Sec. 27.004.  NOTICE AND OFFER OF SETTLEMENT.  (a)  Before the 60th day preceding the date a claimant seeking from a contractor damages or other relief arising from a construction defect initiates an action, the claimant shall give written notice by certified mail, return receipt requested, to the contractor, at the contractor's last known address, specifying in reasonable detail the construction defects that are the subject of the complaint. The claimant shall provide to the contractor any evidence that depicts the nature and cause of the defect and the nature and extent of repairs necessary to remedy the defect, including any expert reports, photographs, and video or audio recordings, if that evidence would be discoverable under Rule 192, Texas Rules of Civil Procedure.  During the 35-day period after the date the contractor receives the notice, and on the contractor's written request, the contractor shall be given a reasonable opportunity to inspect and have inspected the property that is the subject of the complaint to determine the nature and cause of the defect and the nature and extent of repairs necessary to remedy the defect.  To the extent requested, the contractor shall be given the opportunity to conduct up to three inspections during the 35-day period after the date the contractor receives the notice and during any extension of that inspection period provided by law or as otherwise agreed to by the parties. The contractor may take reasonable steps to document the defect. 
(b)  Not later than the 60th day after the date the contractor receives the notice under this section, the contractor may make a written offer of settlement to the claimant.  The offer must be sent to the claimant at the claimant's last known address or to the claimant's attorney by certified mail, return receipt requested.  The offer may include either an agreement by the contractor to repair or to have repaired by an independent contractor partially or totally at the contractor's expense or at a reduced rate to the claimant any construction defect described in the notice and shall describe in reasonable detail the kind of repairs which will be made and the time for completion of the repairs if more than 60 days.  The repairs shall be made not later than the 60th day after the date the contractor receives written notice of acceptance of the settlement offer, unless completion is delayed by the claimant or by other events beyond the control of the contractor.  If a contractor makes a written offer of settlement that the claimant considers to be unreasonable:
(1)  on or before the 25th day after the date the claimant receives the offer, the claimant shall advise the contractor in writing and in reasonable detail of the reasons why the claimant considers the offer unreasonable; and
(2)  not later than the 10th day after the date the contractor receives notice under Subdivision (1), the contractor may make a supplemental written offer of settlement to the claimant by sending the offer to the claimant or the claimant's attorney.
(c)  If the giving of the notice under Subsections (a) and (b) within the period prescribed by those subsections is impracticable because of the necessity of initiating an action at an earlier date to prevent expiration of the statute of limitations or if the complaint is asserted as a counterclaim, the notice is not required.  However, the action or counterclaim shall specify in reasonable detail each construction defect that is the subject of the complaint.  The inspection provided for by Subsection (a) may be made not later than the 75th day after the date of service of the suit, request for arbitration, or counterclaim on the contractor, and the offer provided for by Subsection (b) may be made not later than the 60th day after the date of service.  If, while an action subject to this chapter is pending, the statute of limitations for the cause of action would have expired and it is determined that the provisions of Subsection (a) were not properly followed, the action shall be abated to allow compliance with Subsections (a) and (b).
(d)  The court or arbitration tribunal shall abate an action governed by this chapter if Subsection (c) does not apply and the court or tribunal, after a hearing, finds that the contractor is entitled to abatement because the claimant failed to provide the notice or failed to give the contractor a reasonable opportunity to inspect the property as required by Subsection (a) or failed to follow the procedures specified by Subsection (b).  An action is automatically abated without the order of the court or tribunal beginning on the 11th day after the date a motion to abate is filed if the motion:
(1)  is verified and alleges that the person against whom the action is pending did not receive the written notice required by Subsection (a), the person against whom the action is pending was not given a reasonable opportunity to inspect the property as required by Subsection (a), or the claimant failed to follow the procedures specified by Subsection (b); and
(2)  is not controverted by an affidavit filed by the claimant before the 11th day after the date on which the motion to abate is filed.
(e)  If a claimant rejects a reasonable offer made under Subsection (b) or does not permit the contractor or independent contractor a reasonable opportunity to inspect or repair the defect pursuant to an accepted offer of settlement, the claimant:
(1)  may not recover an amount in excess of:
(A)  the fair market value of the contractor's last offer of settlement under Subsection (b);  or
(B)  the amount of a reasonable monetary settlement or purchase offer made under Subsection (n);  and
(2)  may recover only the amount of reasonable and necessary costs and attorney's fees as prescribed by Rule 1.04, Texas Disciplinary Rules of Professional Conduct, incurred before the offer was rejected or considered rejected.
(f)  If a contractor fails to make a reasonable offer under Subsection (b), the limitations on damages provided for in Subsection (e) shall not apply.
(g)  Except as provided by Subsection (e), in an action subject to this chapter the claimant may recover only the following economic damages proximately caused by a construction defect:
(1)  the reasonable cost of repairs necessary to cure any construction defect;
(2)  the reasonable and necessary cost for the replacement or repair of any damaged goods in the residence;
(3)  reasonable and necessary engineering and consulting fees;
(4)  the reasonable expenses of temporary housing reasonably necessary during the repair period;
(5)  the reduction in current market value, if any, after the construction defect is repaired if the construction defect is a structural failure;
(6)  reasonable and necessary attorney's fees; and
(7)  reasonable and necessary arbitration filing fees and the claimant's share of arbitrator compensation.
(g-1)  The court or arbitration tribunal may order that an offer made by the contractor after the time prescribed is considered timely for purposes of Subsection (b) or (c), as applicable, if the contractor is prejudiced in the contractor's opportunity to inspect as provided for by Subsection (a) or (c) or make an offer provided for by Subsection (b) or (c):
(1)  because the claimant:
(A)  failed to provide the contractor evidence available and in the claimant's possession, custody, or control at the time of the original notice depicting the nature and cause of the defect and the nature and extent of repairs necessary to remedy the defect, including reports, photographs, videos, or any other evidence; or
(B)  amended a claim to add a new alleged defect; or
(2)  due to events beyond the contractor's control.
(h)  A homeowner and a contractor may agree in writing to extend any time period described in this chapter.
(i)  An offer of settlement made under this section that is not accepted before the 25th day after the date the offer is received by the claimant is considered rejected.
(j)  An affidavit certifying rejection of a settlement offer under this section may be filed with the court or arbitration tribunal.  The trier of fact shall determine the reasonableness of a final offer of settlement made under this section.
(k)  A contractor who makes or provides for repairs under this section is entitled to take reasonable steps to document the repair and to have it inspected.
(l)  Repealed by Acts 2023, 88th Leg., R.S., Ch. 291 (S.B. 1768), Sec. 13(3), eff. May 29, 2023, and Ch. 441 (H.B. 2022), Sec. 8(1), eff. September 1, 2023.
(m)  Notwithstanding Subsections (a), (b), and (c), a contractor who receives written notice of a construction defect resulting from work performed by the contractor or an agent, employee, or subcontractor of the contractor and creating an imminent threat to the health or safety of the inhabitants of the residence shall take reasonable steps to cure the defect as soon as practicable.  If the contractor fails to cure the defect in a reasonable time, the owner of the residence may have the defect cured and may recover from the contractor the reasonable cost of the repairs plus attorney's fees and costs in addition to any other damages recoverable under any law not inconsistent with the provisions of this chapter.
(n)  This section does not preclude a contractor from making a monetary settlement offer or an offer to purchase the residence.
(o)  A notice and response letter prescribed by this chapter must be sent by certified mail, return receipt requested, to the last known address of the recipient.  If previously disclosed in writing that the recipient of a notice or response letter is represented by an attorney, the letter shall be sent to the recipient's attorney in accordance with Rule 21a, Texas Rules of Civil Procedure.
(p)  If the contractor provides written notice of a claim for damages arising from a construction defect to a subcontractor, the contractor retains all rights of contribution from the subcontractor if the contractor settles the claim with the claimant.
(q)  If a contractor refuses to initiate repairs under an accepted offer made under this section, the limitations on damages provided for in this section shall not apply.
Added by Acts 1989, 71st Leg., ch. 1072, Sec. 1, eff. Sept. 1, 1989.  Amended by Acts 1993, 73rd Leg., ch. 797, Sec. 5, eff. Aug. 30, 1993;  Acts 1995, 74th Leg., ch. 414, Sec. 10, eff. Sept. 1, 1995;  Acts 1999, 76th Leg., ch. 189, Sec. 5, eff. Sept. 1, 1999;  Acts 2003, 78th Leg., ch. 458, Sec. 2.04, eff. Sept. 1, 2003.
Amended by: 
Acts 2007, 80th Leg., R.S., Ch. 843 (H.B. 1038), Sec. 3, eff. September 1, 2007.
Acts 2023, 88th Leg., R.S., Ch. 291 (S.B. 1768), Sec. 4, eff. May 29, 2023.
Acts 2023, 88th Leg., R.S., Ch. 291 (S.B. 1768), Sec. 13(3), eff. May 29, 2023.
Acts 2023, 88th Leg., R.S., Ch. 441 (H.B. 2022), Sec. 4, eff. September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 441 (H.B. 2022), Sec. 8(1), eff. September 1, 2023.