Welcome to Homeowners of Texas 

UNDERDOG:  The legislative battle of HOT v. the Builder’s lobby was like Underdog v. Dr. Simon Bar Sinister, who put the “mad” in mad science (or “bad” in bad legislation). 

Evil forces wanted to save the builder-protection agency. They concocted a bill to extend the TRCC for 6 more years, adding provisions that “looked” like new consumer protections, but the bill was actually very bad for consumers.

Texas Senate votes to disband homebuilding agency

As the underdog in a fight against overwhelming odds, HOT stood firm in opposing the TRCC Sunset bill. Rather than truly reform the state agency, HB 2295 was deceptively written to provide more protection for builders. It would have caused more harm to consumers. But thankfully we can enjoy a well deserved TRCC sunset.

HOT effectively lobbied against the Texas Association of Builders and their allies. We are disappointed, however, that we also had to battle two consumer groups. These two groups reversed course, partnered with the homebuilders, supported their legislation early in the legislative process, and functioned as AstroTurf. For whatever reason, they lobbied for a 6-year extension of the TRCC, an agency that worked against consumer interests, while claiming to represent consumers.   

HOT proposed many of the key consumer-protection amendments adopted by the House that the builders wouldn’t accept, and we worked hard to garner the necessary Senate votes to prevent suspension of the rules that would have allowed a Senate floor vote. So instead of passing a Sunset bill to keep the TRCC, the senators agreed to disband the agency.

HOT also proposed an alternative in HB 2243 to (1) abolish the TRCC and (2) replace builder registration with licensing through the TDLR (Texas Department of Licensing & Regulation). The bill was modeled after the 28 states that already regulate the homebuilding industry through contractor licensing. It would have addressed the cause of construction disputes by preventing bad builders from operating and by keeping the foxes out of the regulatory hen house. But HB 2243 never reached a floor vote due to a parliamentary error.

Press coverage and spin

• Consolidated News Coverage 
• 05/28/09 HOT Press Release: HOT succeeds against all odds in campaign to abolish the TRCC  
• 05/08/09 HOT Press Release: Homeowners Group Helps Reform State Agency  
• Rep. Ruth McClendon's spin on her TRCC Sunset Bill  
• Home Builders' spin on McClendon's TRCC Sunset Bill 

TRCC announces its Sunset plan

The State's sunset provisions allow for a 1-year wind-down process before all assets must be returned, offices vacated, data archived, and employees dismissed or reassigned. At its 6/11/09 meeting, the TRCC announced this general timeline and action plan related to the implementation of the sunset:

• The commission will not accept new inspection requests after 8/31/09;  
• Inspection requests will be handled as quickly as possible following commission rules, policies and procedures;  
• New homes and projects completed by 8/31/09 must be registered;  
• New builder registrations and renewals will be accepted through 8/31/09 and will be prorated; and  
• Ombudsmen will process complaints and post-inspection actions through 8/31/10.  

Here's why the TRCC was so bad

Without the TRCC, we revert to RCLA and DTPA

By disbanding the TRCC, Texas lawmakers removed a costly and time consuming state inspection process (SIRP) that stood between homeowners and dispute resolution. After the agency sunsets, homeowners who can't get contractors to fix warranty items can take them into arbitration or a civil suit. The choice of arbitration or civil suit depends on restrictions in contracts and warranty agreements, but consumers are usually forced into binding arbitration, which almost always favors the builders.

Previous laws governing construction disputes will remain in effect after the TRCC sunset. They include RCLA (Residential Construction Liability Act) and DPTA (Deceptive Trade Practices Act). That means the legal deck is still stacked in favor of builders, and homeowners will still face significant obstacles trying to be made whole. It also means our fight for Texas homeowners will continue with your support.

This paper by Cheryl Turner explains the complex history of RCLA, which insulates contractors and warranty companies from the consumer protections of DTPA. According to Turner, the special interest RCLA legislation was proposed "to encourage the resolution of construction disputes and protect and reward responsive contractors who timely fixed their mistakes." Its objectives, however, "sometimes come at an extraordinary cost to the homeowner." RCLA gives contractors an opportunity to cure construction defects before litigation, caps the amount of damages, and limits the classes of damages that can be awarded. Because of amendments added between 1989 and 2003, these builder protections now apply even if they "don't make an offer to repair, fail to make a reasonable offer, or fail to perform the agreed-upon repairs in a good and workmanlike manner."

LEGISLATOR "Thank You"

Thanks for prioritizing your support of the public over that of industry and voting to disband the TRCC. Please continue to explore this site and follow us on Twitter & Facebook. We will be making major changes to the site over the next week and hope that you continue to rely on us as a resource. The Legislature tab features information specific to homebuilding issues in this session. Our supporting material includes:

• www.trcc.us is a mini-site specific to TRCC Sunset legislation moving from the House to the Senate 
• Open Letter to Texas & Federal lawmakers 
• LegislativeFlyer0_TRCC_SunsetBill.pdf - The ideal candidate for a final sunset 
• LegislativeFlyer1_TopPriority.pdf describes the TRCC sunset priority and the decision options. 
• LegislativeFlyer2_LicensingNewUsed.pdf compares licensing & registration and consumer protections for buying existing homes versus new ones. 
• LegislativeFlyer3_GlobalCollapse.pdf describes the role of Texas homebuilding in the economic collapse. 
• SoilIssues.pdf is an easy to read white paper that relates expansive clay soils to foundation failures. 

Thanks also to the many Texas homeowners who testified and shared their personal stories with these legislators.

What's NEXT for HOT?

Our recent success as the underdog who helped take down the TRCC has earned the respect of many who didn't think we had a chance. With increased support from homeowners and other stakeholders, HOT is excited about the potential for even more meaningful reforms that further improve homebuilding, the market for new homes, and economic development in Texas, all while protecting consumers from shoddy construction and business practices. Our legislative agendas for Texas and the Nation (see Legislature tab at left) will be updated and prioritized and will likely address:

• Fix housing first - by regulating the unregulated and restoring fairness for homeowners
• Provide at least the same level of consumer protection for buying new homes as existing ones 
• Improve construction quality and the cause of disputes through contractor education & licensing, enforcement, the latest building codes, and insurance bonding 
• Discourage builders from blatant disregard of codes and laws by restoring the concept of punitive damages 
• Protect a homeowner's constitutional right to a jury trial as an alternative to forced arbitration 
• Establish transparency and judicial review of arbitration proceedings to ensure they are just and unbiased
• Give courts & arbiters the ability to grant emotional stress awards to homeowners who suffered greatly 
• Allow homeowners to share legal fees and risks through class actions and recover attorney fees 
• Replace illusory warranties with insurance-backed alternatives that provide real consumer protection 
• Repeal the Brownfields Act, which allows building on contaminated lands without disclosure or liability 
• Prohibit or regulate the vertical integration of builder and finance companies, the offloading of risk by selling mortgaged-backed securities, and the cozy relationships between builders, inspectors, appraisers, arbiters, suppliers, and others in the value chain.  

CONSUMER Guidance

Over the next few weeks, our general counsel will help us draft more detailed guidance. For now, consider this:

Protect your rights

Arbitration - To avoid being forced into binding arbitration, get legal representation up front, before signing anything! Many Texas builders and warranty companies use non-negotiable contracts that require binding arbitration to settle disputes, thus depriving you of your Constitutional right to a civil trial. Homeowners forced into arbitration find little satisfaction. To learn more, read Home Court Advantage, an excellent paper by Public Citizen, or see this NPR report on arbitration in a rape case. Here's our summary:

• Arbitration is a secretive, kangaroo court style adjudication proceeding that often costs far more than a civil suit, carries more risk, and is subject to minimal oversight or judicial review.
• Your contract and warranty agreement define your rights and almost always require binding arbitration that favors your contractor because arbitration firms rely on them for their business.
• Builders often present buyers with an extended home warranty as a Thank-You gift at closing, but the real purpose is to offload their warranty obligations and force you into binding arbitration.
• We believe the industry-wide practice of including binding arbitration clauses in non-negotiable contracts is a restraint of trade when buyers have no choice, such as in The Woodlands, a Houston suburb where all 10 builders do this.

TRCC - Ask your attorney about the statutes of limitations concerning your claim against a builder. You will likely still be required to go through the SIRP (state inspection and resolution process) before preceding with other legal options, and skipping this step can mean giving up those options. The TRCC will continue accepting inspection requests up until 8/31/09. After that you won't have to worry about it and can proceed with other options.

Can't Get a Lawyer?

Most attorneys specializing in construction law represent defendants, i.e. builders and developers. Finding one to represent consumers on contingency can be difficult since Texas laws remain stacked against homeowners. Even with the TRCC abolished, it may take a while for attorneys to resume taking plaintiff's cases again. This still leaves families with mediocre or no legal help.

RCLA (the Residential Construction Liability Act), which remains in effect, still prevents homeowners from recovering attorney fees, compensation for emotional distress, or punitive damages, and it prohibits class-action suits. That means individual homeowners are often left to do battle themselves, often facing the legal departments of huge corporations intent on protecting themselves by wearing you down.

Even if your sales contract does not restrict them to binding arbitration and you are able to win in a jury trial and obtain a judgment, too often you may not be able to collect a dime of what’s owed. That’s because builders can hide assets in their own homestead or among multiple corporations or file for bankruptcy protection, all while also shielding their poor performance history from consumers researching builders before buying a home. We need criminal penalties for criminal behavior.

Families that bought new but defective homes are up against the weight and lobbying power of the $35 Billion Texas homebuilding industry. Still facing overwhelming odds, they need professional help and sympathetic legislators and consumer groups. That's because builder-sponsored legislation created laws that still stand between families in need and solutions that make them whole.

Finding trustworthy Contractors

Yes, there are many good and reputable home builders and contractors to work with, and we met with many of them at a recent Texas Builder Association Rally Day at the Capitol in Austin. (See our 1Q'09 Newsletter) Those good builders shared our concern that irresponsible builders have been allowed to damage the reputation of good builders and the entire home building industry. This has driven up the cost of builders’ insurance, housing, and homeowners’ insurance, which remains the highest in the country.

Bad builders create claims and lawsuits, fees for attorneys and expert witnesses, hidden housing costs such as unnecessary repairs, and loss of equity. Less obvious are the lost wages to take off work and deal with construction disputes and liens on property that can result when builders don’t pay their subcontractors. Worse are the numerous foreclosures and financially ruined homeowners, the downward spiral of home values in entire neighborhoods, the tax base that funds public safety and our kids' education, and factors that directly contributed to a global economic collapse. 

How can you know if a builder/remodeler is qualified and trustworthy? Clearly, it's not enough to just ask them. Personal references can help but aren't reliable if contractors use one good job to scam others. BBB (The Better Business Bureau) tracks complaints and has a dispute mediation process, but it has some of its own flaws since contractors pay to be included. Angie's List is a good alternative since companies are only listed if someone submits a recommendation or complaint, but it's a subscription-based service and has far more information on contractors than for builders. HADD.com and HOBB.org have good collections of homeowners complaint sites that can give you insight into a builder's reputation. Or... visit our consumer links page.

How can you hold builders and contractors accountable when a few Texas builders wrote the rules governing their whole industry? That's not accountability. It's putting the most notorious foxes in charge of designing the hen house. And it's what HOT is trying to fix. Let us know if you'd like to help.

Did you know?

• Texans have more consumer protections when buying a new or used car than when building a new home.  
• Bad building practices are as devastating as bad lending practices, and unaddressed defects have decimated home values in entire communities, like in HuttoParke. 
• You personally need a license to drive a car or catch a fish, and the person who cuts your hair or tows your car needs a license, but the one who builds you home doesn't, even though it's your biggest investment. 
• Licensing elevates professions, protects the public, and improves the economy. That's why we introduced HB 2243 to abolish the TRCC and replace builder registration with licensing under the unbiased TDLR (Texas Department of Licensing & Regulation), which has 100 years of experience. Unfortunately, HB 2243 got caught up in a parliamentary error and did not get a vote on the House floor. 

BUILDER Advice

HOT proudly presents this Business Week book excerpt, which pinpoints the insidious (and often invisible) problems that send great companies, industries or nations crashing to earth. It seems to explain the decline of the Texas home building industry and the institutions (companies and political system) that fueled it. Here are some highlights.

Based on the article, HOT offers this advice for the homebuilding industry:

·       Take this economic downturn and low market demand as an opportunity to retool your organization's skills and culture. Work to develop construction trade schools to feed the pipeline with qualified workers.

·        Become a better citizen and work extra hard to repair your industry's reputation, which was severely damaged by the strong-arm tactics of your lobbyists and attorneys and the TRCC. Whether justified or not, homeowners and many legislators have come to hate builders because of those tactics.

·       Rather than spending millions on lobbyists and attorneys and fighting the real advocacy groups like HOT, work with us and other stakeholders to improve building standards and the homebuilding profession so buyers feel as safe buying new homes versus new ones.

·       Rather than being forced to compete with shoddy builders on price, embrace effective licensing and regulatory oversight to weed them out and keep them out.

·       Rather than dismissing customer complaints as frivolous, listen in an unfiltered and unemotional way to what they're trying to tell you. With this information, you can learn from any past mistakes, understand changing market needs, and work toward building better homes with more value.

·        Rather than shielding yourself from customer lawsuits, discover and fix their underlying cause. Rely on insurance, including performance bonds for each home, to help mitigate risks. And work with the insurance industry to lower their risks too, because that will help lower your rates.

·       Know that past success is one of the biggest impediments to future growth. It can reinforce a traditional way of doing things.

·        Respond to this article with your own advice for other builders, because "a rising tide floats all ships."

ABOUT OUR ORGANIZATION: Homeowners of Texas, Inc. (HOT) is a non-profit corporation, formed in 2008 to enhance the homebuilding industry and restore consumer trust. We are working with homeowners, policy makers, and other stakeholders to make builders accountable to homeowners. Our priority in this 2009 legislative session is to protect homeowners from the devastating effects of substandard construction by abolishing the TRCC and ensuring that new homes and remodeling projects are properly engineered and built with licensed skills and regulatory oversight.