Part 7. TEXAS RESIDENTIAL CONSTRUCTION COMMISSION
The Texas Residential Construction Commission ("commission") adopts 10 TAC §300.10 concerning definitions. The new rule is adopted by the commission with changes to the text as published in the January 4, 2008, issue of the Texas Register (33 TexReg 20).
The agency adopts this section as part of a consolidation of rules and review of 10 TAC Chapters 300, 301, and 302 undertaken pursuant to requirements of Government Code, §2001.039. The commission adopts these definitions to assist those who use the commission's rules by providing terminology that will enable users to better understand and use the rules and navigate that agency's enabling Act. The newly proposed section includes language that was previously adopted in §301.1 of this title and adds new language to implement new legislation enacted during the 80th Legislative Session, Regular Session, House Bill 1038 (Act effective Sept. 1, 2007, 80th Leg., Regular Session), which modifies Title 16, Property Code.
The commission received two sets of comments on the proposed adoption. Robert L. Seibert submitted comments on behalf of his client, The Home Depot, U.S.A., Inc. (Home Depot) and Ned Munoz submitted comments on behalf of the Texas Association of Builders (TAB).
Home Depot's first comment was directed to the proposed definition 10 TAC §300.10(17). Home Depot states that the proposed rule talks about coordination of trades or multiple subcontractors, and it questions the purpose of that language. Home Depot notes that definition as proposed is not the verbatim text of the statutory definition. Home Depot expresses the potential for confusion if a single trade is involved in a transaction with homeowner in excess of $10,000. Home Depot also asks for clarification on the meaning of the term "structural components" and the phrase "penetration of the home's diaphragm."
When the Texas Legislature created the commission through its enactment of House Bill 730, an Act of the 78th Legislature, it used the phrases "material improvement to a home, other than an improvement solely to replace or repair a roof of an existing home" and "an improvement to the interior of an existing home when the cost of the work exceeds $20,000" to define the individuals and business entities that were required to register as "builders" with the commission. Property Code, §401.003 (Vernon Supp. 2003). The term "builder" and the individuals and entities included within that definition are critical to the entire statutory scheme created by House Bill 730, which included amendments to Property Code, Chapter 27, also known as the Residential Construction Liability Act or "RCLA."
Interpreting House Bill 730, the commission adopted 10 TAC §301.1 (15) "improvement to the interior of an existing home when the cost of the work exceeds $20,000--any modification to the interior living space of a home, which includes the addition or installation of permanent fixtures inside the home, pursuant to an agreement for work for total consideration in excess of $20,000 to be paid by a homeowner to a single builder" and 10 TAC §301.1(18): "material improvement--a modification to an existing home that either increases or decreases the home's total square footage of living space that also modifies the home's foundation, perimeter walls or roof. A material improvement does not include modifications to an existing home if the modifications are designed primarily to repair or replace the home's component parts."
These definitions were adopted to clarify the commission's interpretation that the legislature did not intend for the term "builder" to capture construction professionals entering home improvement contracts directly with a homeowner to perform a single repair or replacement of a home's component. The economic reality is that carpet replacement or interior painting alone could exceed the statutory threshold of $20,000--the threshold that was enacted in House Bill 730. Furthermore, the commission's interpretation derives in part from RCLA, which provides a separate avenue for resolving disputes between homeowners and contractors who undertake repairs or alterations to an existing home.
The statutory definitions of "material improvement" and "improvement to the interior of an existing home" adopted by House Bill 1038, an Act of the 80th Legislature are statutory enactments of commission rules almost verbatim. The legislature is presumed to enact a statute with "complete knowledge of existing law and with reference to it." Upjohn Co. v. Rylander , 38 S.W.3d 600 at 608, (Tex.App. - Austin, 2000.) Accordingly, it is presumed that the legislature had complete knowledge of the commission's adoption and use of those terms, when it enacted the definitions. In addition, the legislature further clarified the commission's definition for improvement to the interior of an existing home by adding a phrase from the commission's definition of "material improvement," to wit: "An improvement to the interior of an existing home does not include improvements to an existing home if the improvements are designed primarily to repair or replace the home's component parts." (emphasis added).
House Bill 1038 lowered the monetary threshold for interior improvements to existing homes to $10,000--a figure that encompasses a larger number of projects, such as carpet replacement and interior painting--which would have required an even greater number of tradesmen to have to register as builders or remodelers with the commission, were it not for the limitation of "repair or replacement of a home's component parts." Prior to publication of the proposed rule, the commission held a public hearing in which the definitions of "improvement to the interior of an existing home" and "material improvement" were discussed at length.
Based on the origin of the substance of these definitions and the legislature's adoption of them into statute, the commission again finds that the legislature did not intend to capture within the definition of "builder" every tradesman who enters into a contract with a homeowner for an interior renovation in excess of $10,000 and that, by adopting the commission's definition of "material improvement to an existing home," the legislature knowingly accepted the commission's interpretation of the statute. The commission also interprets the statute to intend to capture within Title 16, Property Code, those improvement contracts to an existing home between a homeowner and a builder or remodeler who subcontracts with one or more tradesmen, thus creating a situation in which the homeowner no longer has privity of contract with all the tradesmen performing work in or on the home, in order to hold those builders and remodelers responsible to the homeowner for work performed by the tradesman selected by the builder or remodeler.
To address Home Depot's confusion, the definition of improvement to the interior of an existing home clearly identifies the parties as a single builder or remodeler, who has received a payment from a homeowner in excess of $10,000 and who uses more than one subcontractor or tradesman. A single tradesman or contractor who enters into a home improvement contract with a homeowner to repair or replace a single component is not within the definition.
Home Depot's next comment addresses the language "work involves the structural components or the penetration of the home's diaphragm." Home Depot questions why this term is included in the definition because it asserts the language adds vagueness to the statutory definition. The commission disagrees with the comment. The purpose of this comment is to address improvements affecting the load-bearing structure of the home. The term "structural components" is used in the commission rules on warranties and performance standards applicable to homes covered by Title 16, Property Code, in 10 TAC Chapter 304. The same term is used in the definition of "structural failure," which is also a term defined in this rulemaking action, but upon which Home Depot made no comment. If a repair or replacement of a component part affects a structural component of the home or requires a penetration into the walls, ceiling, or structural flooring--the diaphragm--of a home, the commission finds that the action has gone beyond repair or replacement of a single component part. The commission asserts that the language proposed for adoption clarifies that position and avoids vagueness.
Home Depot next comments that the definition of interior improvement does not utilize the word "repair" in its example of replacement of a single component with another. The commission finds that the term repair is one with plain meaning--to restore the functionality. The commission does not believe that the example must cover every possibility in order to add clarity to the statute; therefore, the commission has not modified the definition as suggested.
Home Depot asserts that use of "single component part" in the definition substantively revises the statutory definition, which uses the language "component parts." As explained above, the commission interprets the statute to exclude contracts between homeowners and a single tradesman or contractor for the repair or replacement of a single component that also does not affect the structural components of the home.
Home Depot also proposes that the commission define the term "home's component parts," which is used in the statute. The commission finds that the word "component" has a common meaning not requiring special elucidation; therefore, it declines to adopt a definition for "home's component parts."
Home Depot's comments question the second sentence in 10 TAC §300.10(20): "A material improvement includes modifications to an existing home that requires the addition of new structural components or the modification of the home's existing structural components" stating that the meaning is not clear. The commission finds that the proposed rule addresses situations in which a modification to an existing home goes beyond the mere repair or replacement of the home but in fact alters an existing structural component or adds a new one, such as the case of replacing a roof and in the process adding dormer windows, which clearly goes beyond repair or replacement of the roof. Similarly, with the definition of an interior improvement to an existing home, if a repair or replacement requires a builder to alter or add a load-bearing wall, the project has moved beyond the repair or replacement of a component and added or modified a structural one, which the commission believes is a type of improvement project to an existing structure that the legislature intended to be subject to Title 16, Property Code, dispute resolution procedures.
Home Depot also questions the language used in proposed 10 TAC §300.10(27) because the statute uses the language "is occupied" when discussing substantial completion. The commission's proposed rule used the language "can be occupied." "Substantial completion" is a term commonly used among legal professionals and construction industry experts to describe the point in time when the material terms of the contract are complete, even though there may be non-material work unfinished, such as is the case of "punch list" repair items. At the point of "substantial completion," a project can be used for its intended purposes, including occupation; however, it is not dependent upon a party actually occupying the space. The term is so common in the industry, that Title 16, Property Code, does not define the term "substantial completion" as suggested by Home Depot's comment. Moreover, in Property Code, §426.003, the statute makes a distinction between the date of substantial completion and the date of actual occupation. The commission has not modified the proposed text as a result of this comment.
TAB also submitted comments on the definitions rule proposal. The first comment addresses 10 TAC §300.10(9) and the phrase "failure to act." This definition of "construction activities" is current rule language, and it was adopted for use in 10 TAC Chapter 304. See e.g., 10 TAC §304.15(e). A builder is only responsible for damage or defects that are the result of "construction activities." The term was discussed at length during the adoption of those rules, and the commission adopted the definition at that time to make clear that the scope of the builder's responsibilities is for those actions taken or not taken during construction that result in a construction defect. Therefore, the commission declines to modify the proposed definition.
TAB's next comment addresses 10 TAC §300.10 (15) and §300.10 (29). TAB opines that the Act was written for single homes or duplexes and that the phrase "subject to a condominium regime" goes against the Act. TAB cites Chapter 82 of the Property Code for its proposition that property subject to condominium ownership cannot be treated differently under Title 16, Property Code. The phrase represents the commission's policy decision on whether properties subject to condominium regimes are subject to the provisions of Title 16. Property Code, §82.006 is inapposite here. However, at this time, the commission will delete the phrase from these two subsections and revisit the question of whether Title 16, Property Code, applies to single family homes and duplexes that are subject to a condominium regime.
TAB's last comment addresses 10 TAC §300.10(25). TAB points out that §430.001 of the Property Code states the time limits for the limited statutory warranties. TAB is concerned that the proposed language signals the commission's belief that it can set the warranty periods. The rule language is a result of comments received indicating that the rule definition requires readers to consult the statute in addition to reading the rule. However, the commission agrees that the warranty periods are set by statute and not commission rule, so it will modify the proposed rule language.
None of the modifications to the proposed text affect parties not subject to notice by the proposed text as published.
This adoption is adopted pursuant to Property Code, §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16, Property Code.
No other statutes, articles, or codes are affected by the proposal.
§300.10.Definitions.
The following words and terms, when used in rules promulgated by the commission, shall have the following meanings unless the context of the rule clearly indicates otherwise.
(1) Accrual or accrued--when a homeowner first discovers a condition in the home that indicates there may be a construction defect.
(2) Act--the Texas Residential Construction Commission Act, Title 16, Property Code.
(3) Affiliate--a person who directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with a specified person.
(4) Builder--any person who, for a fixed price, commission, fee, wage, or other compensation, sells, constructs, or supervises or manages the construction of, or contracts for the construction of or the supervision or management of the construction of:
(A) a new home;
(B) a material improvement to a home, other than an improvement solely to replace or repair a roof of an existing home; or
(C) an improvement to the interior of an existing home when the cost of the work exceeds $10,000.
(D) When the rule context requires, the term includes
(i) an owner, officer, director, shareholder, partner, affiliate, subsidiary, or employee of the builder;
(ii) a risk retention group governed by Article 21.54, Insurance Code, that insures all or any part of a builder's liability for the cost to repair a residential construction defect; and
(iii) a third party warranty company and its administrator.
(E) The term does not include any person who:
(i) has been issued a license by this state or an agency of this state to practice a trade or profession related to or affiliated with residential construction if the work being done by the entity or individual to the home is solely for the purpose for which the license was issued; or
(ii) sells a new home and:
(I) does not construct or supervise or manage the construction of the home; and
(II) holds a license issued under Chapter 1101, Occupations Code, or is exempt from that chapter under §1101.005, Occupations Code; or
(iii) a homeowner or to a homeowner's real estate broker, agent, interior designer registered under Chapter 1053, Occupations Code, interior decorator, or property manager who supervises or arranges for the construction of an improvement to a home owned by the homeowner.
(F) The term does not include a nonprofit business entity that is exempt from taxation under §501(c)(3), Internal Revenue Code, if:
(i) the construction or supervision or management of the construction of the home, material improvement, or improvement sold by the nonprofit business entity is performed by a builder registered under this title;
(ii) the builder contractually agrees to comply with the provisions of this title;
(iii) the builder is contractually liable to the homeowner for the warranties and building and performance standards of this title; and
(iv) the nonprofit business entity does not participate directly in the construction of the home, material improvement, or improvement.
(5) Builder in good standing--a builder or remodeler that has a current active certificate of registration issued by the commission and that has no unpaid fees or administrative penalties due and owing to the commission.
(6) Commencement of construction--when goods, materials, or equipment has been delivered to the job site for use in the construction of a new home, or a material improvement or an interior improvement to an existing home.
(7) Commission--the Texas Residential Construction Commission, including commission staff when performing the functions of their employment in furtherance of the commission's mission and purpose.
(8) Complaint--a written expression of concern about a registered builder or remodeler's registration status, construction practices or business practices. A complaint does not include a request submitted under Property Code §428.001.
(9) Construction Activities--an action taken or a failure to act by the builder/remodeler, or its employees, agents, contractors or subcontractors, during the process of building a home, or a material improvement or an interior improvement to an existing home.
(10) Construction defect--
(A) the failure of the design, construction or repair of a home, an alteration of or a repair, addition or improvement to an existing home, or an appurtenance to a home to meet the applicable warranty and building and performance standards during the applicable warranty period caused by the action or inaction of the builder, or its employees, agents, contractors or subcontractors; and
(B) any physical damage to the home, an appurtenance to the home, or real property on which the home or appurtenance is affixed that is proximately caused by that failure.
(11) Cosmetic deficiency--any marred, scuffed, scratched or smudged painted surface or countertop; chipped or stained porcelain, tile, grout, or fiberglass; chipped surfaces of appliances or plumbing fixtures; torn or defective window or door screens; marred, smudged, scratched or stained cabinet surfaces or finishes; or, broken, chipped or scratched glass, window or mirror.
(12) Duplex--a single residential structure with two separate dwelling units.
(13) Dwelling unit--a residential structure providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking and sanitation.
(14) Executive Director--the individual employed by the commission as the chief executive for the agency or any person to whom the Executive Director has delegated the authority to act on behalf of the Executive Director.
(15) Home--the real property, improvements and appurtenances thereto for a single family dwelling unit or duplex.
(16) ICC--the International Code Council, Inc., currently located at 5203 Leesburg Pike, Suite 600, Falls Church, Virginia, 22041-3401, or at a subsequent address, and any successor organization that performs substantially the same functions that the ICC performs as of December 1, 2003.
(17) Improvement to the interior of an existing home when the cost of the work exceeds $10,000--any modification to the interior living space of a home, which includes the addition or installation of permanent fixtures inside the home, pursuant to an agreement for work for total consideration in excess of $10,000 to be paid by a homeowner to a single builder or remodeler that involves the coordination of trades or multiple subcontractors or the work involves structural components or the penetration of the home's diaphragm. The definition specifically excludes improvements designed primarily to replace a single component part, such as the replacement of one type of floor covering with another, or to make similar cosmetic changes to interior surfaces, such as replacing laminate countertops with tile.
(18) Living space--the enclosed area in a home that is heated or air-conditioned so that it is suitable for year-round residential use.
(19) Local building official--the agency or department of a municipality, county or other local political subdivision with authority to make inspections and to enforce the laws, ordinances, and regulations applicable to the construction, alteration, or repair of homes in that locality.
(20) Material improvement--a modification to an existing home that either increases or decreases the home's total square footage of living space that also modifies the home's foundation, perimeter walls or roof. A material improvement includes modifications to an existing home that requires the addition of new structural components or the modification of the home's existing structural components, but does not include modifications to an existing home if the modifications are designed primarily to repair or replace the home's component parts.
(21) One or two family residential dwelling--a building that contains one or two dwelling units, including a townhouse, complete with independent living facilities for one or more persons suitable for one household, including permanent provisions for living, sleeping, eating, cooking and sanitation, which is not used as a commercial structure.
(22) Person--an individual, political subdivision, partnership, company, corporation, association, or any other legal entity, however organized.
(23) Remodeler--a person who is a builder under the definition thereof in this section and who enters into an agreement with a homeowner to make material improvements to an existing home or an improvement to the interior of an existing home when the cost of the work exceeds $10,000.
(24) State Inspector--a person employed by the commission whose duties include serving as a member of an appellate panel to:
(A) review the recommendations of third-party inspectors;
(B) provide consultation to third-party inspectors; and
(C) administer the state-sponsored inspection and dispute resolution process through the assignment of third-party inspectors.
(25) Statutory warranty--the legal requirement that the component parts of a home perform to the building and performance standards applicable to the construction for the number of years as set in statute, to wit:
(A) one year for workmanship and materials;
(B) two years for plumbing, electrical, heating, and air conditioning delivery systems;
(C) ten years for major structural components of the home; and
(D) ten years for the warranty of habitability.
(26) Structural failure--for purposes of Property Code §429.001(b) only, the term means non-compliance with the commission-adopted performance standards for major structural components, if applicable to the construction. For purposes of Property Code §429.001(b), if the commission-adopted performance standards do not apply, the term means non-compliance with any applicable written performance standard agreed to between the parties for structural components of a home, or if there are no written performance standards, the term means non-compliance with the usual and customary standards for construction of a structural component of the home such that the structural integrity of the home is compromised or the integrity and performance of the affected structural system is compromised.
(27) Substantial Completion--the later of:
(A) the stage of construction when a new home, addition, improvement, or alteration to an existing home is sufficiently complete that the home, addition, improvement or alteration can be occupied or used for its intended purpose; or
(B) if required, the issuance of a final certificate of inspection or occupancy by the applicable governmental authority.
(28) Third-party inspector--a person approved by the commission to conduct an objective home inspection and prepare a report of that inspection as part of the state-sponsored inspection and dispute resolution process.
(29) Townhouse--a single-family dwelling unit constructed in a group of three or more attached dwelling units in which each unit extends from foundation to roof and with open space on at least two sides not more than three stories in height with a separate means of ingress and egress.
(30) Transaction governed by the Act--an agreement between a homeowner and a builder:
(A) for the construction of a new home; or
(B) for construction on an existing home that is:
(i) a material improvement to the home other than an improvement solely to replace or repair the roof; or
(ii) an improvement to the interior of the home when the cost paid for the work exceeds $10,000.
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 February 13, 2008.
TRD-200800884
Susan K. Durso
General Counsel
Texas Residential Construction Commission
Effective date: March 4, 2008
Proposal publication date: January 4, 2008
For further information, please call: (512) 463-2886
The Texas Residential Construction Commission ("commission") adopts the repeal of 10 TAC §301.1, concerning definitions adopted by the commission without changes to the proposal as published in the January 4, 2008, issue of the Texas Register (33 TexReg 22).
The repeal is part of an overall plan to consolidate rules found in 10 Texas Administrative Code Chapters 300, 301, and 302 as part of an agency rule review undertaken pursuant to requirements of Government Code §2001.039. The repeal is proposed pursuant to an overall plan to consolidate agency administrative rules into a single chapter under the agency's rule review plan. The agency is currently reviewing its rules pursuant to the requirements of Government Code §2001.039.
The commission received no comments on the proposed repeal.
The repeal is adopted pursuant to Property Code §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16, Property Code.
No other statutes, articles, or codes are affected by the repeal.
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 February 14, 2008.
TRD-200800890
Susan K. Durso
General Counsel
Texas Residential Construction Commission
Effective date: March 5, 2008
Proposal publication date: January 4, 2008
For further information, please call: (512) 463-2886
Subchapter C. REGISTRATION OF THIRD-PARTY INSPECTORS
The Texas Residential Construction Commission adopts new 10 Texas Administrative Code §303.212, Third-party Inspector Civil Liability without changes to the proposed text as published in the January 4, 2008, issue of the Texas Register (33 TexReg 23). The new rule is needed to implement a new statutory provision, Property Code §427.003, which was added to the Act by the 80th Texas Legislature in House Bill 1038. The change reduces the impact of liability and the cost of personal liability insurance that some third-party inspectors purchase to protect themselves regarding work performed in their professional capacity. The new statute states that third-party inspectors and state inspectors will be afforded protection from liability for damages in civil actions for acts or omissions in the scope of duties as an inspector in the state-sponsored inspection process. Third-party inspectors do not enjoy protection from liability from damages if the inspector acts with wanton and willful disregard for the rights, safety, or property of another. Similarly, the third-party inspectors do not enjoy protection from liability for damages resulting from an intentional act of misconduct or gross negligence. New §303.212 implements this statutory change.
New §303.212 also requires that a third-party inspector who is sued directly, i.e., who is named individually as a defendant in a civil action, notify the commission in writing within ten days of being served. The new subsection will allow the commission an opportunity to track how often the third-party inspectors are sued in civil lawsuits in the course of performing their duties on behalf of the commission. This information may aid the commission's determination of whether a third-party inspector should be assigned responsibility for inspections to be performed pursuant to the State-sponsored Inspection and Dispute Resolution Process (SIRP), or whether the assignment of SIRP inspections to an inspector should be deferred while a lawsuit or proceeding is pending.
One comment was received on the proposed text from Robert Siebert, an attorney with Davis & Davis, P.C., who submitted comments on behalf of his client, The Home Depot, U.S.A, Inc. (Home Depot). Home Depot expresses its concern with subsection (b) of the proposed rule, in that the language of the proposed rule preamble states that the rule requires a third-party inspector "who is named individually as a defendant in a civil action" to inform the commission of the suit. Home Depot states that this leaves out the possibility that the third-party inspector could be sued in its corporate capacity. Home Depot also notes that Title 16 of the Property Code does not provide the commission express statutory authority to collect this information.
Although the statutory language in Property Code §427.003 refers to legal persons acting as third-party and state inspectors, the commission only registers third-party inspectors in their individual capacities and only pays them in their individual capacities for work performed pursuant to the state-inspection process.
While there is not express authority for the commission to request this information from registered third-party inspectors, the commission has authority over the state-inspection process and has an obligation to protect the integrity of that process. The commission's interest in obtaining information about suits naming third-party inspectors who perform inspection in the State-sponsored Inspection and Dispute Resolution Process (SIRP) is to be aware of potential problems with a particular third-party inspector who is working under the aegis of the commission when conducting state-inspections. This information may aid the commission's determination of whether a third-party inspector should be assigned responsibility for inspections to be performed pursuant to the SIRP, or whether the assignment of SIRP inspections to an inspector should be deferred while a lawsuit or proceeding is pending.
For the reasons stated above, the commission adopted the rule language as proposed.
The commission adopts the new rule under Property Code §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16 of the Property Code; under Property Code §427.003, as promulgated by House Bill 1038; and under Government Code §§2001.021-2001.039, especially §2001.39, which requires state agencies to periodically review their rules.
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 February 14, 2008.
TRD-200800889
Susan K. Durso
General Counsel
Texas Residential Construction Commission
Effective date: March 5, 2008
Proposal publication date: January 4, 2008
For further information, please call: (512) 463-2886
The Texas Residential Construction Commission adopts new Chapter 307, §§307.3 and 307.5 - 307.7, as part of Texas Administrative Code, Title 10, Part 7, relating to inspections of homes in areas without municipal inspections, without changes to the text as published in the January 4, 2008, issue of the Texas Register (33 TexReg 24). The Texas Residential Construction Commission adopts new §§307.1, 307.2 and 307.4 with changes to the proposed text as discussed herein.
The new chapter implements new legislation enacted during the 80th Legislative Session, Regular Session, House Bill 1038 (Act effective Sept. 1, 2007, 80th Legislature, Regular Session), which includes changes to Title 16, Property Code. The chapter provides criteria for the inspection of homes which heretofore were not subject to the inspection codes of a municipality. The requirements of this chapter will result in homes that are in greater compliance with the accepted residential building standards, safer, and with fewer construction defects.
The commission will develop an online system for reporting inspection results. The commission will develop a numbering system that will accommodate a 24 character alpha-numeric identifier that allows builders and remodelers to assign project numbers that can be utilized by fee inspectors to report inspection results. At the time of home registration by the builder, the builder/remodeler will report the project number it assigned to the project so that inspection results and project registration can be associated. If a home registration for a project subject to inspection under this chapter is not associated with inspection results already reported, the builder/remodeler will be given an opportunity to correct any reporting errors before a completion certificate is forwarded to the homeowner.
The commission received a comment regarding the proposed new chapter from Steve Thompson of Damark Homes, Inc. Mr. Thompson expressed concern that the new chapter would introduce more opportunities for conflict between remodeling contractors and inspectors, stating that remodelers already have problems with real estate inspectors who try to force them to bring old residences into compliance with codes when it is not required.
The commission believes that the scope of a remodeling project will determine those elements of construction that must be inspected to ensure compliance with applicable code provisions. Elements that are not part of the remodeling project will not be subject to the inspection requirements. The commission acknowledges that disputes might arise regarding whether a particular element is part of a remodeling project that must be inspected. The commission will make determinations of such disputes on a case-by-case as they arise. In the event that particular types of disputes arise on a recurring basis, the commission may consider further rulemaking to clarify the elements of a remodeling project that must be inspected. Property Code §446.005, as enacted by the 80th Texas Legislature as part of House Bill 1038, gives the commission specific authority to promulgate rules that establish the elements of a construction project that must be inspected to ensure compliance with applicable code provisions.
The commission made a minor modification to the text of §307.1 as it was proposed to clarify that for material improvements and interior renovations on existing properties outside areas in which municipal inspections are available, inspections will be required for those listed stages of construction that are within the scope of the project.
The commission received five comments regarding the proposed new chapter from Ned Munoz on behalf of the Texas Association of Builders (TAB). The first comment addresses §307.2 of the new rules related to windstorm insurance compliance inspections. Mr. Munoz expresses concern with the requirement in §307.2 that, for residential construction in an unincorporated area in which windstorm coverage is available under Insurance Code Chapter 2210, a builder or remodeler must obtain a certificate of compliance for the structure in the manner provided under Insurance Code §2210.251, pursuant to the Texas Department of Insurance regulations. Mr. Munoz asserts that Property Code §446.006(b), as enacted by House Bill 1038, only requires a builder to obtain a certificate of compliance for the structure if the builder is required to do so by statute, and argues that there is no statutory requirement requiring builders to obtain a certificate of compliance for all homes in unincorporated areas. He suggests a revision of the proposed text of §307.2 that would require a builder or remodeler to obtain a certificate of compliance for the structure only if required to do so by statute. To the extent that it is unclear that a builder is only required to obtain windstorm certification if it is required by the Act, the commission has made the requested change in §307.2 and §307.4.
Mr. Munoz' second comment relates to the 24-character alpha-numeric identifier that is referenced in the preamble to §307.4 of the new rules as part of the reporting system for residential construction projects in unincorporated areas. Mr. Munoz states that TAB has received comments from some of its members that a 24-character identifier is too long and should be shortened. He asks the commission to keep this in mind as it develops the numbering system.
Prior to publishing the proposed Chapter 307 rules, the commission received comments from the building industry at a public meeting. Industry members repeatedly expressed concern that the commission's project numbering system allow the builder or remodeler to use whatever project numbering system it currently used so that new numbering systems would not have to be created. With that in mind, the commission determined that it would provide enough character spaces to accept most project numbering systems. The rule preamble is not intended to suggest that each project will have to have a 24-character alpha-numeric identifier, but that the commission's system will accommodate up to 24 characters. Therefore, a builder or remodeler may use shorter project numbers if they so desire. The preamble language in this order reflects this intent.
Mr. Munoz' third comment is that §307.4 of the new rules should not require that a certificate of compliance number be provided to the commission unless a certificate of compliance is required by statute, and reasserts his first comment regarding §307.2 of the new rules as discussed above. The commission has modified §307.4 as discussed above. The commission declines to make a change regarding the language for the alpha numeric identifier for the reasons stated in its response above to Mr. Munoz' first comment.
Mr. Munoz' fourth comment relates to the provision in §307.5 of the new rules that, within 30 days following the registration of a home subject to the inspection provisions of Chapter 307 of the rules, the commission shall issue a certificate of completion to the homeowner and the builder, if the inspection reports have been timely received. Mr. Munoz claims that the 30-day period is too long, that it will cause problems with closings of residential transactions, and that it will lead to an increase in the filings of mechanic's liens because construction funds will not be disbursed until the certificate of completion is issued. Mr. Munoz suggests that the certificates of completion be issued by the commission simultaneously with the registration of the home and the fee inspector's satisfactory inspection report.
Section 307.5 of the new rules tracks the language of Property Code §446.002 that provides the commission 30 days to issue certificates of completion following registration of a home pursuant to Property Code §426.003. Furthermore, the commission believes that "completion" in the context of this code section refers to a compliance with the inspection requirements. Thirty days is a reasonable deadline for the commission's staff to review the inspection reports and registrations of homes that are subject to the inspection requirements of Property Code §446.002. It would be impossible for the commission to simultaneously issue certificates demonstrating compliance on the same date that inspection reports and home registrations are received due to the large volume of home registrations that the commission receives on a daily basis. Section 307.5 does not provide that the commission will take 30 days to issue the certificates of completion in all cases, only that it will have this period of time to issue a certificate of completion if circumstances warrant it. Certificates of completion will be issued as timely as permitted, and the commission anticipates that the amount of time that it takes to issue a certificate of completion will fluctuate depending on the number of filings it receives per period. This being the case, the commission believes that a 30-day period provides necessary flexibility to the commission staff to process the large volume of filings it receives and will receive under the new chapter without unduly prolonging closings. Therefore, the commission will not make changes to the text of §307.5.
However, the commission will provide that the inspector who submits an inspection report will receive verification that the report has been provided as required by this section. The inspector can provide that verification to the builder to demonstrate that compliance with this chapter is complete.
Mr. Munoz' fifth comment relates to the preamble to the new chapter, in which the commission states the builder or remodeler will be given an opportunity to correct any reporting errors with regard to new inspection requirements. Mr. Munoz comments that TAB commends this, but requests that the commission adopt a formal right-to-cure procedure within the rules, and suggests that the commission delay the adoption of the new chapter until a right-to-cure procedure is added.
The commission believes that procedures regarding this issue are established in §307.5(b) of the new chapter. Section 307.5(b) provides that, if the required inspection reports have not been received when a home is registered, the commission will issue a letter notifying the builder and homeowner that the registration was received but that the commission records do not show compliance with the statutory inspection standards for code compliance. It will be up to the builder or remodeler in such a case to effect a cure. The commission believes that §307.5(b) as proposed has a sufficient procedure to address those situations in which a builder or remodeler must cure a particular inspection problem. The commission remains free to amend its procedure in the future if the need arises. Accordingly, the commission will not delay the adoption of new Chapter 307.
The commission also received comments from Rick Herzberger representing Bureau Veritas. Mr. Herzberger suggests that the commission modify §307.3 to require fee inspectors to show particular qualifications in order to act as fee inspectors under Property Code subtitle F. He further recommends that the commission create a list of approved county fee inspectors. Mr. Herzberger expresses Bureau Veritas's concern that, as written, all fee inspectors will not have the qualifications currently required of municipal building inspectors and thus the inspections provided under subtitle F will not be of the same quality of those performed by municipal inspectors. The commission declines to adopt these suggestions because the statute provides that any of the professionals listed in §307.3(a) are qualified to perform the required inspections.
In addition, Mr. Herzberger requested modifications to §307.1, noting that municipalities have five inspections to enforce the International Residential Construction Code, the National Electric Code, plumbing and mechanical codes and the International Energy Conservation Code. Mr. Herzberger reads the intent of subtitle F to replicate municipal inspections in areas in which municipal inspections are not available.
The commission declines to modify the rule as a result of Mr. Herzberger's comments. Section 307.1 provides for inspections at three separate stages of construction. It does not address the matters that will be inspected. The commission intends to address those issues through a uniform reporting format, which will be adopted pursuant to these rules.
The new chapter is adopted under Property Code §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16 of the Property Code.
The new rule is proposed to implement Property Code §408.001 and House Bill 1038.
No other statutes, articles, or codes are affected by the proposal.
§307.1.Code Compliance Inspections Required.
(a) A builder or remodeler who enters into an agreement with a homeowner for a transaction governed by the Act and a home located in a geographic area of the state that is not subject to municipal inspection must hire a qualified fee inspector to inspect the construction for applicable code compliance as required by this chapter.
(b) A builder may use the same or a different fee inspector for the inspections required under this chapter.
(c) For new home construction subject to the inspection requirements of this chapter, a fee inspector shall conduct inspections of the construction project for compliance with the applicable codes at the following stages of construction:
(1) the foundation, prior to the placement of concrete;
(2) the framing and mechanical systems prior to the installation of insulation, wall board or other wall covering facing the home's interior; and
(3) the home upon substantial completion and if not occupied, prior to occupancy.
(d) For improvements to an existing home, a fee inspector shall conduct inspections for code compliance, as applicable, at the following stages of construction if those stages are included in the scope of the construction project:
(1) the foundation, prior to the placement of concrete;
(2) the framing and mechanical systems prior to the installation of insulation, wall board or other wall covering facing the home's interior; and
(3) the home upon substantial completion and if not occupied, prior to occupancy.
(e) When conducting inspections under this chapter, fee inspectors will utilize forms promulgated by the commission to record their findings and conclude whether the construction is code compliant.
§307.2.Windstorm Insurance Compliance Inspections.
For residential construction in an unincorporated area in which windstorm coverage is available under Chapter 2210, Insurance Code, if required by statute a builder or remodeler must obtain a certificate of compliance for the structure in the manner provided under §2210.251, Insurance Code, pursuant to the Texas Department of Insurance regulations.
§307.4.Reporting.
(a) The commission will create a unique project numbering system utilizing a builder's registration number for builders and remodelers to assign to each new residential construction project that is subject to the inspection requirements of this chapter. The commission will use the unique project number to track the inspections reported on each project.
(b) A fee inspector who conducts an inspection pursuant to §307.1 of this chapter will:
(1) obtain a unique password from the commission in order to report the satisfactory completion of each inspection performed pursuant to this chapter to the commission; and
(2) report the completion of the inspection using the assigned project number provided by the builder or remodeler via a commission-provided secure Web portal;
(c) Individual fee inspectors who are unable to submit inspection results via the commission's secure Web portal may submit a written request for a waiver. The commission will provide an alternate method for reporting inspection information.
(d) When registering a home subject to the inspection requirements of this chapter, a builder or remodeler will provide the unique project number it assigned to the property and provided to the fee inspector and, if required by statute to obtain a certificate of compliance under §307.2 of this chapter, will report the WI-8 certificate number at the time the home is registered.
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 February 14, 2008.
TRD-200800888
Susan K. Durso
General Counsel
Texas Residential Construction Commission
Effective date: September 1, 2008
Proposal publication date: January 4, 2008
For further information, please call: (512) 463-2886
10 TAC §§313.1 - 313.7, 313.11, 313.13, 313.15 - 313.18, 313.20, 313.21, 313.26
The Texas Residential Construction Commission ("commission") adopts amendments to Texas Administrative Code, Title 10, Part 7, §§313.1 - 313.6, 313.11, 313.13, 313.15 - 313.18, 313.20, 313.21, and 313.26, relating to the State-sponsored Inspection and Dispute Resolution Process (SIRP) with no changes to the text as published in the January 4, 2008, issue of the Texas Register (33 TexReg 26). The commission adopts §313.7 with changes to the text as published in the January 4, 2008, issue of the Texas Register (33 TexReg 26) and as discussed below. In the December 28, 2007, issue of the Texas Register (32 TexReg 10069), the Commission published notice of its intent to review its rules in Texas Administrative Code, Title 10, Part 7, Chapter 313.
Adoption of the amendments is needed to implement recent changes to Property Code, §§401.003, 418.001, 426.001, 426.004 - 426.007, 428.001, 428.003, 428.004, and 429.001, which were made to the Act by the 80th Texas Legislature in House Bill 1038. The commission's review of the rules in Chapter 313 and determination whether the reasons for adopting the rules continue to exist is needed to fulfill the requirements of Government Code, §2001.039.
The adopted rule amendments relate to various aspects of SIRP requests, including deadlines throughout the SIRP process, qualifications for participation, the stakeholders' responsibilities, registration of the home, notice of the existence of the alleged defects, appointment of the inspector by the commission, the third-party inspector's analysis and inspection report, parties' opportunity to appeal the findings included in the inspection report, fees, and offers to repair alleged defects.
The Commission received comments from the Texas Association of Builders (TAB) regarding the amendments proposed to §313.7 and §313.18. The commission received no comments regarding the rule review.
Existing subsection 313.7(d) states that "A homeowner is required to request a SIRP prior to initiating an action for damages or other relief arising from an alleged construction defect." The commission proposed to add "or builder" and proposed renumbering of the subsection. The commission proposed the amended §313.7(f) to read, "A homeowner or builder is required to request a SIRP prior to initiating an action for damages or other relief arising from an alleged construction defect."
TAB comments that the rule language in proposed subsection 313.7(f) is not consistent with the requirements of Property Code, §426.005, which follows.
PROPERTY CODE, §426.005, PREREQUISITE TO ACTION.
(a) A homeowner or builder must comply with this subtitle before initiating an action for damages or other relief arising from an alleged construction defect (emphasis added).
(b) An action described by Subsection (a) must be filed:
(1) on or before the expiration of any applicable statute of limitations or by the 45th day after the date the third party inspector issues the inspector's recommendation, whichever is later; or
(2) if the recommendation is appealed, on or before the expiration of any applicable statute of limitations or by the 45th day after the date the commission issues its ruling on the appeal, whichever is later.
(c) Any claim for personal injuries, damages to personal goods, or consequential damages or other relief arising out of an alleged construction defect must be included in any action concerning the construction defect.
(d) This section does not apply to an action that is initiated by a person subrogated to the rights of a claimant if payment was made pursuant to a claim made under an insurance policy.
(e) The legislature has not enacted an (e).
(f) A homeowner is not required to comply with this subtitle if:
(1) at the time a homeowner and a builder enter into a contract covered by this title the builder was not registered; or
(2) the certificate of registration of the builder has been revoked.
TAB asserts that Property Code, subsection 426.005(a), requires that, before initiating an action for damages or other relief, the homeowner or builder is required to comply with Subtitle D of the Act. TAB urges that Subtitle D of the Act requires specific procedures for compliance with the SIRP process, not merely the filing of a SIRP request. TAB states that, although the language exists in the current rule, the language proposed in 10 TAC §313.7(f) does not comport with the requirements of the statute. TAB observes that the language is in conflict with the enabling statute and requests the subsection be amended to match the applicable statute.
In response to TAB's comment that 10 TAC §313.7(f) is inconsistent with Property Code, §426.005, the commission modifies its rule. Property Code, Subtitle D, relates to the state-sponsored inspection and dispute resolution process, statutory warranty, and building and performance standards. Property Code, §426.005(a), states that, before a homeowner or builder initiates an action for damages or other relief arising from an alleged construction defect, the applicant must comply with the provisions of the subtitle. The commission agrees that, prior to initiating a civil action, the homeowner or homebuilder must seek relief through the SIRP process. The commission is not aware of any person who has been confused by the language in §313.7(f) that participation in the SIRP process is a prerequisite to civil action or to understand that merely filing a SIRP request was sufficient to satisfy the requirements of the statute. However, TAB is correct in that compliance with subtitle D of the Property Code is something more than filing a request to initiate the SIRP. Accordingly, 10 TAC §313.7(f) and (g) have been modified to make clear that homeowners, builders, and remodelers must comply with subtitle D before initiating a civil action, except in instances in which the builder or remodeler was not registered and in good standing with the commission at the time of entering the contract.
TAB submits comments regarding proposed 10 TAC §313.18. TAB states that it cannot locate the proposed rule change implementing Property Code, §428.004(e). TAB requests the commission remedy the oversight by adding the statutory provisions in Property Code, subsections 428.004(e) and (f), to rule §313.18(e). In response to TAB's comment, the commission declines to modify the rule. The amendments to Property Code, §428.004, are a codification of the rules already adopted by the agency in which a builder or remodeler who made an offer of repair substantially similar to the recommendations for repair contained in a final unappealable agency inspection report are not required to reimburse the commission for the inspection fee. Rule §313.18(a)(2) implements Property Code, subsections 428.004(e) and (f). A builder that follows the requirements of commission rule §313.18(a)(2) may overcome the presumption that the builder must reimburse the commission for the cost of the inspection and fees paid by the requestor.
The commission adopts the rule amendments under Property Code, §408.001, which provides general authority for the commission to adopt rules necessary for the implementation of Title 16, Property Code. The commission adopts the rule amendments to implement Property Code, §§401.003, 418.001, 426.001, 426.004 - 426.007, 428.001, 428.003, 428.004, and 429.001, as promulgated by House Bill 1038. The rule review is conducted in accordance with Government Code §2001.039, requiring periodic review of the commission's rules to determine whether the reasons for initially adopting the rules in Chapter 313 continue to exist.
The statutory provisions affected by the proposed rule amendments and rule review are set forth in Title 16, Property Code, §§408.001, 401.003, 418.001, 426.001, 426.004 - 426.007, 428.001, 428.003, 428.004, and 429.001, and Government Code, §2001.039.
No other statutes, articles, or codes are affected by the adoption and rule review. As a result of the review, the commission finds that the reasons for initially adopting the rules in Chapter 313 continue to exist.
§313.7.Notice of the Request.
(a) At the time that a request is filed with the commission, the requestor shall send a copy of the request and copies of all information submitted to the commission along with the request, by certified mail, return receipt requested, to all other interested parties to the dispute.
(b) A copy of the request and the submitted information mailed to other interested parties under subsection (a) of this section must also be mailed to counsel for any interested party represented by counsel, if the identity of counsel is known to the requestor.
(c) An interested party who receives notice that a request has been submitted to the commission and who has information pertaining to the determination of eligibility under §313.9 of this chapter shall submit that information to the commission and provide a copy of the information to the requestor within ten days of receiving a copy of the notice of the request.
(d) A respondent who receives a copy of a request may request that additional items be added to the list of alleged defects for inspection. The respondent must provide the request for additional items in writing to both the commission and to the requestor within ten days of receiving a copy of the notice of the request.
(e) When the homeowner receives notice of a SIRP request and declines to participate in the process, the commission will close the file and notify the parties that the homeowner has elected not to participate in the state-inspection process.
(f) A homeowner or builder is required to comply with subtitle D of the Property Code prior to initiating an action for damages or other relief arising from an alleged construction defect.
(g) On or after September 1, 2007, a homeowner may, but is not required to comply with subtitle D of the Property Code if:
(1) at the time a homeowner and builder entered into a contract, the builder was required by Property Code §416.001 to be registered with the commission but was not registered; or
(2) the builder's certificate of registration has been revoked by the commission.
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 February 13, 2008.
TRD-200800887
Susan K. Durso
General Counsel
Texas Residential Construction Commission
Effective date: March 4, 2008
Proposal publication date: January 4, 2008
For further information, please call: (512) 463-2886