Texas Register
.
The rules were published for comment in the January 23, 2004, issue of
the
Texas Register
(29 TexReg 581).
Written comments were due February 23, 2004. Written comments were submitted
by John Cobarruvias of Homeowners Against Deficient Dwellings (hereinafter
"HADD") and Joseph Scallon. No party requested a hearing pursuant to the Administrative
Procedure Act, Government Code §2001.029. However, the commission held
informal public meetings around the state between January and March of 2004
and gathered comments on a variety of issues pending before the commission,
including rule comments. During those informal meetings, the commission received
specific oral comments on the proposed arbitration certification rules from
HADD, Scott Hamilton, Jay Dyer of the Texas Association of Builders (hereinafter
"TAB") and Steve Lane of Lennar Family of Builders (hereinafter "Lennar").
Scott Hamilton and HADD made comments on §318.20(b) regarding qualifications
for certified arbitrators. Mr. Hamilton made the comment that the requirement
that certified arbitrators have five years of experience might make it hard
to find arbitrators. Although Mr. Hamilton's assessment may have validity,
the requirement is statutory pursuant to Property Code §417.001(b)(1).
HADD commented that arbitrators should not have to be familiar with the warranty
and building standards in order to make a decision. Property Code §417.001(b)(2)
requires that certified arbitrators have familiarity with the warranty standards
adopted by the commission pursuant to Property Code Chapter 430. Accordingly,
the commission has not changed the text of the proposed rule as a result of
these comments.
TAB recommends that the commission eliminate the reference to the Property
Code in §318.20 as it relates to familiarity with warranties adopted
by the commission pursuant to Property Code 430 and the provisions of the
Property Code Chapter 27, which is the Residential Construction Liability
Act. The commission has determined that the references to the Property Code
are appropriate because the rule quotes the language of Property Code §417.001(b)(2),
which states, in part, requirements for certification of arbitrators. The
references provide clear direction for those directly affected by the certification
requirements of this subchapter. However, the commission has determined that
it may be more descriptive and therefore more useful to interested parties
to describe those statutory references. Accordingly, the commission has modified
the proposed language of rule to include descriptive language.
Lennar commented that it did not understand the meaning of §318.20(b)(4)
as it relates to an "indirect personal or business relationship" and that
the language as written might create a basis for a party to challenge the
impartiality of an arbitrator. The commission finds that the terminology "indirect
personal or business relationship" is commonly used and understood to mean
a relationship created by an association between an interested party and a
close family member, business partner or affiliate and that common understanding
is clear in this context. Therefore, the commission does not find it necessary
to modify the language for the reason stated. However, in reviewing the rule
in light of the comment, the commission does believe that a direct or indirect
financial relationship may also create a conflict of interest and has modified
the proposed rule language to include the term "financial." With regard to
the issue of whether §318.20(b)(4) will create a basis for challenging
an arbitrator, the commission notes that the use of an arbitrator who has
been certified by the commission under Property Code Chapter 417 is completely
voluntary. The statute only requires that the commission maintain a list of
arbitrators that have met certain statutory qualifications and other qualifications
that may be required by the commission. The commission believes that it may
be useful for someone requesting information about an arbitrator included
on the commission-maintained list to have access to information about an arbitrator's
direct and indirect personal, financial and business relationships with others
who are likely to be parties involved in a dispute involving the residential
construction industry who are registered by the commission. Moreover, arbitration
agreements often include the method of selection of the arbitrator or arbitration
panel and Property Code §417.001(c) specifically provides that arbitrators
not certified under Chapter 417 are not prohibited from conducting arbitrations
involving residential construction defects. Therefore, nothing in this subchapter
requires a party to a residential construction dispute to select an arbitrator
from the commission-maintained list.
TAB commented that §318.22 should also include certain statutory language
that during the comment period any person may contest the application in writing
submitted to the commission. The commission does not believe the statutory
language adds anything to the rule meaning because the current language invites
interested persons to comment both positively and negatively on the applications
published in the
Texas Register
. Therefore,
the commission declines to include the more restrictive language suggested,
which might be construed as an implication that only negative comments will
be considered. However, the commission has modified the rule language to include
the requirements that the comments be submitted in writing to the commission
to clarify the procedure for submission.
Lennar commented that it is unclear as to whether §318.22, which requires
individuals certified under this subchapter to notify the commission of a
material change in the information provided to the commission in connection
with the certification process, includes notification of a change in the list
of relationships submitted under §318.20(b)(4). The term "material change"
is commonly understood to mean a substantive change in the information previously
provided and relied upon by the recipient. However, to clarify that the request
for notification of a material change in information includes the information
submitted under §318.20, the commission has modified the rule language
to include a reference to §318.20.
Lennar commented that §318.32(d)(1)(C) as written would not include
the American Arbitration Association because that association is not organized
for the purpose of conducting educational seminars or courses. Although the
rule as currently written would allow the Executive Director to approve courses
provided by the American Arbitration Association, the commission has modified
the language to make clear that professional associations of arbitrators and
other entities organized for the purpose of providing arbitration services
that regularly conduct arbitration courses are acceptable. The subparts of
the rule have been revised to accommodate the changes.
Joseph Scallon commented on §318.32 as it relates to continuing education
and notes his belief that continuing education is not appropriate for builders.
Section 318.32 does not impose a continuing education requirement on builders;
therefore, the commission has not made any change to the rule language as
a result of Mr. Scallon's comment.
TAB commented that the renewal provision in §318.32 should be permissive
and not mandatory. The point is well-taken and the commission has modified
the rule on renewal to reflect this comment.
HADD commented that arbitrators should have to disclose whether they are
affiliated with any organizations, such as the American Arbitration Association,
and whether any lawsuits or complaints have been filed against them for any
arbitration. The commission has determined that the process of publication
of the application will allow persons with complaints about a specific arbitrator
to provide such information to the commission. The commission agrees that
disclosure of membership in a professional association of arbitrators may
be useful to someone seeking information about the commission-maintained list
of certified arbitrators. As a result, the commission has modified the rule
language on that point.
All comments regarding these rules, including any not specifically referenced
herein, were fully considered by the commission. The commission has made other
minor modifications to the proposed rule text for the purpose of clarifying
its intent and improving style and readability.
The new sections are adopted under the Property Code Chapters
27, 417 and 430 and House Bill 730, 78th Legislature, Regular Session.
No other statutes, articles, or codes are affected by the adoption.
§318.20.Application.
(a)
An individual seeking to become certified as a residential
construction arbitrator with the commission must submit a completed application
on a commission-prescribed form accompanied by the appropriate fee.
(b)
An individual seeking to become certified as a residential
construction arbitrator with the commission shall:
(1)
provide evidence that the individual has acquired a minimum
of five (5) years of experience conducting arbitrations between homeowners
and builders involving construction defects;
(2)
certify that the individual is familiar with the statutory
warranties and building and performance standards established by the commission
pursuant to Property Code, Chapter 430 and with the provisions of Property
Code, Chapter 27, known as "the Residential Construction Liability Act";
(3)
certify that the individual has not had any professional
license or certification suspended or revoked in any jurisdiction;
(4)
disclose whether the individual is currently a member of
a professional association of arbitrators or licensed as a member of a bar
association; and
(5)
submit a list that includes any person known by the applicant
to be registered as a builder or registered as a third-party inspector by
the commission with whom the applicant has a direct or indirect personal,
financial or business relationship that could reasonably be considered to
create a conflict of interest for that applicant in serving as an arbitrator
in a dispute involving the person listed as a party or a witness.
§318.22.Publication and Comment.
(a)
The commission shall publish in the
Texas Register
notice of the application of each individual seeking
to become certified under this subchapter.
(b)
The commission shall accept written public comment submitted
to the commission on each application for twenty-one (21) days after the date
of publication of the notice and consider the comments received when reviewing
the application.
§318.24.Certification.
After the conclusion of the comment period under §318.22 of this
subchapter, if the commission finds it would serve the public interest, the
commission shall certify the individual as an arbitrator under this subchapter.
§318.26.Denial of an Application.
(a)
The commission shall deny an application for certification
if the commission determines that the individual is not qualified or if certification
of the individual would otherwise not serve the public interest.
(b)
If the commission denies an application, the commission
shall provide written notice to the individual not later than the 15th day
after the closing of the public comment period on the application.
§318.28.Appeal.
(a)
An individual whose application has been denied under §318.26
of this subchapter may appeal the decision by written request to the Executive
Director.
(b)
The decision of the Executive Director on the appeal is
a final agency decision not subject to further administrative appeal.
§318.30.Material Change in Information.
Each individual who is certified as an arbitrator under this subchapter
shall report to the commission in writing any material change in the information
provided to the commission under §318.20 of this subchapter or as otherwise
requested by the commission in providing a certificate pursuant to Property
Code Chapter 417 within thirty (30) days of the change.
§318.32.Renewal of Certification.
(a)
An individual who has been certified by the commission
under this subchapter may submit an application for renewal of the certification
no later than thirty (30) days prior to the expiration of the effective date
of the certificate as established by the commission.
(b)
The individual seeking renewal shall submit a renewal application
on a commission-prescribed form accompanied by the appropriate fee as established
by the commission.
(c)
Each individual seeking to renew a certificate previously
approved under this subchapter must provide evidence that the individual has
completed five (5) hours of approved continuing education since the effective
date of the certificate provided by the commission.
(d)
For purposes of renewal under this section "approved continuing
education" includes attendance of a course or seminar on arbitrations conducted
by:
(1)
an accredited institution of higher education;
(2)
a state bar association;
(3)
an entity organized for the purpose of conducting educational
seminars or courses for arbitrators or lawyers;
(4)
a professional association of arbitrators that also regularly
sponsors or conducts seminars or courses for arbitrators or lawyers;
(5)
an entity organized for the purposes of providing arbitration
services that also regularly sponsors or conducts seminars or courses for
arbitrators or lawyers; or
(6)
any other course or seminar approved by the Executive Director
for purposes of this subchapter.
(e)
An individual seeking to renew under this section who is
also an attorney licensed by the State Bar of Texas may satisfy the continuing
education requirements of this section by satisfying the annual continuing
legal education licensure requirements set by the State Bar.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 23, 2004.
TRD-200402732
Susan Durso
General Counsel
Texas Residential Construction Commission
Effective date: May 13, 2004
Proposal publication date: January 23, 2004
For further information, please call: (512) 475-0595