If you are a contractor who specializes in residential construction in Texas, you need a residential construction contract tailored to conform with Texas law. Below are some statutes and guidelines you should follow to maximize your right right to payment.
Residential Construction Contract Requirements: Statutes that Govern Residential Contracts
1. Texas Property Code §53.255 and .256 requires contractor to provide a list of disclosures and list of subcontractors and suppliers to the homeowner. There is no penalty for not providing this information.
2. Residential Construction Liability Act (RCLA) Texas Property Code §27. This statute governs disputes between a homeowner and a contractor. There are specific notice and procedural requirements that must be followed that can affect a contractor’s case and whether a case can be brought to litigation. It also requires all residential construction contracts contain statutory language outlining the notice procedures under this chapter.
3. Regulation Z Texas Business and Commerce Code (TBCC) §601. This is a consumer protection statute that requires a contractor to give the consumer 3 days to cancel the contract. This notice must be provided next to the signature in the contract and a cancellation form must be provided to the consumer.
4. Texas Property Code §41.007. This statute requires home improvement contracts to contain a warning that the property may be subject to lien if they don’t pay. Failure to include this warning is considered a deceptive act under the Texas Deceptive Trade Practices Act. This warning is also a prerequisite to the contractor having a right to lien.
5. Disaster Repair Work. If you are performing disaster repair work outside of the County where your office is located or any adjacent county, you must include an additional warning in the contract according to §58 of the TBCC.
Procedure to Preserve Your Lien Rights
If you are a residential contractor, many of your projects will be on homestead properties. The Texas Constitution protects a person’s homestead from forced sale with a few limited circumstances – one of which is a mechanic’s lien. To successfully lien a homestead, a contractor must follow certain contractual procedures. They are:
1. A written contract between contractor and owner;
2. Signed by both spouses;
3. Filed in the property records with the county clerk PRIOR to any work being done on the homestead.;
4. Contract contains the warnings outlined above;
5. Comply with the notice provisions and deadlines for filing liens set forth in §53 of the property code (not covered in this outline).
Contract Scope and Exclusions
Make sure you are very clear and specific as to what your scope includes, and just as importantly, DOES NOT include. Use an addendum if necessary. Homeowners will always remember (or misremember) things in their favor and believe that the scope includes more than what you put in your bid. They may also not understand construction very well and have unreasonable expectations as to what you can do with the budget they provided you. The more specific you make the scope, the better.
Please note that this is not a comprehensive summary for residential construction contracts. If you get into a position where you need to file a lien, there is a separate set of procedures and deadlines that you must follow in order to successfully attach the lien to the property. Any dispute between you and the property owner is possibly governed by RCLA, which has its own procedural requirements and deadlines. You need to contact me or other competent legal counsel at the onset of either of these situations since they both contain deadlines you must meet to preserve your right to payment.