Residential Construction Liability Act

May 5, 2022

Residential Construction Liability Act

        Residential Construction Liability Act: A worst enemy or a best friend.

The Residential Construction Liability Act (‘RCLA’ or “Act”) was written to promote settlement, outside of court, between contractors and residential property owners for construction defects. The RCLA is a double-edged sword that if used correctly can help contractors limit or remove liability for construction defects, or if ignored, can cause the contractor to incur substantial economic damages. The following information will highlight the areas of the Act that contractors need to be aware of.

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Who does the act apply to:

The RCLA is broadly interpreted to incorporate contractors who build or perform repairs on residences. The courts have gone so far as to call ‘realtors’ contractors for the purpose of the Act. (In Re Wells, 252 S.W.3d 439.) In other words, if you have performed a repair or work on a residence, this Act applies to you and/or your company.

What are you liable for:

Contractors are only liable for the work they or their agents, employees, or subcontractors performed. They are not liable for settling or shrinkage of the residence within normal building standards. This act does not limit other causes of action a property owner may have against the contractor including fraud.

Who can initiate the RCLA process:

Homeowners, or claimants, are not the only people who can commence the RCLA process. Under certain circumstances the claimant can assign his rights, or have his rights subrogated to a third-person. Should those rights be instilled on a third-party, different rules apply.

Timelines and requirements for the Act:

           The act has strict timelines that must be adhered to by both the claimant and the contractor.

  1. Sixty day letter: Sixty days before a claimant can file a lawsuit pertaining to a residential construction defect, the claimant must send a certified letter (return receipt requested) to the last know address of the contractor. The letter must include reasonable details of the construction defect(s).
  2. Contractor can ask for proof of the defects including: expert reports, photographs, and videos.
  3. 35 day period: during the 35 days following receipt of the letter by the contractor, the contractor may request an inspection of the property himself or send a representative in order to document and assess the alleged defects. The claimant must give the contractor a reasonable opportunity to perform the inspection.
  4. 45 day period: 45 days following receipt of the letter by the contractor, they can make a written settlement offer of either repairing the property or paying for the property to be fixed and the letter must be sent via certified mail (return receipt requested).
  5. The claimant has 25 days to accept or reject the offer, via a writing, and must explain in detail why they are rejecting the offer.
  6. The contractor may then send a revised offer within 10 days of the rejection of the first offer by the claimant.

Failure to abide by these time periods may abate, or move back, any legal action at the request of the contractor.

The importance of the offer:

If there is a legitimate construction defect, the contractor would be well advised to make a reasonable offer to repair or pay for the repair. Why? Because if the claimant rejects the reasonable offer their damages are limited to the fair market value of the rejected offer and cost and reasonable attorney’s fees incurred prior to the rejection. In other words, if a reasonable offer is made and rejected, the claimant will not be able to recover any attorney’s fees from subsequent litigation. On the other hand, if the contractor fails to make a reasonable offer or no offer at all, the claimant may recover the reasonable cost of repairs, cost of replacement or repairs of damaged goods in the residence, reasonable and necessary engineering and consulting fees, reasonable temporary housing, reduction in market value of the house, and reasonable and necessary attorney’s fees through trial. The attorney’s fees alone can be tens of thousands of dollars depending on the case.

In summation, the RCLA is a tool that a wise contractor can use to limit or elude damages if used correctly. Please give us a call if you receive an RCLA notice so that we can further help you navigate this process.

Contact Us

Martinez Hsu, P.C.

4001 Airport Freeway Suite 150

Bedford, Texas 76021



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