Many homeowners have had problems with homebuilders or contractors who have done questionable work. What are the legal remedies for substandard home construction or repairs?
A little historical background is in order. In 1973, the Texas Legislature passed what is commonly known as the Deceptive Trade Practices Act (the “DTPA”). The DTPA made it relatively easy for consumers to recover large judgments for “false, misleading, or deceptive acts or practices.” It didnâ€™t take long for creative lawyers to convince juries that many ordinary breaches of contract were deceptive or misleading in some way. This was particularly true for homeowners. We all live somewhere, and we all have horror stories about leaking roofs, shifting foundations, and lousy repair jobs. Homebuilders and repair contractors took a beating at the courthouse under the DTPA, and many of them got hit with actual damages plus large awards for “additional damages” – code for punitive damages, meaning punish the guy and maybe even put him out of business. Additional damages under the DTPA include treble damages for mental anguish. The DTPA put contractors at a tremendous disadvantage at the courthouse; after all, what juror hadnâ€™t suffered mental anguish when the plumbing leak in the bathroom overflowed onto the nice new bedroom carpet?
In 1989, the Texas Legislature, under intense pressure from the home building industry, passed the Residential Construction Liability Act (the “RCLA”). The RCLA limits damages for construction defects or repairs to reasonable costs of repairs, engineering and consulting fees, expenses of temporary housing, reduction in current market value after repairs in the case of a structural failure, and attorneys fees. In many cases the RCLA also gives the contractor the right to inspect the home and make an offer to repair the defects. The contractor can also force the homeowner to mediation in cases involving more than $7,500. Most importantly, no “additional damages” can be recovered, and the RCLA specifically excludes DTPA claims in most cases. In short, the RCLA shifts the balance of power to the contractor.
I have represented homeowners and contractors in numerous construction defect cases, so I do not have a professional bias either way. In my opinion, the DTPA went too far in punishing homebuilders and repair contractors for shoddy work that could be remedied with damages for breach of contract. However, the DTPA did give the contractor a real incentive (additional damages) to do his job right, and the RCLA takes away that incentive. Regardless of whether the RCLA is right or wrong in its treatment of homeowners, it is the law. Homeowners with legitimate claims for construction defects or repairs should carefully document their claims (nothing beats good photos showing the missing rafters or the loose shingles), and be prepared to deal with the contractor to repair the problem. If that fails, the only remedy is a glorified breach of contract suit under the RCLA.
Construction defect litigation is often costly, and far more frustrating and time-consuming than most people realize. There is an old adage among trial lawyers that “A bad settlement is better than a good trial.” The compulsory mediation requirement of the RCLA is a good one, because most cases settle at mediation, resulting in a settlement the parties can live with, instead of a “good trial” that often only benefits the lawyers and expert witnesses.