The Legal Side of Storm Recovery

Don't mess with Texas. Every state has its own peculiar set of laws and as a state that has suffered several devastating natural disasters, the Lone Star State is poised to nail contractors who cross the lines. Texas is particularly concerned about contractors that appear to take unfair advantage of a disaster, especially if they are not local. One set of rules applies to contractors who have a permanent business location in the county where the work will be performed, or in the adjacent county. A different set of rules applies to contractors who are not from one of those two counties, even if they are located in Texas.

A non-local contractor is prohibited from collecting advances or deposits, and cannot collect anything before work begins, whether the work is residential or commercial. After work begins, the non-local contractor cannot collect any amount in excess of the value of materials delivered and work actually performed (past tense). Non-local contractors must include certain verbiage in their contracts in compliance with the Texas Business and Commerce Code. Drafting contracts requires special skill and training. Homemade contracts invite trouble.

Like many states, Texas has a three-day right of rescission. The buyer can cancel the transaction at any time prior to midnight of the third business day after the date of the transaction. The contract must include a specific statutory disclosure of the right to cancel. The contractor must also provide two copies of a Notice of Cancellation for the customer's use in the event the customer elects to cancel. The disclosure and the Notice must follow the exact form set out in Texas statutes. For other important information, visit the Texas Attorney General’s Web site: http://bit.ly/2ePThqr.

Unless the building owner has waived the right to the List of Subcontractors and Suppliers in writing, the original contractor on a project for the construction of improvements in Texas under a residential construction contract must provide the owner a written list that identifies by name, address, and telephone number for each subcontractor and supplier the contractor intends to use. The Contractor must also provide an updated List of Subcontractors and Suppliers not later than the 15th day after the date a subcontractor or supplier is added or deleted. The right to these lists can be waived if a certain procedure is followed. If the owner refuses to waive the right, and the contractor is unwilling to proceed with the project without the waiver, then the contractor must decline the project.

The procedure for reserving lien rights varies depending on whether the property meets Texas' legal definition of a "homestead," which is based on whether the property is urban or rural, and its size. Texas law states that to fix a lien on a homestead, the person who is to furnish material or perform labor and the owner must execute a written contract setting forth the terms of the agreement. The contract must be executed before the material is furnished or the labor is performed. If the owner is married, the contract must be signed by both spouses. If the contract is made by an original contractor, the contract inures to the benefit of all persons who labor or furnish material for the original contractor. The contract must be filed with the county clerk of the county in which the homestead is located. The county clerk shall record the contract in records kept for that purpose.

Texas has other requirements for disclosures and notices which an experienced lawyer can explain. Consult with experienced legal counsel before executing contracts and stay abreast of licensing requirements and new developments in the law.

These statements are for general information and are not intended to be legal advice. Each case turns on its own facts, which must be individually evaluated by a licensed attorney. Ed Cross, the "Restoration Lawyer," provides products to contractors nationwide and can be reached at (760) 773-4002 or EdCross@EdCross.com