost overruns are supposed to be handled, they may not be routinely followed. That can result in a builder or contractor waiving their right to recoup increased costs and subjecting them to claims of breach otherwise (although the parties’ course of conduct may come into play if previous changes occurred without at least a reservation of rights to enforce the contract terms for other instances). Contracts providing for a set payment or amount for the entire project place all risk of increased cost on the builder or contractor who bid the job, whereas a cost-plus contract gives more transparency in return for the owner assuming that risk. Some contractors will nonetheless attempt to pass every extra cost onto the owner and leverage their control over the project—often with threats of a lien, litigation, or otherwise—to extract additional money in this way. Owners not wanting to deal with a dispute and disruption may be forced or coerced into accept some modifications in that way, yet the contractor’s refusal to complete work until extra money is paid more often than not is improper and puts them in default as a repudiation or anticipatory breach, giving rise to various options under contract law that may include hiring another contractor and seeking recovery of any extra costs in the process from the original.
6. Payment Issues
There are many types of funding, payment, accounting, and refund disputes that can occur in connection with construction, repair, or remodeling projects. The Construction Trust Fund Statute and Prompt Payment Act in Texas—which are respectively found at Chapters 28 and 162 of the Texas Property Code—can make a general contractor a “trustee” of funds paid by an owner to ensure payment of subcontractors, suppliers, and material vendors, and requires such third parties be promptly paid also. That helps protect the owner or a developer from claims by third parties and property liens. Issues dealing with how the money is allocated and applied can easily occur with a cost-plus type of construction contract, but residential projects where the amount is over $5,000 also require a “construction account” be created for the benefit of the owner. Failure to follow all the statutory requirements can leave a builder, general contractor, or other contractor liable for much more than just failures in the construction work.
Procedural Requirements for a Texas Construction Dispute
If you are having a dispute with a builder or contractor, or have discovered something defective about your property in Texas, there are many things to think about before making a complaint to the responsible parties. It is often advisable to contact a construction defect attorney to determine your rights and represent you in the process, since there are several statutory requirements that can apply and cause you to lose your rights and remedies if not properly satisfied, with some of the major ones outlined below.
The Statute of Limitations and Statute of Repose in Texas for Construction Claims
Construction defect claims based on the failure of a construction professional to meet standards in their industry are usually classified as torts in Texas, although such claims can be covered by a contract too. In general, tort claims must be filed within two years and breach of contract within four years, although parties can agree in a contract to an even far shorter period with strict notice requirements that, if not satisfied, could affect the ability to bring a claim at all.
The time period in which to file suit over a construction defect can be extended, however, due to the “discovery rule” that applies when it is not possible to know of a hidden problem until years later. That applies both to an original owner and subsequent purchaser. Anytime a person buys a home or other real estate in Texas, the previous owner generally has a duty to inform them of known defects with the property (and Section 5.008 of the Texas Property Code mandates a seller’s disclosure for most residential sales in particular). If the prior owner makes a false statement or leaves out something important they knew, you may be able to hold them legally responsible for the undisclosed damage caused by a construction defect or other repair issue, particularly if it was not easily discoverable by ordinary inspection. Otherwise, the purchaser can bring a claim against the builder, contractor, or repair company who did the work if it is discovered later, so long as it is still possible under the statute of repose in Texas for such claims.
A statute of repose is intended to cut off all claims at some fixed date even if not yet discovered or manifesting itself. That is a policy choice that gives assurance to builders that they will not have to defend old or stale claims forever. Sections 16.008, 16.009, and 16.011 of the Texas Civil Practice and Remedies Code create a 10-year statute of repose for construction defects and related claims (including those against surveyors and interior designers), although that can be extended by a further two years if notice is given to the defendant before the 10-year period elapses. Product liability claims in Texas generally have a longer 15-year statute of repose (found at Section 16.012).
It is thus important to determine your rights as soon as possible after discovering a problem with your home or commercial property. The best way to do so—even if it has been years since the construction or repair project and you were not an owner of the property at that time—is to contact an experienced commercial litigation attorney who can help get the right professionals out to assess the circumstances and determine damages, and make sure you check all the boxes to bring claims against each and every responsible party.
Statutory Notice is Required for Residential Construction or Repair Disputes
Chapter 27 of the Texas Property Code—the Residential Construction Liability Act (RCLA)—was enacted in 1989 to help promote settlements between property owners and builders, developers, contractors, remodeling companies, and others doing work on residential homes. The statute applies broadly to any problem not involving personal injury, death, or damage to goods that might arise out of the “design, construction, or repair” of a new or existing single-family home, duplex, or condominium, along with any “appurtenances” thereto (such as a pool, detached garage, or outdoor projects that may include landscaping). A special definition of “contractor” excludes a roof repair or replacement from the RCLA and interior improvements that cost $10,000 or less. The statute specifically does not apply to claims for statutory fraud or when a contractor abandons the project before completion either, which may arise when a contractor on a set fee project tries to extract more money for cost overruns.
When the RCLA applies, a homeowner must (except for limited situations) provide written notice to the contractor that describes the problem in reasonable detail and gives an opportunity to inspect and repair or otherwise resolve the matter. The RCLA is a mandatory statute that must be followed to bring a valid claim, whether it is asserted by the original or a subsequent homeowner, with failure to do so potentially resulting in a dismissal that means a complete loss of any remedy due to the statute of limitations or repose. A home construction, repair, or remodeling contract that is subject to the RCLA is supposed to contain a disclosure statement in bold font putting the property owner on notice that they are subject to Chapter 27 of the Texas Property Code. Failure of the builder or contractor to include such a notice in the contract has a statutory penalty of $500.
There are several requirements for a notice under the RCLA to be valid:
- It must be in writing
- It must be sent by “certified mail return receipt requested” (no exception)
- It must be directed to the contractor’s last known address
- It must specify the construction defects and cost to repair, if known
- And, if the contractor requests evidence, the owner must provide any non-privileged investigation reports along with photos, videos, repair estimates, etc.
After written notice is provided, the contractor has 35 days to inspect or have others inspect the problem. They can choose to make a written offer of settlement within 45 days as well (and must provide that offer in writing with the same formality). The owner can accept or reject the settlement offer by a written response within 25 days. If rejecting the offer as “unreasonable” though, the owner must provide further written notice stating the specific reasons why. The builder or contractor can make a supplemental offer within 10 days after that, if so inclined. Any accepted offer generally must be carried out and completed by the contractor within 45 days.
Failure to send the formal notice required by the RCLA results in a lawsuit being abated (i.e., put on hold) for that statutory process to play out, and dismissal is required if not properly done followed thereafter. There is only one instance where prior notice is not required: when it is necessary to file suit immediately to avoid expiration of the statute of limitations or repose, but the contractor is still allowed time after suit if filed for an inspection and the settlement process to play out once the suit is served. Accordingly, there is no way around the statutory requirement unless the builder or contractor fails to respond, although it should be noted the deadlines can be shortened if there is “an imminent threat to the health or safety of the inhabitants of the residence.”
Again, the purpose of the statute is to encourage settlements. That it does not only by requiring notice but also by creating incentives for both sides to act reasonably and compromise to a fair result.
In particular, an owner who rejects a “reasonable” offer—which is something that will never be completely known if proper at the time since it ultimately is judged only much later by a court or jury—is limited to recovering the fair market value of the contractor’s last offer of settlement and any attorney’s fees incurred before rejection. In other words, rejecting an offer that a court or jury later determines was “reasonable” means the property owner will most likely end up receiving far less than a complete recovery, since litigation costs and attorney’s fees after the rejection will assuredly eat up a lot (if not all) of what is deemed the fair market value.
On the other hand, a builder, remodeling company, or contractor who fails to act reasonably in the process themselves becomes subject to paying the homeowner not only for the cost of repairs but also their expert and consulting fees, temporary housing costs, and even any reduction in market value of the property after repair if it involves a structural issue. Those are all economic damages that can be recovered, with other statutes like the Deceptive Trade Practices Act (DTPA) providing for multiplied awards in the circumstance of any false, misleading, or deceptive conduct, as well as for breaches of express or implied warranties pertaining to habitability or the duty of good and workmanlike services.
“Certificate of Merit” for Claims Against an Architect, Engineer, or Surveyor
Claims against an architect, engineer, landscape architect, or land surveyor in Texas face an additional hurdle at the outset in that, not only may written notice and other requirements apply, but the plaintiff must also file a “Certificate of Merit” with their lawsuit or have it automatically dismissed at the start. This is a protection such professionals and their insurance companies were able to get enacted into law—found primarily at Chapter 152 of the Texas Civil Practice and Remedies Code—to prevent what some felt were too many frivolous suits being filed that unnecessarily increased the costs of doing business and procuring insurance.
The statute requires a certificate to be in the form of an affidavit that establishes the person: (i) is competent to testify; (ii) holds the same professional license or registration as the defendant; and (iii) practices in the same field so as to be qualified to offer testimony based on their knowledge, skill, experience, education, training, and practice. In other words, bringing suit against an architect, engineer, or surveyor in Texas requires the property owner to first hire and pay for an expert report from another professional in the same area establishing a legitimate basis that some negligence, error, or omission fell below the standard of care in that industry, in order to bring a valid lawsuit.
The only exception for filing a Certificate of Merit with the petition is when the statute of limitations is about to expire within 10 days, and it is established the claimant could not procure such an expert affidavit in time to file with the petition before the rights were lost. The affidavit must generally be added though within 30 days after the suit is filed in that instance (although it can be further extended by a court if there is good cause).
The consequences of failing to include a Certificate of Merit are, if it is raised by the other side and not waived in any respect, an automatic dismissal. Importantly, a court also has discretion though to dismiss such a suit “with prejudice,” which means it is forever barred from being corrected and brought again. Courts typically will not do that unless it is exceedingly apparent that the reason a certificate was not included, or that it is defective, is because the claim has no merit and no certificate could be corrected in good faith. But that is a risk which requires taking extra care to make sure an expert affidavit complies with both the procedural and substantive requirements of evidence and proof to create a fact dispute in litigation. An attorney is the best person to provide an assessment on that question.
Many construction defect disputes also involve the threat or actual filing of a “mechanic’s lien,” which, despite its name, is not limited to work by a mechanic only. Chapter 53 of the Texas Property Code governs such liens for construction projects (whereas, to avoid confusion, Chapter 70 addresses liens for a mechanic working on a vehicle), although someone hired directly by a property owner can also assert a lien directly under the rights in the Texas Constitution (which applies only to those contracting directly with the property owner, but provides for a much longer deadline to file a lien as well, up to four years).
There are strict requirements to perfect a lien and many are routinely done incorrectly. Liens involving residential homestead in particular has additional requirements, such as mandating there be a written contract, that it be signed by both spouses if the real estate was owned by a married couple, and the contract has to be filed before or with the lien affidavit at the time it goes to a county clerk’s office, plus foreclosed within a year or it may forever lapse.
Mechanic’s liens are otherwise a powerful tool for contractors, subcontractors, material suppliers, and laborers to help ensure their invoices get paid, since a lender typically will not provide financing if there is a lien on property. That requires a lien be resolved to avoid holdups in the process of completing a construction project or to sell the property to another. It is important to do it right though since knowingly filing an invalid lien, as well as refusing to voluntarily release an invalid lien, allows a court to impose a minimum sanction of $10,000 in connection with any damages suffered at the time of getting a court to order the removal.
The deadlines for perfecting a mechanic’s lien related to construction projects depends on whether (a) it involves a commercial or residential project and (b) whether the party asserting a lien was working directly with the owner or another contractor. If the work was done by agreement between the property owner and contractor or supplier directly, then there is no need to provide notice before filing a lien. Otherwise, the party asserting a lien has to give notice first to both the party it contracted with and the owner (called a “pre-lien notice”).
The deadline for a pre-lien notice in a commercial project is to serve the property owner and general contractor no later than the 15th day of the third month after the labor was performed or materials were provided (on a month-to-month basis). In a residential project, the deadline is moved up to no later than the 15th day of the second month.
The deadline for filing a lien with the county recorder’s office where the property is located also varies depending on the type of project, but also focused on when the contract is done as opposed to a month-to-month basis when work or materials were provided. In a commercial project, the lien affidavit must be filed no later than the 15th day of the fourth month after the contract ends (which may be completion of work, termination, abandonment, or otherwise). In a residential project, it is the 15th day of the third month after the contract ends.
Mechanic’s liens are easily done incorrectly and may entitle a property owner to a minimum of $10,000 in damages if not voluntarily released as a result. Consulting with a construction defect attorney can help you determine your rights.
Other Potentially Related Statutes to Know About in a Construction Defect Claim
It is not possible to list out here all the potential statutes and provisions of law that may impact a construction claim in Texas. Some to be aware of, however, include anti-indemnity laws in Texas (such as Chapter 130 of the Texas Civil Practice and Remedies Code for architects and engineers, Chapter 151 of the Texas Insurance Code for construction contracts that have consolidated insurance programs, and Chapter 127 of the Texas Civil Practice and Remedies Code related to oilfield projects). Some projects may also have performance bonds, payment bonds, and surety bonds. Bonds are typically obtained for larger private construction and are required by law on public projects where the prime contract exceeds $25,000. That is because a mechanic’s lien cannot be filed on public property, and so a bond protects subcontractors, workers and laborers, vendors, and material suppliers in a similar way.
Contact a Skilled Dallas-Fort Worth Construction Defect Claim Attorney Today
If you suspect or have discovered that your home, commercial building, real estate investment, development, or other property has serious defects due to a construction problem, was built or repaired by shoddy contractor work, or have any other questions of whether you may have a claim related to faulty construction, repair, or remodeling, you may have a right to compensation by pursuing legal action. The sooner you contact a knowledgeable construction defect attorney, the better.
Reach out to Wright Commercial Litigation today to schedule a free consultation to discuss your construction problem, and see if the firm may be able to assist you on a contingency or hybrid basis.