Excerpts from the August 2008 Staff Report of the Texas Sunset Commission on the Continued Viability of the Texas Residential Construction Commission

NOTE: In 1977, the Texas Legislature created the Sunset Advisory Commission to identify and eliminate waste, duplication, and inefficiency in government agencies. The 12-member Commission is a legislative body that reviews the policies and programs of more than 150 government agencies every 12 years. The Commission questions the need for each agency, looks for potential duplication of other public services or programs, and considers new and innovative changes to improve each agency’s operations and activities. The Commission seeks public input through hearings on every agency under Sunset review and recommends actions on each agency to the full Legislature. In most cases, agencies under Sunset review are automatically abolished unless legislation is enacted to continue them.

The following are DIRECT EXCERPTS from the Sunset Commission's Staff Report on the TRCC:

Summary
Current regulation of the residential construction industry is fundamentally flawed and does more harm than good.

Ultimately, the Legislature will need to decide the approach for overseeing this industry. This report presents an opportunity to have a more comprehensive discussion of dispute resolution and legal processes available to homeowners and the regulation of the residential construction industry as a whole.

"The Texas Residential Construction Commission was never meant to be a true regulatory agency with a clear mission of protecting the public. It has elements of a regulatory agency in its registration of homebuilders, but this program is not designed to ensure that only qualified persons can enter the field – the way true regulatory agencies work – and so does not work to prevent problems from occurring. The Commission also has tools for taking enforcement action, but the ease of satisfying the registration requirements and significant gaps in who must be registered make it easy for even problem builders to stay in business. The Commission also administers the State Inspection Process, designed to resolve disputes between homeowners and builders before either party may pursue legal action. Th is lengthy and sometimes difficult process has been a source of frustration for homeowners trying to address defects with their homes. Despite changes last Session ostensibly to strengthen the process by making builders subject to new penalties if they refuse to off er repair of a confirmed defect, the Commission still has no real power to require builders to make needed repairs. Because homeowners must submit to this process before they may seek remedies in court, those who fail to satisfy its requirements either out of confusion or frustration lose their access to court. No other regulatory agency has a program with such a potentially devastating effect on consumers’ ability to seek their own remedies.

The cumulative impact of these programs is a greater lack of trust than is seen
with other regulatory agencies. People do not trust the regulatory processes to protect them from unqualified builders who should not be in business. Homeowners do not trust the State Inspection Process to help fix defects in their houses. When confronted with the daunting issues involved in controlling such a large, important, and complex field as residential construction, Sunset staff did not trust that the commitment exists to establish the true regulation needed for the protection of the public.

In its review of the Texas Residential Construction Commission, Sunset staff concluded that anything short of a true regulatory program does more harm than good, and should be abolished. Despite recent improvements in the State Inspection Process regarding satisfactory offers of repair, the process is still ineffective and likewise needs to be abolished. The Commission cannot require needed repairs, and the Process potentially threatens the Commission’s ability to objectively enforce regulations. Although agency staff work diligently to implement regulations and help consumers navigate the various processes for redressing complaints, good intentions are not a substitute for having adequate statutory tools.

Issue and Recommendation

Issue 1
The Texas Residential Construction Commission Fails to Provide Meaningful Oversight and Public Protection Because of Fundamental Structural Flaws in the Current Regulatory Approach.

Key Recommendation

Abolish the Texas Residential Construction Commission and repeal the Texas Residential Construction Commission Act.

Key Findings􀂋 The Legislature created the Texas Residential Construction Commission to be a different type of regulatory agency – providing both industry oversight and an inspection service.

􀂋 Registration does not provide an effective mechanism for adequately protecting the public and regulating the residential construction industry.

􀂋 The State Inspection Process requires a heavy investment of resources and is ineffective in requiring meaningful results.

􀂋 Other agency functions do not add value, distract from the Commission’s main duties, and confuse many homeowners.

􀂋 The overall regulatory scheme for residential construction has broad impacts beyond the agency’s purview, leading to considerable consumer distrust.

􀂋 While most other states regulate builders, the majority do so with more rigorous licensing programs.

􀂋 Fundamental flaws with current industry regulations and the expansion of regulation needed to fix them make it difficult to justify either continuing down the current path or overhauling the State’s approach.

Conclusion
From its inception, the Texas Residential Construction Commission has received criticism of its ability to eff ectively oversee builders and protect Texans from poor quality construction. Although the Legislature recently listened to these concerns and made significant changes to the Commission and its enforcement abilities, these eff orts only mask fundamental flaws in the State’s current approach to industry regulation. To fix these structural flaws would require an expansion of industry regulation that Sunset staff concluded cannot be accomplished in the near future. Without true regulation designed to ensure public protection, Texans are better served without the Texas Residential Construction Commission.

San Antonio Attorney Trey Wilson has significant experience in residential construction claims, and the Texas Residential Construction Commission SIRP and complaint processes. He regularly represents owners in claims against registered builders. Trey Wilson may be contacted at www.sa-law.com or 210/223-4100.