NEW HOME CONSTRUCTION DEFECTS—WADING THROUGH THE RCLA

May 11, 2020

My business has been consumed with business and real estate law cases lately, and I’ve missed working in one of my favorite areas of law–construction law. Today I want to chat about the construction law experience I have in representing home owners and builders in legal actions related to alleged construction defects in the construction of the property purchased. I want to make sure to mention that not all builders are bad or have ill intent in these cases. Sometimes construction issues come up whether the builder intended them to arise or not. To me, it is all about how the builder responds once they are made aware of the potential defect. I have seen builders respond in every which way. This is all to say, each construction defect case has its own story. 

This is why the great state of Texas created a statutory framework in which to use when a homeowner has exhausted all self-help remedies (tried working it out with the builder, but ultimately forced to hire legal counsel), and wants to pursue legal action against the builder. The Texas Residential Liability Act (abbreviated RCLA) and all of its glory is set forth in Chapter 27 of the Texas Property Code. The statute is black and white and provides a detailed dance that the homeowner and builder need to go through before they can pursue legal action (arbitration or litigation) against the builder. The deadlines and process are spelled out clearly, and it is complex and detailed. I have seen lawsuits thrown out pre-trial and requests for arbitration denied for non-compliance with the RCLA. Also, attorney’s fees are a unique part of this statute–in certain cases, depending on various facts and circumstances, they are awarded to a prevailing homeowner. When hiring an attorney to represent you in an action of this nature, they must be familiar with the RCLA and its process.

Most, if not all new home construction contracts include an arbitration clause these days. This means, once the notice and opportunity periods to cure (as outlined in detail in the RCLA) are exhausted, the parties are left to resolve their dispute in an arbitration proceeding. Arbitration is an alternative forum in which to resolve a dispute (versus going to trial). The details of each arbitration will be spelled out in the construction contract. However, generally speaking, arbitrations take place quite quickly and are presided over by an impartial arbitrator, namely one with extensive experience in construction law, and mutually agreed upon by both parties. Typically each party is represented by counsel at the proceeding itself. Each side has an opportunity to present their case, provide evidence to the arbitrator, and question witnesses from the opposing party. In so many ways, it is much like a trial presentation, but far less formal. From there, the arbitrator takes all of the evidence on advisement and renders a decision after having time to review. Decisions are usually received within 30 days of the proceeding, but I’ve seen other, more complex cases, take longer. Depending on how your arbitration clause is written, some decisions are final and non-appealable. That is a huge deal when considering the variety of appeal options available in a general trial setting. 

I love talking construction law (nerd-alert), please reach out if you ever have any questions or concerns related to a construction law matter. I hope you never find yourself in a situation where you are suing a builder, or are a builder being sued by a purchaser, but if you do, please reach out!

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