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  81R11730 UM-D
 
  By: Smith of Tarrant H.B. No. 3629
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the continuation and functions of the Texas Residential
  Construction Commission and the licensing and regulation of certain
  builders.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Title 12, Insurance Code, is amended by adding
  Chapter 3504 and a heading to read as follows:
  CHAPTER 3504. THIRD-PARTY WARRANTY COMPANIES FOR CERTAIN
  RESIDENTIAL CONSTRUCTION
         SECTION 2.  Section 430.008, Property Code, is transferred
  to Chapter 3504, Insurance Code, redesignated as Section 3504.001,
  and amended to read as follows:
         Sec. 3504.001 [430.008].  REGULATION AND APPROVAL OF
  THIRD-PARTY WARRANTY COMPANY FOR CERTAIN RESIDENTIAL
  CONSTRUCTION.  (a)  The department [commission] may approve as a
  third-party warranty company for the purposes of Section 430.009,
  Property Code:
               (1)  an entity that has operated warranty programs in
  this state for at least five years;
               (2)  a company whose performance is insured by an
  insurance company authorized to engage in the business of insurance
  in this state; or
               (3)  an insurance company that insures the warranty
  obligations of a builder under the statutory warranty and building
  and performance standards as provided by Chapter 430, Property
  Code.
         (b)  A third-party warranty company must submit to the
  department [commission] an annual application and fee in the form
  and in the amount required by the commissioner [commission] by rule
  before the company may be approved under this section.
         SECTION 3.  Section 214.906, Local Government Code, is
  amended to read as follows:
         Sec. 214.906.  VERIFICATION OF BUILDER REGISTRATION.  A
  municipality may not issue a building permit to a builder, as
  defined by Section 401.003, Property Code, for construction
  described by Section 401.003(a), Property Code, unless the
  municipality has verified that the builder is licensed by
  [registered with] the Texas Residential Construction Commission
  under Chapter 416, Property Code, or is exempt from holding a
  license [registration] under Section 401.005, Property Code.
         SECTION 4.  Sections 27.001(4), (5), and (8), Property Code,
  are amended to read as follows:
               (4)  "Construction defect" [has the meaning assigned by
  Section 401.004 for an action to which Subtitle D, Title 16, applies
  and for any other action] means a matter concerning the design,
  construction, or repair of a new residence, of an alteration of or
  repair or addition to an existing residence, or of an appurtenance
  to a residence, on which a person has a complaint against a
  contractor. The term may include any physical damage to the
  residence, any appurtenance, or the real property on which the
  residence and appurtenance are affixed proximately caused by a
  construction defect.
               (5)  "Contractor":
                     (A)  means:
                           (i)  a person [builder, as defined by
  Section 401.003,] contracting with an owner for the construction or
  repair of a new residence, for the repair or alteration of or an
  addition to an existing residence, or for the construction, sale,
  alteration, addition, or repair of an appurtenance to a new or
  existing residence;
                           (ii)  any person contracting with a
  purchaser for the sale of a new residence constructed by or on
  behalf of that person; or
                           (iii)  a person contracting with an owner or
  the developer of a condominium for the construction of a new
  residence, for an alteration of or an addition to an existing
  residence, for repair of a new or existing residence, or for the
  construction, sale, alteration, addition, or repair of an
  appurtenance to a new or existing residence; and
                     (B)  includes:
                           (i)  an owner, officer, director,
  shareholder, partner, or employee of the contractor; and
                           (ii)  a risk retention group registered
  under Chapter 2201 [Article 21.54], Insurance Code, that insures
  all or any part of a contractor's liability for the cost to repair a
  residential construction defect.
               (8)  "Structural failure" [has the meaning assigned by
  Section 401.002 for an action to which Subtitle D, Title 16, applies
  and for any other action] means actual physical damage to the
  load-bearing portion of a residence caused by a failure of the
  load-bearing portion.
         SECTION 5.  Section 27.002(b), Property Code, is amended to
  read as follows:
         (b)  To [Except as provided by this subsection, to] the
  extent of conflict between this chapter and any other law,
  including the Deceptive Trade Practices-Consumer Protection Act
  (Subchapter E, Chapter 17, Business & Commerce Code) or a common law
  cause of action, this chapter prevails.  [To the extent of conflict
  between this chapter and Title 16, Title 16 prevails.]
         SECTION 6.  Section 27.003(a), Property Code, is amended to
  read as follows:
         (a)  In an action to recover damages or other relief arising
  from a construction defect:
               (1)  a contractor is not liable for any percentage of
  damages caused by:
                     (A)  negligence of a person other than the
  contractor or an agent, employee, or subcontractor of the
  contractor;
                     (B)  failure of a person other than the contractor
  or an agent, employee, or subcontractor of the contractor to:
                           (i)  take reasonable action to mitigate the
  damages; or
                           (ii)  take reasonable action to maintain the
  residence;
                     (C)  normal wear, tear, or deterioration;
                     (D)  normal shrinkage due to drying or settlement
  of construction components within the tolerance of building
  standards; or
                     (E)  the contractor's reliance on written
  information relating to the residence, appurtenance, or real
  property on which the residence and appurtenance are affixed that
  was obtained from official government records, if the written
  information was false or inaccurate and the contractor did not know
  and could not reasonably have known of the falsity or inaccuracy of
  the information; and
               (2)  if an assignee of the claimant or a person
  subrogated to the rights of a claimant fails to provide the
  contractor with the written notice and opportunity to inspect and
  offer to repair required by Section 27.004 [or fails to request
  state-sponsored inspection and dispute resolution under Chapter
  428, if applicable,] before performing repairs, the contractor is
  not liable for the cost of any repairs or any percentage of damages
  caused by repairs made to a construction defect at the request of an
  assignee of the claimant or a person subrogated to the rights of a
  claimant by a person other than the contractor or an agent,
  employee, or subcontractor of the contractor.
         SECTION 7.  Sections 27.004(a), (b), (c), and (d), Property
  Code, are amended to read as follows:
         (a)  Before [In a claim not subject to Subtitle D, Title 16,
  before] the 60th day preceding the date a claimant seeking from a
  contractor damages or other relief arising from a construction
  defect initiates an action, the claimant shall give written notice
  by certified mail, return receipt requested, to the contractor, at
  the contractor's last known address, specifying in reasonable
  detail the construction defects that are the subject of the
  complaint. On the request of the contractor, the claimant shall
  provide to the contractor any evidence that depicts the nature and
  cause of the defect and the nature and extent of repairs necessary
  to remedy the defect, including expert reports, photographs, and
  videotapes, if that evidence would be discoverable under Rule 192,
  Texas Rules of Civil Procedure. During the 35-day period after the
  date the contractor receives the notice, and on the contractor's
  written request, the contractor shall be given a reasonable
  opportunity to inspect and have inspected the property that is the
  subject of the complaint to determine the nature and cause of the
  defect and the nature and extent of repairs necessary to remedy the
  defect. The contractor may take reasonable steps to document the
  defect. [In a claim subject to Subtitle D, Title 16, a contractor
  is entitled to make an offer of repair in accordance with Subsection
  (b). A claimant is not required to give written notice to a
  contractor under this subsection in a claim subject to Subtitle D,
  Title 16.]
         (b)  Not [later than the 15th day after the date of a final,
  unappealable determination of a dispute under Subtitle D, Title 16,
  if applicable, or not] later than the 45th day after the date the
  contractor receives the notice [under this section, if Subtitle D,
  Title 16, does not apply], the contractor may make a written offer
  of settlement to the claimant. The offer must be sent to the
  claimant at the claimant's last known address or to the claimant's
  attorney by certified mail, return receipt requested. The offer
  may include either an agreement by the contractor to repair or to
  have repaired by an independent contractor partially or totally at
  the contractor's expense or at a reduced rate to the claimant any
  construction defect described in the notice and shall describe in
  reasonable detail the kind of repairs which will be made. The
  repairs shall be made not later than the 45th day after the date the
  contractor receives written notice of acceptance of the settlement
  offer, unless completion is delayed by the claimant or by other
  events beyond the control of the contractor. If a contractor makes
  a written offer of settlement that the claimant considers to be
  unreasonable:
               (1)  on or before the 25th day after the date the
  claimant receives the offer, the claimant shall advise the
  contractor in writing and in reasonable detail of the reasons why
  the claimant considers the offer unreasonable; and
               (2)  not later than the 10th day after the date the
  contractor receives notice under Subdivision (1), the contractor
  may make a supplemental written offer of settlement to the claimant
  by sending the offer to the claimant or the claimant's attorney.
         (c)  If [compliance with Subtitle D, Title 16, or] the giving
  of the notice under Subsections (a) and (b) within the period
  prescribed by those subsections is impracticable because of the
  necessity of initiating an action at an earlier date to prevent
  expiration of the statute of limitations or if the complaint is
  asserted as a counterclaim, [compliance with Subtitle D, Title 16,
  or] the notice is not required. However, the action or counterclaim
  shall specify in reasonable detail each construction defect that is
  the subject of the complaint. The [If Subtitle D, Title 16, applies
  to the complaint, simultaneously with the filing of an action by a
  claimant, the claimant must submit a request under Section 428.001.
  If Subtitle D, Title 16, does not apply, the] inspection provided
  for by Subsection (a) may be made not later than the 75th day after
  the date of service of the suit, request for arbitration, or
  counterclaim on the contractor, and the offer provided for by
  Subsection (b) may be made [not later than the 15th day after the
  date the state-sponsored inspection and dispute resolution process
  is completed, if Subtitle D, Title 16, applies, or] not later than
  the 60th day after the date of service [, if Subtitle D, Title 16,
  does not apply]. If, while an action subject to this chapter is
  pending, the statute of limitations for the cause of action would
  have expired and it is determined that the provisions of Subsection
  (a) were not properly followed, the action shall be abated to allow
  compliance with Subsections (a) and (b).
         (d)  The court or arbitration tribunal shall abate an action
  governed by this chapter if Subsection (c) does not apply and the
  court or tribunal, after a hearing, finds that the contractor is
  entitled to abatement because the claimant failed to [comply with
  the requirements of Subtitle D, Title 16, if applicable, failed to]
  provide the notice or failed to give the contractor a reasonable
  opportunity to inspect the property as required by Subsection (a),
  or failed to follow the procedures specified by Subsection (b).  An
  action is automatically abated without the order of the court or
  tribunal beginning on the 11th day after the date a motion to abate
  is filed if the motion:
               (1)  is verified and alleges that the person against
  whom the action is pending did not receive the written notice
  required by Subsection (a), the person against whom the action is
  pending was not given a reasonable opportunity to inspect the
  property as required by Subsection (a), or the claimant failed to
  follow the procedures specified by Subsection (b) [or Subtitle D,
  Title 16];  and
               (2)  is not controverted by an affidavit filed by the
  claimant before the 11th day after the date on which the motion to
  abate is filed.
         SECTION 8.  Section 27.0042(b), Property Code, is amended to
  read as follows:
         (b)  A contractor may not elect to purchase the residence
  under Subsection (a) if [:
               [(1)] the residence is more than five years old at the
  time an action is initiated [; or
               [(2)     the contractor makes such an election later than
  the 15th day after the date of a final, unappealable determination
  of a dispute under Subtitle D, Title 16, if applicable].
         SECTION 9.  Section 41.007(a), Property Code, is amended to
  read as follows:
         (a)  A contract for improvements to an existing residence
  described by Section 41.001(b)(3) must contain:
               (1)  the contractor's license [certificate of
  registration] number from the Texas Residential Construction
  Commission if the contractor is required to be licensed [register]
  as a builder by [with] the commission;
               (2)  the address and telephone number at which the
  owner may file a complaint with the Texas Residential Construction
  Commission about the conduct of the contractor if the contractor is
  required to be licensed [register] as a builder by [with] the
  commission; and
               (3)  the following warning conspicuously printed,
  stamped, or typed in a size equal to at least 10-point bold type or
  computer equivalent:
         "IMPORTANT NOTICE:  You and your contractor are responsible
  for meeting the terms and conditions of this contract.  If you sign
  this contract and you fail to meet the terms and conditions of this
  contract, you may lose your legal ownership rights in your
  home.  KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW."
         SECTION 10.  Chapter 401, Property Code, is amended by
  adding Section 401.0011 to read as follows:
         Sec. 401.0011.  PURPOSE; TEXAS RESIDENTIAL CONSTRUCTION
  COMMISSION.  (a)  The Texas Residential Construction Commission
  oversees builders licensed by the commission to ensure that
  builders are responsible and accountable to the homeowners with
  whom they contract.
         (b)  The commission's mission includes ensuring the
  protection of the public by educating builders and homeowners about
  all aspects of the residential construction industry affecting the
  building or remodeling of homes.
         SECTION 11.  Section 401.002(6), Property Code, is amended
  to read as follows:
               (6)  "Home" means the real property and improvements
  and appurtenances for a single-family or two-family dwelling of up
  to three stories [house or duplex].
         SECTION 12.  Sections 401.003(a), (b), and (d), Property
  Code, are amended to read as follows:
         (a)  In this title, "builder" means 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:
               (1)  a new home;
               (2)  a material improvement to a home, including [other
  than] an improvement solely to replace or repair a roof of an
  existing home, the construction of a swimming pool, or the repair of
  the foundation of the home; or
               (3)  an improvement to the interior of an existing home
  when the cost of the work exceeds $10,000.
         (b)  The term includes:
               (1)  an owner, officer, director, shareholder,
  partner, affiliate, subsidiary, or employee of the builder;
               (2)  a risk retention group governed by Chapter 2201
  [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
               (3)  a third-party warranty company governed by Chapter
  3504, Insurance Code, and its administrator.
         (d)  The term does not include a nonprofit business entity
  that is exempt from taxation under Section 501(c)(3), Internal
  Revenue Code, if:
               (1)  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
  licensed [registered] under this title;
               (2)  the builder contractually agrees to comply with
  the provisions of this title;
               (3)  the builder is contractually liable to the
  homeowner for the warranties and building and performance standards
  of this title; and
               (4)  the nonprofit business entity does not participate
  directly in the construction of the home, material improvement, or
  improvement.
         SECTION 13.  Section 401.005(c), Property Code, is amended
  to read as follows:
         (c)  An individual who builds a home or a material
  improvement to a home and sells the home immediately following
  completion of the building or remodeling and does not live in the
  home for at least one year following completion of the building or
  remodeling is responsible as a builder under the warranty
  obligation created by this title for work completed by the
  individual.  Responsibility under this subsection requires [does
  not automatically require] an individual to obtain a license
  [register] under Section 416.001.
         SECTION 14.  Section 401.006, Property Code, is amended to
  read as follows:
         Sec. 401.006.  SUNSET PROVISION.  The Texas Residential
  Construction Commission is subject to Chapter 325, Government Code
  (Texas Sunset Act). Unless continued in existence as provided by
  that chapter, the commission is abolished and this title expires
  September 1, 2013 [2009].
         SECTION 15.  Sections 401.007(a), (b), and (c), Property
  Code, are amended to read as follows:
         (a)  The [If the] commission [has reasonable cause to believe
  that a person is violating a statute to which this chapter applies,
  the commission, in addition to any other authorized action,] may
  issue an emergency order, including an emergency order to cease and
  desist, to any person regardless of whether the person is a builder
  licensed under this title [from the violation or an order to take
  affirmative action, or both], to enforce a statute to which this
  chapter applies if the commission determines that an emergency
  exists requiring immediate action to protect the public health and
  safety or if the commission has reasonable cause to believe that a
  person is violating a statute to which this chapter applies.  The
  commission may issue the emergency order without notice and hearing
  or with any notice and hearing the commission considers practicable
  under the circumstances [compliance].  A person may appeal the
  order directly to district court in accordance with Chapter 2001,
  Government Code.
         (b)  The [Before issuing an order under this section, the]
  commission shall set the time and place and give notice for a
  hearing to affirm, modify, or set aside an emergency order that was
  issued without a hearing [of a hearing before a hearings officer].  
  The hearing is governed by Chapter 2001, Government Code.  Based on
  the findings of fact, conclusions of law, and recommendations of
  the hearings officer, the commission by order may find whether a
  violation has occurred.
         (c)  The commission, after providing notice and an
  opportunity to appear for a hearing, may impose against a person who
  violates an emergency [a cease and desist] order an administrative
  penalty in an amount not to exceed $1,000 for each day of violation.  
  In addition to any other remedy provided by law, the attorney
  general or the commission may institute in district court a suit for
  injunctive relief and to collect an administrative penalty.  A bond
  is not required of the commission with respect to injunctive relief
  granted under this section.  In the action, the court may enter as
  proper an order awarding a preliminary or final injunction.
         SECTION 16.  Sections 406.001(a) and (c), Property Code, are
  amended to read as follows:
         (a)  The Texas Residential Construction Commission consists
  of 11 [nine] members appointed by the governor with the advice and
  consent of the senate as follows:
               (1)  four members must be builders who each hold a
  license [certificate of registration] under Chapter 416;
               (2)  four [three] members must be representatives of
  the general public;
               (3)  one member must be a licensed professional
  engineer who practices in the area of residential construction;
  [and]
               (4)  one member must be [either] a licensed architect
  who practices in the area of residential construction; and
               (5)  one member must be [or] a building inspector who
  meets the requirements set forth in Chapter 427 and practices in the
  area of residential construction.
         (c)  A person may not be a public member of the commission if
  the person or the person's spouse:
               (1)  is a builder licensed [registered] with the
  commission, or is otherwise registered, certified, or licensed by a
  regulatory agency in the field of residential construction;
               (2)  is employed by or participates in the management
  of a business entity or other organization regulated by or
  receiving money from the commission;
               (3)  owns or controls, directly or indirectly, more
  than a 10 percent interest in a business entity or other
  organization regulated by or receiving money from the commission;
  or
               (4)  uses or receives a substantial amount of tangible
  goods, services, or money from the commission other than
  compensation or reimbursement authorized by law for commission
  membership, attendance, or expenses.
         SECTION 17.  Section 406.002(a), Property Code, is amended
  to read as follows:
         (a)  Commission members serve staggered six-year terms, with
  three or four members' terms expiring February 1 of each
  odd-numbered year. The terms of three of the builder
  representatives must expire in different odd-numbered years. The
  terms [term] of three [one] of the representatives of the general
  public must expire in different [each] odd-numbered years [year].
         SECTION 18.  Section 406.004(b), Property Code, is amended
  to read as follows:
         (b)  A person may not be a public member of the commission and
  may not be a commission employee employed in a "bona fide executive,
  administrative, or professional capacity," as that phrase is used
  for purposes of establishing an exemption to the overtime
  provisions of the federal Fair Labor Standards Act of 1938 (29
  U.S.C. Section 201 et seq.) and its subsequent amendments, if:
               (1)  the person is an officer, employee, manager, or
  paid consultant of a Texas trade association [or consumer
  association] in the field of residential construction, including
  the business of supplying construction materials, or the field of
  real estate sales, including the issuance of title insurance; or
               (2)  the person's spouse is an officer, manager, or paid
  consultant of a Texas trade association or consumer association in
  the field of residential construction, including the business of
  supplying construction materials, or the field of real estate
  sales, including the issuance of title insurance.
         SECTION 19.  Section 408.001, Property Code, is amended to
  read as follows:
         Sec. 408.001.  RULES.  The commission shall adopt rules as
  necessary for the implementation of this title, including rules[:
               [(1)     governing the state-sponsored inspection and
  dispute resolution process, including building and performance
  standards, administrative regulations, and the conduct of hearings
  under Subtitle D;
               [(2)]  establishing limited statutory warranty and
  building and performance standards for residential construction[;
               [(3)  approving third-party warranty companies; and
               [(4)  approving third-party inspectors].
         SECTION 20.  Section 408.002(c), Property Code, is amended
  to read as follows:
         (c)  The commission may charge a reasonable fee for:
               (1)  [a homeowner to submit a request for
  state-sponsored inspection under Subtitle D;
               [(2)]  providing public information requested under
  Chapter 552, Government Code, excluding information requested from
  the commission under Section 409.001; or
               (2) [(3)]  producing, mailing, and distributing
  special printed materials and publications generated in bulk by the
  commission for use and distribution by builders.
         SECTION 21.  Section 409.001, Property Code, is amended to
  read as follows:
         Sec. 409.001.  PUBLIC INTEREST INFORMATION.  (a)  The
  commission shall prepare information of public interest describing
  the functions of the commission, the provisions of the limited
  statutory warranty and building and performance standards, [the
  state-sponsored inspection and dispute resolution process,] and
  the procedures by which complaints [or requests] are filed with and
  resolved by the commission.
         (b)  The commission shall make the information available to
  the public and appropriate state agencies and shall post the
  information on the commission's website. The commission shall make
  the information available on the commission's website in a format
  that allows builders to download the information and provide it to
  homeowners as required by Subsection (c).
         (c)  Within 30 days of registering a home as [the receipt by
  the commission of the registration] required by Section 426.003, a
  builder [the commission] shall provide [mail] a copy of the
  information of public interest described in Subsection (a) to the
  owner of the home as described in the registration.
         (d)  The commission shall also prepare and make available on
  the commission's website information regarding the different
  categories and designations of builders in this state as well as
  different options that builders may offer homeowners related to the
  construction or remodeling of a home.
         SECTION 22.  Section 409.0011(b), Property Code, is amended
  to read as follows:
         (b)  The commission shall create and make accessible to the
  public an electronic list and a hard-copy list of builders who:
               (1)  are licensed [registered] with the commission; and
               (2)  provide in this state building services, including
  accessible floor plans, to persons with mobility-related special
  needs.
         SECTION 23.  Section 409.004, Property Code, is amended to
  read as follows:
         Sec. 409.004.  DIRECTORY OF BUILDERS.  The commission shall
  make available to the public a list of each builder who holds a
  license [certificate of registration] issued under Chapter 416.
         SECTION 24.  The heading to Subtitle C, Title 16, Property
  Code, is amended to read as follows:
         SUBTITLE C. BUILDER LICENSING [REGISTRATION]
         SECTION 25.  The heading to Chapter 416, Property Code, is
  amended to read as follows:
  CHAPTER 416. LICENSE [CERTIFICATE OF REGISTRATION]
         SECTION 26.  Section 416.001, Property Code, is amended to
  read as follows:
         Sec. 416.001.  LICENSE [REGISTRATION] REQUIRED; RULES. (a)  
  Notwithstanding any other law, a [A] person may not engage in
  business as a builder in this state or act as a builder unless the
  person holds a license [certificate of registration] under this
  chapter.
         (b)  The commission shall adopt all rules necessary to
  implement the licensing program under this chapter, including rules
  relating to:
               (1)  license eligibility including the education and
  experience required to obtain a license;
               (2)  renewal requirements, examination requirements,
  and continuing education requirements for license holders;
               (3)  security and insurance requirements;
               (4)  disciplinary actions; and
               (5)  any other issues determined necessary by the
  commission.
         SECTION 27.  The heading to Section 416.002, Property Code,
  is amended to read as follows:
         Sec. 416.002.  LICENSE APPLICATION [FOR CERTIFICATE].
         SECTION 28.  Sections 416.002(a) and (e), Property Code, are
  amended to read as follows:
         (a)  An applicant for an original or renewal license
  [certificate of registration] must submit an application on a form
  prescribed by the commission.
         (e)  Based on a commission investigation of an alleged
  violation of Sections 418.001(a)(12)-(18) [418.001(a)(14)-(20)],
  the commission may require an applicant for renewal of a license
  [certificate of registration] to disclose to the commission every
  person with an ownership interest in the applicant's business as a
  builder.  This subsection does not apply to a publicly traded
  company.
         SECTION 29.  Section 416.004(a), Property Code, is amended
  to read as follows:
         (a)  The commission shall charge and collect:
               (1)  a filing fee for an application for an original
  license [certificate of registration] that does not exceed $500;
               (2)  a fee for renewal of a license [certificate of
  registration] that does not exceed $300; and
               (3)  a late fee that does not exceed the amount of the
  fee due if payment of a license [registration] application or
  renewal fee due under this title is late.
         SECTION 30.  Chapter 416, Property Code, is amended by
  adding Section 416.0041 to read as follows:
         Sec. 416.0041.  SECURITY REQUIREMENTS. (a) As a guarantee
  that a builder will meet the builder's obligations under this
  subtitle, each licensed builder shall maintain with the commission
  a bond or other security accepted by the commission.
         (b)  A bond posted as security must:
               (1)  be issued by an insurer authorized to engage in the
  business of insurance in this state;
               (2)  be continuous;
               (3)  be cancelable by the surety only after at least 90
  days' notice to the commission; and
               (4)  recognize that the obligation continues for the
  terms of the contracts written by the builder while the bond is in
  force.
         (c)  Any security provided under this section in a form other
  than a bond must be convertible to cash by the commission for the
  benefit of persons who contract with the builder in this state,
  without resort to the courts, if the commission determines that the
  builder is in default of the builder's financial obligations to
  those contract holders. Any amount remaining after all contract
  holders' claims are paid must be returned to the builder not later
  than the 120th day after the date the last outstanding contract
  expires.
         SECTION 31.  Section 416.005, Property Code, is amended to
  read as follows:
         Sec. 416.005.  GENERAL ELIGIBILITY REQUIREMENTS.  A person
  may not receive a license [certificate of registration] under this
  chapter unless:
               (1)  the person, at the time of the application:
                     (A)  is at least 18 years of age; and
                     (B)  is a citizen of the United States or a
  lawfully admitted alien; and
               (2)  the commission is satisfied with the person's
  honesty, trustworthiness, and integrity based on information
  supplied or discovered in connection with the person's application.
         SECTION 32.  Section 416.006, Property Code, is amended to
  read as follows:
         Sec. 416.006.  ADDITIONAL ELIGIBILITY REQUIREMENTS FOR
  BUSINESS ENTITIES.  (a)  To be eligible for an original or renewal
  license [certificate of registration] under this chapter:
               (1)  a corporation must designate one of its officers
  as its agent for the purposes of this chapter;
               (2)  a limited liability company must designate one of
  its managers as its agent for the purposes of this chapter; and
               (3)  a partnership, limited partnership, or limited
  liability partnership must designate one of its managing partners
  as its agent for the purposes of this chapter.
         (b)  A corporation, limited liability company, partnership,
  limited partnership, or limited liability partnership is not
  eligible to hold a license [be registered] under this chapter and
  may not act as a builder unless the entity's designated agent is
  individually licensed [registered] as a builder.
         SECTION 33.  Section 416.007, Property Code, is amended to
  read as follows:
         Sec. 416.007.  LICENSE ISSUANCE [OF CERTIFICATE].  (a)  Not
  later than the 15th day after the date the commission receives an
  application from an applicant who meets the requirements of this
  chapter, the commission shall issue a license [certificate of
  registration] to the applicant.
         (b)  The license [certificate of registration] remains in
  effect for the period prescribed by the commission if the license
  [certificate] holder complies with this chapter and pays the
  appropriate renewal fees.
         (c)  The commission shall issue one license [certificate of
  registration] for each business entity licensed [registered] under
  this chapter.
         SECTION 34.  The heading to Section 416.008, Property Code,
  is amended to read as follows:
         Sec. 416.008.  DENIAL OF LICENSE [REGISTRATION].
         SECTION 35.  Section 416.008(a), Property Code, is amended
  to read as follows:
         (a)  If the commission denies an application for an original
  license [certificate of registration] or a renewal application, the
  commission shall give written notice to the applicant not later
  than the 15th day after the date the commission receives the
  application.
         SECTION 36.  Section 416.009, Property Code, is amended to
  read as follows:
         Sec. 416.009.  LICENSE EXPIRATION [OF CERTIFICATE].  (a)  
  The commission may issue or renew a license [certificate of
  registration] for a period that does not exceed 24 months.
         (b)  The commission by rule may adopt a system under which
  licenses [certificates of registration] expire on several dates
  during the year. The commission shall adjust the date for payment
  of renewal fees accordingly.
         (c)  In a year in which the expiration date for a license
  [certificate of registration] is changed, the renewal fee payable
  shall be prorated on a monthly basis so that the license
  [certificate] holder pays only that portion of the fee that is
  allocable to the number of months during which the license
  [certificate of registration] is valid. On renewal of the license
  [certificate of registration] on the new expiration date, the total
  renewal fee is payable.
         SECTION 37.  Sections 416.010(a), (b), (c), and (d),
  Property Code, are amended to read as follows:
         (a)  A builder shall maintain a fixed office location in this
  state. The address of the builder's principal place of business
  must be designated on the license [certificate of registration].
         (b)  Not later than the 30th day after the date a builder
  moves from the address designated on the license [certificate of
  registration], the builder shall submit an application,
  accompanied by the appropriate fee, for a license [certificate of
  registration] that designates the new location of the builder's
  principal place of business. The commission shall issue a license
  [certificate of registration] that designates the new location if
  the new location complies with the requirements of this section.
         (c)  If a builder operates under any name other than the name
  that is set forth on the builder's license [certificate of
  registration], the builder shall, within 45 days of operating under
  this other name, disclose this other name to the commission.
         (d)  This section does not require a builder to obtain a
  license [certificate of registration] for each sales office.
         SECTION 38.  Sections 416.012(a), (b), (c), (d), and (e),
  Property Code, are amended to read as follows:
         (a)  The commission shall recognize or administer continuing
  education programs for builders licensed [registered] by the
  commission.  A licensed [registered] builder must participate in
  the programs to the extent required by this section to maintain the
  builder's license [registration].
         (b)  A licensed builder [who registers for the first time on
  or after September 1, 2007,] must complete, during the first year
  the builder is licensed [registered] with the commission, five
  hours of continuing education, one hour of which must address
  ethics.
         (c)  A licensed builder who has satisfied [is registered
  before September 1, 2007, and all other builders who register for
  the first time on or after September 1, 2007, and satisfy] the
  requirements of Subsection (b)[,] must thereafter complete three
  [five] hours of continuing education every two [five] years, one
  hour of which must address ethics.
         (d)  The commission shall permit a licensed [registered]
  builder to receive continuing education credit for educational,
  technical, ethical, or professional management activities related
  to the practice of residential construction, including:
               (1)  successfully completing or auditing a course
  sponsored by an institution of higher education;
               (2)  successfully completing a course certified by a
  professional or trade organization;
               (3)  attending a seminar, tutorial, short course,
  correspondence course, videotaped course, or televised course on
  the practice of residential construction;
               (4)  participating in an in-house course sponsored by a
  corporation or other business entity;
               (5)  teaching a course described by Subdivisions
  (1)-(4);
               (6)  publishing an article, paper, or book on the
  practice of residential construction;
               (7)  making or attending a presentation at a meeting of
  a residential or builder association or organization or writing a
  paper presented at the meeting;
               (8)  participating in the activities of a residential
  or builder association, including serving on a committee of the
  organization;  and
               (9)  engaging in self-directed study on the practice of
  residential construction.
         (e)  A licensed [registered] builder may not receive more
  than one [two] continuing education credit hour [hours] during each
  two-year [five-year] period for engaging in self-directed study.
         SECTION 39.  Section 418.001, Property Code, is amended to
  read as follows:
         Sec. 418.001.  GROUNDS FOR DISCIPLINARY ACTION.  A person,
  including a builder or a person who is designated as a builder's
  agent under Section 416.006, or a person who owns or controls a
  majority ownership interest in the builder is subject to
  disciplinary action under this chapter for:
               (1)  fraud or deceit in obtaining a license
  [registration or certification] under this subtitle;
               (2)  misappropriation or misapplication of trust funds
  in the practice of residential construction, including a violation
  of Chapter 32, Penal Code, or Chapter 162[, if found by a final
  nonappealable court judgment];
               (3)  naming false consideration in a contract to sell a
  new home or in a construction contract;
               (4)  discriminating on the basis of race, color,
  religion, sex, national origin, or ancestry;
               (5)  publishing a false or misleading advertisement;
               (6)  failure to honor, within a reasonable time, a
  check issued to the commission, or any other instrument of payment,
  including a credit or debit card or electronic funds transfer,
  after the commission has sent by certified mail a request for
  payment to the person's last known business address, according to
  commission records;
               (7)  failure to pay an administrative penalty assessed
  by the commission under Chapter 419 [or a fee due under Chapter
  426];
               (8)  failure to pay a final nonappealable court
  judgment arising from a construction defect or other transaction
  between the person and a homeowner;
               (9)  failure to register a home as required by Section
  426.003;
               (10)  failure to remit the fee for registration of a
  home under Section 426.003;
               (11)  [failure to reimburse a homeowner the amount
  ordered by the commission as provided by Section 428.004(d);
               [(12)] engaging in statutory or common-law fraud or
  misappropriation of funds, as determined by the commission after a
  hearing under Section 418.003;
               [(13)     a repeated failure to participate in the
  state-sponsored inspection and dispute resolution process if
  required by this title;]
               (12) [(14)]  failure to obtain a license [register as a
  builder] as required under Chapter 416;
               (13) [(15)]  using or attempting to use a license
  [certificate of registration] that has expired or that has been
  revoked;
               (14) [(16)]  falsely representing that the person
  holds a license [certificate of registration] issued under Chapter
  416;
               (15) [(17)]  acting as a builder using a name other
  than the name or names disclosed to the commission;
               (16) [(18)]  aiding, abetting, or conspiring with a
  person who does not hold a license [certificate of registration] to
  evade the provisions of this title or rules adopted under this
  title, if found by a final nonappealable court judgment;
               (17) [(19)]  allowing the person's license
  [certificate of registration] to be used by another person;
               (18) [(20)]  acting as an agent, partner, or associate
  of a person who does not hold a license [certificate of
  registration] with the intent to evade the provisions of this title
  or rules adopted under this title;
               [(21)     a failure to reasonably perform on an accepted
  offer to repair or a repeated failure to make an offer to repair
  based on:
                     [(A)     the recommendation of a third-party
  inspector under Section 428.004; or
                     [(B)     the final holding of an appeal under Chapter
  429;]
               (19) [(22)]  a repeated failure to respond to a
  commission request for information;
               (20) [(23)]  a failure to obtain a building permit
  required by a political subdivision before constructing a new home
  or an improvement to an existing home;
               (21) [(24)]  abandoning, without justification, any
  home improvement contract or new home construction project engaged
  in or undertaken by the person, if found to have done so by a final,
  nonappealable court judgment;
               (22)  making threats, without justification, to a
  homeowner [(25)   a repeated failure to comply with the requirements
  of Subtitle F]; or
               (23) [(26)]  otherwise violating this title or a
  commission rule adopted under this title.
         SECTION 40.  Section 418.002(a), Property Code, is amended
  to read as follows:
         (a)  On a determination that a ground for disciplinary action
  under Section 418.001 exists, the commission may:
               (1)  revoke or suspend a license [registration or
  certification] in the event of repeated prior violations that have
  resulted in disciplinary action;
               (2)  probate the suspension of a license [registration
  or certification];
               (3)  formally or informally reprimand a licensed
  [registered or certified] person; or
               (4)  impose an administrative penalty under Chapter
  419.
         SECTION 41.  Section 418.004(c), Property Code, is amended
  to read as follows:
         (c)  An appeal to a district court of a final decision of the
  commission under this section regarding a revocation or suspension
  of a license [registration or certification] is determined by
  substantial evidence.
         SECTION 42.  Section 419.002(c), Property Code, is amended
  to read as follows:
         (c)  A violation of Section 418.001(2) or (11) [(12)] is
  punishable by a penalty not to exceed $100,000.
         SECTION 43.  Section 419.004, Property Code, is amended to
  read as follows:
         Sec. 419.004.  ENFORCEMENT OF PENALTY.  If a person does not
  pay an administrative penalty imposed under this chapter and
  enforcement of the penalty is not stayed, the commission may:
               (1)  refer the matter to the attorney general for
  collection of the penalty; or
               (2)  enforce any part of the order that specifies
  disciplinary action to be taken against the licensed [registered or
  certified] person if the licensed [registered or certified] person
  fails to pay the administrative penalty within the time prescribed.
         SECTION 44.  Sections 420.001 and 420.002, Property Code,
  are amended to read as follows:
         Sec. 420.001.  REQUIRED WRITTEN DISCLOSURE.  In a contract
  for the construction of a new home or an improvement to an existing
  home required to be registered under Section 426.003, the contract
  must contain a notice to the consumer in at least 10-point bold type
  or the computer equivalent that gives the telephone number of the
  commission and states:
         STATE LAW REQUIRES THAT A PERSON HOLD A LICENSE ISSUED BY 
  [CERTIFICATE OF REGISTRATION FROM] THE TEXAS RESIDENTIAL
  CONSTRUCTION COMMISSION IF THE PERSON CONTRACTS TO CONSTRUCT A NEW
  HOME OR IF THE PERSON CONTRACTS TO CONSTRUCT A MATERIAL IMPROVEMENT
  TO AN EXISTING HOME OR CERTAIN IMPROVEMENTS TO THE INTERIOR OF AN
  EXISTING HOME AND THE TOTAL COST OF THE IMPROVEMENT IS $10,000 OR
  MORE (INCLUDING LABOR AND MATERIALS).
         YOU MAY CONTACT THE COMMISSION AT [insert commission's
  telephone number] TO FIND OUT WHETHER THE BUILDER HAS A VALID
  LICENSE [CERTIFICATE OF REGISTRATION]. THE COMMISSION HAS
  INFORMATION AVAILABLE ON THE HISTORY OF BUILDERS, INCLUDING
  SUSPENSIONS, REVOCATIONS, COMPLAINTS, AND RESOLUTION OF
  COMPLAINTS.
         [THIS CONTRACT IS SUBJECT TO CHAPTER 426, PROPERTY CODE.     THE
  PROVISIONS OF THAT CHAPTER GOVERN THE PROCESS THAT MUST BE FOLLOWED
  IN THE EVENT A DISPUTE ARISES OUT OF AN ALLEGED CONSTRUCTION
  DEFECT.]  IF YOU HAVE A COMPLAINT CONCERNING A CONSTRUCTION DEFECT
  YOU MAY CONTACT THE COMMISSION AT THE TOLL-FREE TELEPHONE NUMBER
  [TO LEARN HOW TO PROCEED UNDER THE STATE-SPONSORED INSPECTION AND
  DISPUTE RESOLUTION PROCESS].
         Sec. 420.002.  REQUIRED CONTRACT PROVISIONS.  In a contract
  for the construction of a new home or an improvement to an existing
  home required to be registered under Section 426.003, the contract
  is not enforceable against a homeowner unless the contract:
               (1)  contains the builder's name and license
  [certificate of registration] number; and
               (2)  contains the notice required by Section 420.001.
         SECTION 45.  The heading to Subtitle D, Title 16, Property
  Code, is amended to read as follows:
  SUBTITLE D.  [STATE-SPONSORED INSPECTION AND DISPUTE RESOLUTION
  PROCESS;]  STATUTORY WARRANTY AND BUILDING AND PERFORMANCE
  STANDARDS
         SECTION 46.  Sections 430.001(d) and (e), Property Code, are
  amended to read as follows:
         (d)  The International Residential Code for One- and
  Two-Family Dwellings that applies to nonelectrical aspects of
  residential construction for the purposes of the limited statutory
  warranties and building and performance standards adopted under
  this section is:
               (1)  for residential construction located in a
  municipality or the extraterritorial jurisdiction of a
  municipality, the version of the International Residential Code
  applicable to nonelectrical aspects of residential construction in
  the municipality under Section 214.212, Local Government Code;
               (2)  for residential construction located in an
  unincorporated area not in the extraterritorial jurisdiction of a
  municipality, the version of the International Residential Code
  applicable to nonelectrical aspects of residential construction in
  the municipality that is the county seat of the county in which the
  construction is located; and
               (3)  for residential construction located in an
  unincorporated area in a county that does not contain an
  incorporated area, the version of the International Residential
  Code that existed on May 1, 2009 [2001].
         (e)  The National Electrical Code for One- and Two-Family
  Dwellings that applies to electrical aspects of residential
  construction for the purposes of this section is:
               (1)  for residential construction located in a
  municipality or the extraterritorial jurisdiction of a
  municipality, the version of the National Electrical Code
  applicable to electrical aspects of residential construction in the
  municipality under Section 214.214, Local Government Code;
               (2)  for residential construction located in an
  unincorporated area not in the extraterritorial jurisdiction of a
  municipality, the version of the National Electrical Code
  applicable to electrical aspects of residential construction in the
  municipality that is the county seat of the county in which the
  construction is located; and
               (3)  for residential construction located in an
  unincorporated area in a county that does not contain an
  incorporated area, the version of the National Electrical Code that
  existed on May 1, 2009 [2001].
         SECTION 47.  Section 430.005(b), Property Code, is amended
  to read as follows:
         (b)  This section does not exempt a builder in an area
  described by Subsection (a) from the builder licensing and home
  registration requirements imposed by this title, including the
  requirements of Sections 416.001 and 426.003.
         SECTION 48.  Sections 430.009(a) and (c), Property Code, are
  amended to read as follows:
         (a)  A builder may elect to provide a warranty through a
  third-party warranty company approved under Chapter 3504,
  Insurance Code [by the commission].
         (c)  A third-party warranty company approved under Chapter
  3504, Insurance Code, [by the commission] has all of the
  obligations and rights of a builder under this subtitle [regarding
  performance of repairs to remedy construction defects or payment of
  money instead of repair].
         SECTION 49.  Section 430.010, Property Code, is amended to
  read as follows:
         Sec. 430.010.  MINIMUM STANDARDS FOR DETERMINATION OF
  DEFECT. The commission by rule shall adopt defect inspection
  procedures to be used by a [A] third-party warranty company for the
  purposes of [shall use defect inspection procedures substantially
  similar to the procedures adopted by the commission under] this
  subtitle. A warranty company may adopt warranty standards in
  addition to the standards adopted by the commission. A third-party
  warranty company may not reduce the limited statutory warranty and
  building and performance standards, except that a third-party
  warranty company shall not be required to provide a warranty of
  habitability.
         SECTION 50.  The following provisions of the Property Code
  are repealed:
               (1)  Sections 27.001(3) and (9);
               (2)  Section 27.004(l);
               (3)  Sections 401.002(3), (4), (10), (11), (12), and
  (15);
               (4)  Section 408.002(d);
               (5)  Section 416.011;
               (6)  Chapter 417;
               (7)  Section 418.002(c);
               (8)  Sections 426.001, 426.002, 426.004, 426.005,
  426.006, 426.007, and 426.008;
               (9)  Chapters 427, 428, and 429;
               (10)  Sections 430.005(c) and 430.011(b);
               (11)  Chapter 431; and
               (12)  Subtitles E and F, Title 16.
         SECTION 51.  (a)  Except as provided by this section, the
  changes in law made by this Act to Chapter 27, Property Code, and
  the repeal by this Act of Sections 426.005, 426.007, and 426.008,
  Property Code, apply only to an action commenced on or after the
  effective date of this Act. An action commenced before the
  effective date of this Act or with respect to which a request was
  filed under Section 428.001, Property Code, before the repeal of
  that section by this Act, is governed by the law in effect
  immediately before the effective date of this Act, and that law is
  continued in effect for that purpose.
         (b)  The change in law made by this Act to Section
  27.003(a)(2), Property Code, applies only to a repair made on or
  after the effective date of this Act. A repair made before the
  effective date of this Act is subject to the law as it existed
  immediately before the effective date of this Act, and that law is
  continued in effect for that purpose.
         (c)  Section 401.003, Property Code, as amended by this Act,
  applies only to activity described by that section, as amended by
  this Act, commenced on or after the effective date of this Act.
  Activity commenced before the effective date of this Act is
  governed by the law in effect immediately before the effective date
  of this Act, and that law is continued in effect for that purpose.
         (d)  Section 401.005(c), Property Code, as amended by this
  Act, applies only to a home or material improvement to a home, the
  building or remodeling of which commences on or after the effective
  date of this Act. A home or material improvement to a home
  described by Section 401.005(c), Property Code, as amended by this
  Act, the building or remodeling of which is commenced before the
  effective date of this Act is subject to the warranty obligation
  applicable to the home or material improvement to the home
  immediately before the effective date of this Act.
         (e)  Section 401.007, Property Code, as amended by this Act,
  applies only to an order regarding an emergency or a violation of a
  statute to which Chapter 401, Property Code, applies that occurs on
  or after the effective date of this Act. An order regarding an
  emergency or a violation of a statute that occurred before the
  effective date of this Act is governed by the law in effect at the
  time the emergency or violation occurred, and that law is continued
  in effect for that purpose.
         (f)  Promptly after this Act takes effect, the governor shall
  appoint the two additional members to the Texas Residential
  Construction Commission as required by Section 406.001, Property
  Code, as amended by this Act. In appointing those members, the
  governor shall appoint one person to a term expiring February 1,
  2011, and one to a term expiring February 1, 2013.
         (g)  Section 406.004(b), Property Code, as amended by this
  Act, applies only to a member of the Texas Residential Construction
  Commission appointed or reappointed on or after the effective date
  of this Act. A commission member appointed or reappointed before
  the effective date of this Act is subject to the law as it existed
  immediately before the effective date of this Act, and that law is
  continued in effect for that purpose.
         (h)  The Texas Residential Construction Commission shall
  adopt rules as required by Chapter 416, Property Code, as amended by
  this Act, not later than December 1, 2009.  A person is not required
  to hold a license under Chapter 416, Property Code, as amended by
  this Act, until January 1, 2010. A person registered as a builder
  under Chapter 416, Property Code, as it existed immediately before
  the effective date of this Act, is not required to comply with an
  examination requirement to obtain a license under Chapter 416, as
  amended by this Act, until September 1, 2014.
         (i)  Section 418.001, Property Code, as amended by this Act,
  applies only to a ground for disciplinary action that occurs on or
  after the effective date of this Act. A ground for disciplinary
  action that occurs before the effective date of this Act is governed
  by the law in effect at the time the ground for disciplinary action
  occurred, and that law is continued in effect for that purpose.
         (j)  The change in law made by this Act to Section 420.001,
  Property Code, applies only to a contract entered into on or after
  January 1, 2010.  A contract entered into before that date is
  governed by the law in effect on the date the contract was entered
  into, and the former law is continued in effect for that purpose.
         (k)  The repeal by this Act of Section 428.005, Property
  Code, does not apply to the receipt by a builder of a notice
  described by that section before the effective date of this Act.
  The receipt by a builder of a notice described by that section
  before the effective date of this Act is governed by the law in
  effect immediately before that date, and that law is continued in
  effect for that purpose.
         (l)  The repeal by this Act of Section 436.003, Property
  Code, applies only to an arbitration initiated on or after the
  effective date of this Act. An arbitration initiated before the
  effective date of this Act is governed by the law applicable to the
  arbitration immediately before the effective date of this Act, and
  that law is continued in effect for that purpose.
         (m)  The repeal by this Act of Chapter 437, Property Code,
  applies only to an arbitration award filed on or after the effective
  date of this Act. An award filed before the effective date of this
  Act is governed by the law in effect immediately before that date,
  and that law is continued in effect for that purpose.
         (n)  The repeal by this Act of Chapter 438, Property Code,
  applies only to an arbitration award issued on or after the
  effective date of this Act. An award issued before the effective
  date of this Act is governed by the law in effect immediately before
  that date, and that law is continued in effect for that purpose.
         SECTION 52.  Except as otherwise provided by this Act, this
  Act takes effect September 1, 2009.