Mandatory County Code Inspections -- Being Outside the City Limits No Longer Enables Faulty Construction

Big changes are in effect for all homebuilders and remodelers who build in the unincorporated areas of the state. As of September 1, 2008, all homes constructed in unincorporated areas, or areas not subject to municipal inspections, must undergo a minimum of three inspections to ensure building code compliance.

Legislation was passed in 2001, making the International Residential Code (“IRC”) the municipal residential building code in the state. Then, in 2003, the Texas Legislature mandated that all homes in the state, including those in the unincorporated areas, be built to IRC standards. Finally, last session saw the passage of legislation requiring that all homes in the unincorporated areas, as well as areas without
municipal inspections, must be inspected for code compliance beginning September of
this year.

A minimum of three inspections will be performed by a third party inspector, or Fee
Inspector, and must occur at the following stages of construction:

1. foundation, prior to the placement of concrete;
2. framing and mechanical systems prior to being covered with sheetrock or other
interior wall covering; and
3. final inspection when the home is completed.

The builder/remodeler is responsible for contracting with the Fee Inspector, which
includes the following pool: (1) a licensed engineer; (2) a registered architect; (3) a professional inspector licensed by the Texas Real Estate Commission—a TREC
inspector; or (4) a third-party inspector approved by the Texas Residential Construction Commission (“TRCC”)—a TRCC code inspector.

It is important to note that the builder/remodeler may use the same or different Fee Inspector for the three required inspections, and that the builder/remodeler, has the ability to hire the Fee Inspector of his choice and is not forced to use any one category of Fee Inspectors.

The TRCC will create a unique numbering system using a builder’s registration number
for all construction subject to the new inspections. This number will be used to track the inspections. The fee inspectors will electronically report the completion of an inspection using the unique number and receive a verification document showing the inspections have been satisfactorily completed. The purpose of this document is to show that the home has passed these required inspections so as not to hold up closings.

Within 30 days thereafter of the registration of the home, the homeowner and builder will receive an official "Certificate of Completion."

For a remodel, the inspections will only be required if necessary based on the scope of work. The applicable building code will be the building code in effect for the area, as currently mandated by the TRCC Act. The applicable building code for residential construction located in an unincorporated area not in a city’s ETJ is the IRC as adopted and amended by the county seat of the county in which the construction is located. If the county seat has not adopted and/or amended the IRC, the applicable building code is the IRC as it existed on May 1, 2001. The applicable building codes as described above do not constitute a change in the rules or the statute.

Inspection records and documents will not be turned over to the TRCC by the inspector or builder. However, the TRCC will conduct random audits of the inspection records, and builders must maintain those records for a minimum of five years.

After publishing the proposed rules on the subject and making some amendments to them
based on formal Texas Association of Builders (“TAB”) comments, the TRCC has
adopted the final Fee Inspector rules. To see a copy of the formal rules, please visit the Commission’s website at: http://www.trcc.state.tx.us/Inspectors/CountyInspections.asp

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.

12 Ways for Homeowners to Keep Contractors, Builders & Remodelers Honest

There are presently thousands of complaints by homeowners against contractors, builders and remodelers in Texas. While many of these disputes will be resolved through the Texas Residential Construction Commission, hunderds will end-up in Court. Here are 7 suggestions from a Construction Lawyer to make sure that disputes have a chance of being averted:

1. Ensure that your prospective builder or remodeler is registered with the Texas Residential Construction Commission BEFORE hiring him or her. The check is simple, and can be performed online at the TRCC website. Tell him that you will insist that YOUR PROJECT be registered with TRCC.

2. Before hiring a builder, ask for at least 3 recent references from satisfied customers, and follow-up on those references.

3. Make sure that the Residential Construction Contract is Written, and provides specific deadlines, specifications, and payment provisions. The PLANS & SPECIFICATIONS should be attached as an Exhibit to the Contract.

4. Make sure that your builder is in solid financial condition -- ask for a letter of good standing from his or her bank. Many builders, while seemingly well-to-do, are in financial dire straits.

5. Ask for copies of your contractor's "BUILDER's RISK INSURANCE POLICY." If he doesn't have one, insist that he obtain such coverage BEFORE beginning your project.

6. Obtain from the builder a list of all suppliers and subcontractors (including names, telephone numbers and address) who will perform work or supply materials for your residence. You have a right to know who expects to be paid from your project, and who will enter your home.

7. Insist that your construction lender REQUIRES your signature and approval of all draw requests that the builder or remodeler makes against your construction or home improvement loan -- do NOT rely on bank inspectors. No money should be disbursed WITHOUT YOUR WRITTEN APPROVAL.

8. SPEND AS MUCH TIME AS YOU CAN ON THE JOBSITE! Watch the painters paint and the framers frame. Work will be perform3ed more satisfactorily if you are watching, and you can immediately address discrepancies or deviations from the plans.

9. Each time the builder or remodeler takes a draw, DEMAND that he has all suppliers and subcontractors sign PAYMENT AFFIDAVITS AND/OR LIEN RELEASES. You must, at all costs, avoid situations where a builder draws payment for a subcontractor's work, but fails to pay that subcontractor.

10. DO NOT RELEASE THE "RETAINAGE" or "final 10%" of the construction loan proceeds until FINAL CLOSING -- which should take place at a title company. Unless and until you obtain a "COMPLETION AFFIDAVIT," the retainage should not be released.


Following these POINTERS may help you avoid conflicts with your builder or remodeler. If, despite your best efforts, a dispute cannot be resolved, contact Attorney Trey Wilson for assistance in resolving or litigating construction disputes.