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The Legislature is Back

JD Holzheauser
JD Holzheauser
The 88th Regular Session of the Texas Legislature commenced on January 10, 2023. The Legislature has 140 days from that date to address the business of the State of Texas. Constitutionally speaking, the only requirement of the Legislature when it meets in regular session is that they have to pass a budget for the following biennium. But the Legislature goes well beyond passing a budget every two years. Thousands of bills are filed in the House of Representatives and Senate every session, and they will continue to be filed until the filing deadline.

In addition to all other issues that are covered in the bills, such as education, health and safety, transportation, infrastructure, etc., the Legislature commonly takes up business that impacts the construction industry. The bill filing deadline in the House and Senate is the 60th day after the start of the Session – March 10, 2023. Every construction issue that is presented to the Legislature as a bill will not be covered in this article, mostly because there is not enough space. But we can cover some of the legislation that has been filed and is being considered for passage this year.

House Bill 2310
House Bill (HB) 2310 was filed by Representative Terry Canales. The caption of the bill reads that it is related to “certain construction defect litigation.” HB 2310 proposes to create a new chapter in the Civil Practice and Remedies Code (CPRC) – Chapter 28. At its core, HB 2310 would create additional requirements for anyone who asserts a construction defect claim in a Texas court. The law would only apply to what is defined as “commercial property,” which the bill defines as “an improvement to publicly or privately owned real property that is used for human habitation or from which governmental activity or commercial enterprise is conducted.” Commercial property does not include certain small residences or highways, roadways, bridges, overpasses, or similar physical infrastructure used by motor vehicles. Other than people’s homes and roads and bridges, the term commercial property is rather broad.

HB 2310 also defines the term “commercial construction defect.” It would be a defect in the design, engineering, material, workmanship, or construction of commercial property. That means that Chapter 28 would apply to design defects and construction defects. Once a claimant has identified a commercial construction defect, Chapter 28 would require that the claimant meet certain standards in its pleading related to the claimed defect. Chapter 28 would also allow the entity defending against that claim to file a motion to dismiss the defect claim if the pleading does not sufficiently meet the pleading requirements or if no reasonable jury could agree with the claimant on its claim.

HB 2310 is worth keeping an eye on in the construction realm. It is not limited to public or private projects. It is not limited to design or construction defects. And it is in addition to other requirements, such as the certificate of merit requirements in Chapter 150 of the CPRC. HB 2310, or some similar version of it, could impact construction defect litigation. Time will tell if it passes.

House Bill 1963
Another bill to keep your eye on is HB 1963. This bill was filed by House Chairmen Jeff Leach and would amend the provisions in Chapter 162 of the Property Code, commonly referred to as the Trust Fund Act (Act). The Act classifies construction payments made to contractors or subcontractors as trust funds. The entity that receives funds meant for a lower tier entity is considered the trustee of those funds and the entity to whom the funds are owed is the beneficiary. It is a violation of the Act for a trustee to misapply those trust funds. Keep in mind that this is an extremely simplified explanation of the Act.

HB 1963 would expand the funds that would be considered trust funds to include statutorily-required retainage – 10 percent of the contract value. HB 1963 also adds a mandatory award of attorney’s fees and costs for a trust fund beneficiary that prevails on a claim for violation of the Act. It is important to note that the award of attorney’s fees is not made available for a trustee who successfully defends against a claim it violated the Act.

Vogele
Your local Wirtgen America dealer
Kirby Smith Machinery
Nueces Power Equipment

As noted above, there are other bills that have been filed and relate to the construction industry. Most bills do not become law. The legislative process in Texas is designed so that it is difficult for legislation to make it through both chambers of the Legislature. Therefore, it is impossible to say what will and will not make it to the Governor’s desk. But it is important that construction businesses stay informed about changing laws.

If you want more information or want to become involved in the legislative process, contact your local industry association. The construction industry associations have a well-organized and cooperative legislative action arm that advocates for the rights of the construction industry. And keep your eyes and ears open for legislative updates this summer. Most industry associations and businesses that serve the industry, like construction law firms, host legislative update events after the session’s end to help keep their members and clients informed on how the law has changed during the last legislative session and what steps stakeholders should take to account for any changes that may have occurred.

In 1866, a New York judicial decision included these words in an opinion: “No man’s life, liberty, or property are safe while the legislature is in session.” 1 Tucker 248, 249 (N.Y. Surr. 1866) Perhaps exaggeration, but still something to think about 150 years later.

JD Holzheauser is a Senior Counsel at Peckar & Abramson, P.C. He can be reached at jholzheauser@pecklaw.com and 512.236.0009

Gradall Co
Your local Gradall Industries dealer
Kirby Smith Machinery
WPI
ASCO Equipment