THE TEXAS RESIDENTIAL CONSTRUCTION COMMISSION ACT:

On December 18, 2003, the TRCC adopted new rules concerning the registration of new homes, material improvements to existing homes and certain interior renovations exceeding $20,000. As of January 1, 2004, homebuilders are required to register homes with the TRCC and pay a registration fee per home of $30. For new homes, a homebuilder will have up to 15 days following the end of the month in which the title transferred to register the new home and submit the required fee. For material improvements to existing homes and certain interior renovations exceeding $20,000, a homebuilder will have up to 15 days following the earlier of the date when the agreement to do the work is signed or the date the work commences. Home registration forms are accessible in PDF format on the commission’s website www.trcc.state.tx.us; can be obtained by calling the TRCC at 877-651-TRCC; or can be picked up in person at the TRCC office located at 311 E. 14th Street, Austin, Texas 78711. If a homebuilder registers with the TRCC less than 60 days after the required filing period, the homebuilder may still register the home and pay a late penalty of two times the established fee, which is $60. If a homebuilder fails to register within those 60 days after the original 15 day period, the homebuilder will be subject to an administrative penalty.

For the first time in the State of Texas, residential homebuilders must register with the commission. There is a TRCC homebuilder registration form that can be obtained from the TRCC as set forth above in the home registration section. The form must be completed and sent to the TRCC along with a filing fee of $125. The original registration should have been completed and sent in to the TRCC by March 1, 2004. The TRCC will issue to each homebuilder that meets the TRCC requirements a certificate of registration which is valid for 24 months. All applicants must meet the minimum requirements, which include being at least 18 years old at the time of the application and a citizen of the United States or a lawfully admitted alien, as well as satisfy the TRCC that the applicant is honest, trustworthy and has integrity. The rules also require each applicant to disclose past criminal history for felonies and misdemeanor crimes involving moral turpitude. Significantly, if a homebuilder does not pay a judgment or an arbitration award the TRCC has stated that the homebuilder can have his or her registration revoked and will no longer legally be able to build homes in Texas. The TRCC has also indicated that for companies it will search the names of the owners and if an owner has not paid a judgment or arbitration award the company can have its registration revoked. This is intended to prevent a homebuilder from changing the name of his or her company or joining another company after the non-payment of a judgment or arbitration award in an effort to keep in place a certificate of registration. Homebuilders who fail to register with the TRCC are not legally entitled to build homes in Texas and if they do so they will be subject to serious administrative penalties.

The TRCC is in the process of qualifying and registering inspectors with experience on issues involving workmanship and materials and inspectors with experience on issues involving a structural matter. An individual interested in registering with the TRCC as an inspector must submit a completed application form to the TRCC and pay a $50 fee. The forms are available from the TRCC as set forth above in the home registration section. The inspectors will take part in the state sponsored inspection and dispute resolution process.

The TRCC is also in the process of qualifying and registering residential construction arbitrators. Individuals interested in registering with the TRCC as an arbitrator must submit a completed application form to the TRCC and pay a $50 fee. The forms are available from the TRCC as set forth above in the home registration section. The arbitrators will take part in the state sponsored inspection and dispute resolution process.

State Sponsored Inspection and Dispute Resolution Process (“SIRP”)

A homeowner can submit a claim against a homebuilder to the TRCC to be resolved under SIRP. The TRCC will assign an inspector and an arbitrator to the claim. The inspector will review the claim and inspect the home with respect to the alleged defects complained about by the homeowner. The inspector will issue a report agreeing with or disagreeing with the claimed defects in construction reported by the homeowner. If the building inspector’s report concludes that there are defects in the construction of the home, the homebuilder may make a written offer of settlement to the homeowner to repair the construction defects found in the inspector’s report. If no settlement can be reached between the homeowner and homebuilder based upon the inspector’s report and an offer of settlement, then an arbitration can be initiated. In the arbitration, a rebuttable presumption will be made in favor of the findings in the inspector’s report.