Highlights of Our Recent Legislative Achievements

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2023

 

Owner-Directed Change Order Reform - Amended the private and public Prompt Pay Acts to address excessive owner-directed change orders. Permits a contractor or subcontractor to refuse owner-directed additional work if: (1) the change order is unsigned; and (2) the estimate(s) (cumulative) for the work exceeds 10% of contract price.

 

Texas Regulatory Consistency Act - Prohibits cities and counties from regulating in the following codes: Agriculture; Finance; Insurance; Labor; Natural Resources; Occupations; and Property. Allows an injured party to bring a civil suit seeking only declaratory and injunctive relief against the local government.

 

2021

 

Design Defect Liability Reform - Reversed the 1907 Texas Supreme Court holding in Lonergan v. San Antonio Loan & Trust Co. by clarifying in statute that contractors are not liable for damages due to defective design documents provided to them by someone other than their subcontractors. Exceptions provided for critical infrastructure projects, design-build contracts, and other contracts wherein the contractor provides design input that is incorporated into the project plans.

 

Lien Law Updates - Amended Chapter 53, Property Code, to make changes to Texas’ lien laws. Changes include aligning statutory deadlines with those applicable to other civil proceedings; eliminating the “second-month notice”; adopting statutory forms for Notice of Unpaid Balance and Notice of Unpaid Retainage; and reducing the limitations period on a suit to foreclose a lien to 1 year with an optional second year upon agreement of the parties.

 

Public Contracting Disputes - Requires a governmental entity to notify the vendor of a disputed amount and include a detailed statement of the amount in dispute. Limits withholding to no more than 110% of the disputed amount.

 

Public Works Retainage - Amended the Government Code to reform the retainage provisions in contracts for the construction or repair of public buildings or public works. Specifically, limits retainage to 5% for projects over $10 million.

 

2019

 

Right to Repair on Public Projects - Amended the Government Code to require that prior to litigation, a public entity must obtain a report detailing alleged construction defects and share the report with the contractors. Not later than the fifth day after the date a contractor receives the report, the contractor must provide a copy of the report to each subcontractor whose work is subject to the defect claim. All contractors will then have 30 days to inspect and 120 days to repair damages if they so choose.

 

2015

 

Consolidated Insurance Program (CIP) - The Texas Insurance Code was amended to require the principal of a CIP to provide certain information about the CIP to a contractor who is to be enrolled in the CIP no later than 10 days before the date the contractor enters into a construction contract. This information will allow the contractor to compare the coverage provided by the CIP to the contractor’s own insurance and will allow the contractor to make an informed decision on whether to enter into the construction contract. The bill also made the same notification requirement of any contractor when hiring a contractor that will also be covered by a CIP. This ensures that every contractor on the project receives the notification.

 

Pre-Litigation Requirements for Condo Owners’ Associations Defect Cases - Restricted condominium unit owners’ associations in condominiums that have eight or more units from filing lawsuits or initiating arbitration proceedings to resolve a claim relating to the construction or design of a unit on behalf of the owners unless the owners’ association obtains an inspection and written independent third-party report that identifies and describes the condition of the specific units or common elements that are subject to the claim and obtains approval from unit owners holding at least 50% of the total votes in the association at a regular, annual or special meeting.

 

2011

 

Indemnification - The enforceability of broad form indemnification and related additional insured endorsements for general construction work was limited by the Legislature. While there are some exceptions for types of projects and certain types of indemnity agreements, the overall effect is to make unenforceable indemnification agreements that require a person to be responsible for another’s negligent acts. There is a similar restriction on additional insured endorsements on the indemnitor’s insurance policy. This legislation capped decades of work by the subcontracting industry in its repeated attempts at relief from indemnifications for negligence of others.

 

Consolidated Insurance Programs - A general liability policy issued under a consolidated insurance program must provide a minimum of 3 years of completed operations coverage.

 

Lien Waivers - The Legislature adopted conditional and unconditional statutory lien waiver forms for construction payments. Most importantly, in most all cases, a person cannot waive a right to a mechanic’s lien prior to receiving payment for work performed or materials supplied.

 

2009

 

Texas Fraudulent Lien Act - Because of broad language, an innocent mistake or error may expose the claimant to significant civil and criminal penalties. Many subcontractors and suppliers were reluctant to file liens because of this exposure.  The Act was amended to provide that a violation of the Act involving a mechanic’s and materialman’s lien requires showing that the claimant filed the lien with an intent to defraud.

 

Texas Construction Trust Fund Act - The Act was amended to provide that funds subject to the Act are not subject to seizure by a bankruptcy trustee for an upstream payor who files bankruptcy. The Act was also amended to overturn an appellate court decision that limited a claimant’s remedies for non-payment on a public project to the payment bond. The language change included providing that the remedies under the Act and other remedies are in addition to any remedy provided by a payment.

 

Attorney Fees - Legislation was passed providing that if a contractor or supplier prevails in a suit involving a construction contract with a local governmental entity, the contractor or supplier is entitled to recover its attorney fees from the governmental entity.

 

2007

 

Contingent Payment - This measure provided that a contingent payment clause is not effective: (1) when the subcontractor does the work properly and the owner withholds payment because of actions of the general contractor or another subcontractor; (2) if the owner/general contractor relationship is a sham; or (3) the enforcement of the contingent payment clause would otherwise be unconscionable. The clause is effective when the owner does not pay due to insolvency; however, the subcontractor can give notice to the general contractor after payment is not made in accordance with the Prompt Pay Act that for future work the clause is not effective.