Yes, defects in design, construction, and materials do exist - possibly in every man-made building. No building is perfect, but not every construction defect ("CD") warrants discovery, correction, or compensation. Those that do should be corrected and wrong-doers held accountable, using litigation when necessary. If litigation were limited to only cases of consequential defects, this bill ~ Senate Bill 834 and its companion House Bill 1455 ~ would not be needed.

 

FACT 1

This bill does not prevent the condo HOA from hiring lawyers and engineers who specialize in CD claims when the condo has defects that are so apparent and significant that the homeowners support the decision to go after the bad guys.

 

FACT 2

This bill does protect condominium designers, developers, and builders, by slowing down the litigation train. But, it also protects volunteer HOA directors from being pressured to make decisions in a vacuum. And, it protects individual homeowners from having their homes dragged into a lawsuit without the homeowner's knowledge or approval.

 

FACT 3

The need for this bill arises out of a wave of frivolous CD litigation that targets condominiums built within the past 10 years. "Frivolous"?? If we assume that every building has a CD of some kind, no CD lawsuit is frivolous in a legal sense. However, a lawsuit IS frivolous in a practical sense if it's based on an alleged defect for which discovery and correction are most costly and destructive than leaving the building as-is.

 

FACT 4

The problem of frivolous CD litigation is not new and it's not home-grown. It began 25 years ago in California, and then moved to Nevada, Arizona, and Colorado, on its way to Texas. How does it spread? Lawyers who specialize in this type of litigation open offices in state after state.

 

FACT 5

In the wake of the wave of CD litigation, states are enacting laws similar to this bill to make their states less attractive to the cottage industry of suing condominium developers. Seeing the wave approaching, Texas is being proactive - taking advantage of other states' heard-earned lessons.

 

FACT 6

In response to the wave of opportunistic CD litigation against condo developers, way back in 2008 the National Law Commissioners tried to help developers by amending the model Uniform Common Interest Ownership Act (UCIOA) to add Section 3-124, titled "Litigation Involving Declarant."

 

FACT 7

CD lawyers are attracted to condos because the volunteer HOA boards are easy to sign up thanks to Texas condo law (TUCA), which this bill would change. There is no evidence that condo buildings are any more problem-prone than other types of buildings, such as office towers.

 

FACT 8

The ambulance-chasing aspect of frivolous CD litigation that gives rise to this bill is often portrayed thus:

 

Volunteer directors are told they have a legal fiduciary duty to the unit owners to search for CDs in common elements and in units before it's too late to prosecute a claim. The CD lawyer offers to handle the hunt for CDs and the lawsuit-related expenses in exchange for a contingent fee contract approved by the board. Each party named in the lawsuit spends considerable money out-of-pocket responding to and investigating the claim. Even if a party did nothing wrong or caused only a nominal defect, its insurance company is likely to insist on a cash settlement because CD litigation is notoriously expensive to defend against. Typically, all parties - whether guilty or innocent - have settled by time of trial, and the HOA's CD lawyer takes his share of the settlement proceeds. 

 

FACT 9

Without this law, Texas can expect to feel the full force of the wave of condo CD litigation that is moving down from Colorado. Because neither alleged defects nor litigation appeal to FHA, it will be difficult to obtain FHA or other institutional financing to buy or refinance a condo. Also, Texas will continue to be deprived of the talents of many excellent design and building professionals who refuse to create condominiums in Texas out of a healthy fear of frivolous litigation. Further, the cost of insuring building professionals against CD claims will continue to rise, and will be translated into higher home prices.

 

FACT 10

It's fair and reasonable for provisions in condominium declarations to protect "special interests," such as the city, master association, institutional lenders (FHA), HOA manager, and the developer. Those special interest provisions should not be changed by a vote of homeowners without the protected party's approval, if that's how the declaration is written.

Much is being written about the hoops that a condo HOA will have to jump through on the way to the courthouse. Here are the hoops (paraphrased) that apply only to claims of defect in the design or construction of a unit or common element. I use "developer" to stand for all parties against whom the HOA makes a claim.

Hoop 1.  Hire a licensed engineer to inspect the alleged defects and provide a written report. The engineer must be hired and paid by the HOA.

Hoop 2. Invite the developer to join the engineer on his scheduled inspection.

  

Hoop 3. Send the engineer's written report to each owner and to the developer. ("notice")

Hoop 4. Give the developer at least 90 days to inspect and correct the reported defects. ("opportunity to cure")

Hoop 5.   If the developer fails to perform, consult a construction defect lawyer to get a copy of his contract and estimated costs of litigation.

Hoop 6. Call a special meeting of HOA members to vote on the decision to sue the developer.  The engineer's report and other documentation accompany the meeting notice.

Hoop 7.   At least 67% of the homeowners must approve the board's recommendation to sue the developer. 

   

 

HEARING NOTICE

 

For each hearing, the committee must post a notice 5 days in advance. The notice states the date, time, and place of the hearing. It also lists the bills that will be given their first public hearing.  The bills are listed in numerical order, but may be heard in a different order.  The notices are posted on the legislature's website, on each committee's page.

 

WEBCAM COVERAGE

  

You  may be able to watch the committee hearings on your computer (or some other device).  Most committee hearings are in rooms with webcams that you can watch "live" in real time, or later as an archived broadcast. It's all available on the legislature's website.  Also, use these links for House broadcasts and the Senate broadcasts.  If you want to watch after the hearing, look for the "video archives". On the House page it's near the bottom. On the Senate page, near the top.   

 

WHAT TO EXPECT AT THE END OF THE DAY

 

Typically, committees don't vote on a bill the day it is heard. Instead, bills are left "pending" in committee until brought up for a vote at a future committee hearing. A pending bill can be changed behind closed doors between the public hearing and the date of voting. (Doesn't seem fair.) At any time after the public hearing, the committee may vote on the original bill that was heard, or on a substituted version that was not heard. If a substituted version is approved by the committee, the bill number will be preceded by C.S. for "Committee Substitute" when it leaves the committee. The public doesn't have access to the CS version until after the committee approves it.

Unless you're politically well connected - and even then - it can be frustrating for the average citizen to participate in the lawmaking process. Here are three tips:

 

Tip One. Attend committee hearings and be prepared to testify. Live testimony carries more weight than letters, faxes, and emails.

 

Tip Two. Financially support organizations that have lobbyists in Austin. As a member of the organization, you can urge its government relations staff or lobbyist to see your point of view and to share your sense of urgency about supporting or stopping a particular bill.

 

Tip Three. If you don't already know, learn the identity of the State Representative and State Senator who represent the district in which you live. (Use "Who represents me?" on Texas Online's homepage.) Because you are their "constituent", they will be attentive. Find out what committees they serve on, and whether they authored any of the POA bills. Then, communicate - in person, if possible. Otherwise, by phone or letter. Always identify yourself as a constituent. Help them represent you.

The Texas Legislature Online website is the second best thing about our Legislature. (The first being the hiatus between sessions.) TLO is chock full of information and fueled by a powerful search engine that's easy to learn and use. Open 24/7 for free. If you have any interest in legislation, you'll love exploring this amazing website. Look for the "My TLO" tab next to "Home" in the top left corner. Here you can sign up for automatic email alerts of bills that interest you, or topics, or committee meetings.   

If you're Type A about terminology for common interest communities, this report may drive you bonkers. I use HOA and POA interchangeably - and inconsistently - to refer to mandatory membership associations for all types of common interest development - condos, townhomes, subdivisions, masters, mixed-use, and subs.

 

Texas laws, however, do distinguish between condos and non-condos. Condos are subject to Chapter 82 (TUCA) of the Property Code (and maybe also Chapter 81, depending on age).  The non-condos are subject to Chapter 209 of the Property Code, which refers to the developments as "subdivisions."  So, a property is either a condo or a subdivision, and its owners association may be called either HOA or POA or "condo association" or "townhome association" or "neighborhood association" or . . . the options are endless.

 

Speaking of townhomes . . . . contrary to popular belief, Texas law does not recognize townhomes as something other than a condo or subdivision. Townhomes are a style of building that can be condominium in ownership (Chapter 82) or non-condo (Chapter 209).

 

Of course, there's more to it than this windshield tour. But, you get the idea.  Don't bet on what a word means. :-)