Important Reminder about Construction Claims for Builders and Contractors
In light of the recent devastation caused by Hurricane Harvey, we want to remind area builders of the 2011 law that applies to disaster remediation contractors performing work in Texas.
In 2011, wildfires ravaged over 40,000 acres of Texas land located in Bastrop and Grimes Counties. In addition to those wildfires, Texas experiences tornadoes, hail storms, floods and hurricanes on a regular basis. As a result, residential, commercial and industrial properties and structures required construction remediation. While many honest and hardworking Texas construction companies were there to help, some communities were plagued by unscrupulous contractors, referred to as “storm chasers,” who took money up front and failed to perform services as promised. In response to the misdeeds of these storm chasers, the Texas Legislature enacted the Disaster Remediation Contracts Statute which affects contractors who engage in remediation construction projects stemming from a natural disaster.
A new law was passed in 2011 by the Texas Legislature and was included in Chapter 58 of the Texas Business & Commerce Code.
The law applies to disaster remediation contractors, which is identified as those engaged in the removal, cleaning, sanitizing, demolition, reconstruction, or other treatment of improvements to real property performed because of damage or destruction to that property caused by a natural disaster. A natural disaster is defined as widespread or severe damage, injury, or loss of life or property related to any natural cause, including fire, flood, earthquake, wind, storm, or wave action, that results in a disaster declaration by the governor. This means that any construction remediation project related to a natural disaster falls under this new law.
The statute requires any agreement for disaster remediation work be reduced to a written contract. Contracts for disaster remediation projects must contain a disclosure statement with specific language outlining the statute’s prohibitions in boldfaced type of at least 10 point font:
This contract is subject to Chapter 58, Business & Commerce Code. A contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered.
The requirements and legal effects of the statute cannot be waived by any party through contract or other means. Additionally, any violation of the statute is also considered a violation of the Texas Deceptive Trade Practices Act which allows for the recovery of attorneys’ fees and multiplying damages in certain instances.
The law also provides that a contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered. Therefore, a contractor cannot require a down payment, draw or other form of payment until work begins.
The law does not apply to remediation contractors if they maintain a physical business address in the county or a county adjacent to where the work is to be performed for one year prior to the date of contracting. This exception allows “local” companies to continue business as usual. However, the best practice would be to have your contracts and business practices set to comply with this law so that you can be ready to help in the event the next natural disaster is more than a county away. This new law affects all contracts entered into on or after September 1, 2011.