88R3339 ATP-F     By: Bryant H.B. No. 3422       A BILL TO BE ENTITLED   AN ACT   relating to the correction or removal of certain obsolete   provisions of the Property Code.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  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 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 2.  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 3.  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 4.  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 5.  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 6.  Section 53.172, Property Code, is amended to   read as follows:          Sec. 53.172.  BOND REQUIREMENTS. The bond must:                (1)  describe the property on which the liens are   claimed;                (2)  refer to each lien claimed in a manner sufficient   to identify it;                (3)  be in an amount that is double the amount of the   liens referred to in the bond unless the total amount claimed in the   liens exceeds $40,000, in which case the bond must be in an amount   that is the greater of 1-1/2 times the amount of the liens or the sum   of $40,000 and the amount of the liens;                (4)  be payable to the parties claiming the liens;                (5)  be executed by:                      (A)  the party filing the bond as principal; and                      (B)  a corporate surety authorized and admitted to   do business under the law in this state and licensed by this state   to execute the bond as surety, subject to Subchapter A, Chapter   3503, Insurance Code [Section 1, Chapter 87, Acts of the 56th   Legislature, Regular Session, 1959 (Article 7.19-1, Vernon's Texas   Insurance Code)]; and                (6)  be conditioned substantially that the principal   and sureties will pay to the named obligees or to their assignees   the amount that the named obligees would have been entitled to   recover if their claims had been proved to be valid and enforceable   liens on the property.          SECTION 7.  Section 74.3013(h), Property Code, is amended   to read as follows:          (h)  In this section, a nonprofit cooperative corporation   means a cooperative corporation organized under Chapters 51 and 52,   Agriculture Code, the Texas Nonprofit [Non-Profit] Corporation   Law, as described by Section 1.008(d), Business Organizations Code   [Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes)],   the Texas Cooperative Association Law, as described by Section   1.008(i), Business Organizations Code [Act (Article 1396-50.01,   Vernon's Texas Civil Statutes)], and Chapter 161, Utilities Code.          SECTION 8.  Sections 112.058(c) and (d), Property Code, are   amended to read as follows:          (c)  The community trust may transfer assets of the trust to   a nonprofit corporation only if the nonprofit corporation is   organized under the Texas Nonprofit Corporation Law, as described   by Section 1.008(d), Business Organizations Code, [the Texas   Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's   Texas Civil Statutes)] and organized for the same purpose as the   community trust. The charter of the nonprofit corporation must   describe the purpose of the corporation and the proposed use of the   assets transferred using language substantially similar to the   language used in the instrument creating the community trust.          (d)  To transfer the assets of and terminate a community   trust under this section, the governing body of the community trust   must:                (1)  file a petition in a probate court, county court,   or district court requesting:                      (A)  the transfer of the assets of the trust to a   nonprofit corporation established for the purpose of receiving and   administering the assets of the trust; and                      (B)  the termination of the trust;                (2)  send by first class mail to each trust settlor and   each trustee of each component trust of the community trust who can   be located by the exercise of reasonable diligence a copy of the   governing body's petition and a notice specifying the time and   place of the court-scheduled hearing on the petition; and                (3)  publish once in a newspaper of general circulation   in the county in which the proceeding is pending a notice that reads   substantially similar to the following:          TO ALL INTERESTED PERSONS:          (NAME OF COMMUNITY TRUST)  HAS FILED A PETITION IN (NAME OF   COURT) OF (NAME OF COUNTY), TEXAS, REQUESTING PERMISSION TO CONVERT   TO A NONPROFIT CORPORATION. IF PERMITTED TO CONVERT:                (1)  THE (NAME OF COMMUNITY TRUST) WILL BE TERMINATED;   AND                (2)  THE ASSETS OF THE TRUST WILL BE:                      (A)  TRANSFERRED TO A NONPROFIT CORPORATION WITH   THE SAME NAME AND CREATED FOR THE SAME PURPOSE AS THE (NAME OF   COMMUNITY TRUST); AND                      (B)  HELD AND ADMINISTERED BY THE CORPORATION AS   PROVIDED BY THE TEXAS NONPROFIT [NON-PROFIT] CORPORATION LAW [ACT   (ARTICLE 1396-1.01 ET SEQ., VERNON'S TEXAS CIVIL STATUTES)].          THE PURPOSE OF THE CONVERSION IS TO ACHIEVE SAVINGS AND USE   THE MONEY SAVED TO FURTHER THE PURPOSES FOR WHICH THE (NAME OF   COMMUNITY TRUST) WAS CREATED.          A HEARING ON THE PETITION IS SCHEDULED ON (DATE AND TIME) AT   (LOCATION OF COURT).          FOR ADDITIONAL INFORMATION, YOU MAY CONTACT THE GOVERNING   BODY OF THE (NAME OF COMMUNITY TRUST) AT (ADDRESS AND TELEPHONE   NUMBER) OR THE COURT.          SECTION 9.  Section 202.002(b), Property Code, is amended to   read as follows:          (b)  This chapter does not affect the requirements of Chapter   123, Human Resources Code [the Community Homes for Disabled Persons   Location Act (Article 1011n, Vernon's Texas Civil Statutes)].          SECTION 10.  Section 202.003(b), Property Code, is amended   to read as follows:          (b)  In this subsection, "family home" is a residential home   that meets the definition of and requirements applicable to a   family home under Chapter 123, Human Resources Code [the Community   Homes for Disabled Persons Location Act (Article 1011n, Vernon's   Texas Civil Statutes)]. A dedicatory instrument or restrictive   covenant may not be construed to prevent the use of property as a   family home. However, any restrictive covenant that applies to   property used as a family home shall be liberally construed to give   effect to its purposes and intent except to the extent that the   construction would restrict the use as a family home.          SECTION 11.  Section 204.004(b), Property Code, is amended   to read as follows:          (b)  The association must be nonprofit and may be   incorporated as a Texas nonprofit corporation. An unincorporated   association may incorporate under the Texas Nonprofit [Non-Profit]   Corporation Law, as described by Section 1.008(d), Business   Organizations Code [Act (Article 1396-1.01 et seq., Vernon's Texas   Civil Statutes)].          SECTION 12.  Section 204.010(a), Property Code, is amended   to read as follows:          (a)  Unless otherwise provided by the restrictions or the   association's articles of incorporation or bylaws, the property   owners' association, acting through its board of directors or   trustees, may:                (1)  adopt and amend bylaws;                (2)  adopt and amend budgets for revenues,   expenditures, and reserves and collect regular assessments or   special assessments for common expenses from property owners;                (3)  hire and terminate managing agents and other   employees, agents, and independent contractors;                (4)  institute, defend, intervene in, settle, or   compromise litigation or administrative proceedings on matters   affecting the subdivision;                (5)  make contracts and incur liabilities relating to   the operation of the subdivision and the property owners'   association;                (6)  regulate the use, maintenance, repair,   replacement, modification, and appearance of the subdivision;                (7)  make additional improvements to be included as a   part of the common area;                (8)  grant easements, leases, licenses, and   concessions through or over the common area;                (9)  impose and receive payments, fees, or charges for   the use, rental, or operation of the common area and for services   provided to property owners;                (10)  impose interest, late charges, and, if   applicable, returned check charges for late payments of regular   assessments or special assessments;                (11)  if notice and an opportunity to be heard are   given, collect reimbursement of actual attorney's fees and other   reasonable costs incurred by the property owners' association   relating to violations of the subdivision's restrictions or the   property owners' association's bylaws and rules;                (12)  charge costs to an owner's assessment account and   collect the costs in any manner provided in the restrictions for the   collection of assessments;                (13)  adopt and amend rules regulating the collection   of delinquent assessments and the application of payments;                (14)  impose reasonable charges for preparing,   recording, or copying amendments to the restrictions, resale   certificates, or statements of unpaid assessments;                (15)  purchase insurance and fidelity bonds, including   directors' and officers' liability insurance, that the board   considers appropriate or necessary;                (16)  if the restrictions allow for an annual increase   in the maximum regular assessment without a vote of the membership,   assess the increase annually or accumulate and assess the increase   after a number of years;                (17)  subject to the requirements of the Texas   Nonprofit [Non-Profit] Corporation Law, as described by Section   1.008(d), Business Organizations Code, [Act (Article 1396-1.01 et   seq., Vernon's Texas Civil Statutes)] and by majority vote of its   board of directors, indemnify a director or officer of the property   owners' association who was, is, or may be made a named defendant or   respondent in a proceeding because the person is or was a director;                (18)  if the restrictions vest the architectural   control authority in the property owners' association or if the   authority is vested in the property owners' association under   Section 204.011:                      (A)  implement written architectural control   guidelines for its own use or record the guidelines in the real   property records of the applicable county; and                      (B)  modify the guidelines as the needs of the   subdivision change;                (19)  exercise other powers conferred by the   restrictions, its articles of incorporation, or its bylaws;                (20)  exercise other powers that may be exercised in   this state by a corporation of the same type as the property owners'   association; and                (21)  exercise other powers necessary and proper for   the governance and operation of the property owners' association.          SECTION 13.  The following provisions of the Property Code   are repealed:                (1)  Section 5.018;                (2)  Sections 27.001(3) and (9);                (3)  Section 27.004(l); and                (4)  Section 27.007(c).          SECTION 14.  This Act takes effect immediately if it   receives a vote of two-thirds of all the members elected to each   house, as provided by Section 39, Article III, Texas Constitution.     If this Act does not receive the vote necessary for immediate   effect, this Act takes effect September 1, 2023.