The Texas Residential Construction Liability Act

The Residential Construction Liability Act, often called the RCLA, is found in Chapter 27 of the Texas Property Code. At a broad level, it provides a statutory framework for many residential construction disputes involving alleged construction defects. The Act does not create a stand-alone cause of action by itself. Instead, it affects how certain claims are handled, especially before suit or arbitration begins, and it can affect recoverable damages, available defenses, and the overall posture of the dispute. 

One of the most important features of the RCLA is that it is designed to encourage pre-suit resolution. In many situations, a claimant cannot simply file suit immediately over an alleged residential construction defect. Instead, the statute generally requires written notice, an opportunity to inspect, and an opportunity for a contractor to make a settlement offer before formal litigation or arbitration proceeds. Texas Property Code § 27.004 sets out that notice-and-offer process. 

Basic Questions About the RCLA

What is the RCLA? 

What kinds of claims does it cover? 

What does the RCLA mean by a construction defect? 

Who can be a contractor under the Act? 

What properties does it apply to? 

What claims are excluded? 

What is the pre-suit notice and offer process? 

How can noncompliance affect damages or delay a case? 

What Is the RCLA?

The RCLA is the shorthand name for Chapter 27 of the Texas Property Code. It applies to many disputes arising from alleged residential construction defects and sets out procedural and substantive rules that can affect those claims. The statute defines key terms in § 27.001, addresses when the chapter applies in § 27.002, addresses liability in § 27.003, and sets out the notice-and-offer process in § 27.004. 

A useful way to think about the RCLA is that it is not just a notice requirement. It is a statutory framework that can shape a residential construction dispute from the start, including pre-suit procedure, settlement opportunities, damages, and defenses. 

What Kinds of Claims Does the RCLA Cover?

Under Texas Property Code § 27.002(a), the RCLA applies to any action to recover damages or other relief arising from a construction defect, subject to certain statutory exclusions. The Act also defines “action” to include a court proceeding or an arbitration. That means the statute can matter whether a dispute is headed to court or to arbitration. 

At a broad level, the Act can apply to many disputes involving alleged deficiencies in the design, construction, or repair of a covered residence or appurtenance. In practice, that often means the RCLA must be evaluated early, before a party decides how and when to proceed formally. 

What Does the RCLA Mean by a “Construction Defect”?

Under Texas Property Code § 27.001(3), a construction defect means a deficiency in the design, construction, or repair of a new residence, of an alteration of or repair or addition to an existing residence, or of an appurtenance to a residence, on which a person has a complaint against a contractor. 

The key point is that the statute is focused on alleged deficiencies in residential construction-related work. In practical terms, that can include new residential construction, remodeling, repairs, additions, and work involving related residential structures and improvements. 

Who Can Be a “Contractor” Under the RCLA?

The term contractor is defined broadly in Texas Property Code § 27.001(4). Depending on the facts, it can include a builder, a person contracting for the sale or construction of a new residence, a person involved with certain condominium or housing-project construction, and certain risk retention groups that insure residential construction-defect liability. The definition also extends to certain owners, officers, directors, shareholders, partners, and employees of a contractor. 

So the RCLA is not limited only to one type of homebuilder. Whether the Act applies often turns on the statutory definitions and the structure of the project or transaction. 

What Properties Does the RCLA Apply To?

The RCLA applies to covered residences and certain appurtenances. Under Texas Property Code § 27.001(6), the statute’s definition of residence includes various residential property types, and § 27.001(2) defines an appurtenance to include structures or facilities constructed in connection with the construction or alteration of a residence, whether attached or unattached. 

At a broad level, that means the Act can extend beyond the main residence itself. Depending on the project, it may also apply to related residential improvements and structures connected with the home. 

What Claims Are Excluded from the RCLA?

The RCLA does not apply to every possible dispute touching residential construction. Under Texas Property Code § 27.002, the statute excludes certain claims, including claims for personal injury, survival, wrongful death, and damage to goods. It also excludes certain actions arising from fraud in a real estate transaction, wrongful abandonment of an improvement project before completion, and misapplication of construction trust funds. 

That matters because if a claim falls outside the RCLA, Chapter 27 procedures and limitations may not govern that particular claim. In some disputes, only part of the broader case may be subject to the Act. 

What Is the Pre-Suit Notice and Offer Process?

The pre-suit notice process is one of the most important parts of the RCLA. Before filing suit or initiating arbitration over a covered residential construction defect claim, a claimant generally must provide written notice at least 60 days in advance, identify the alleged defects in reasonable detail, and provide available discoverable evidence concerning the nature and cause of the defects and the nature and extent of the repairs believed to be necessary. After receiving notice, the contractor may inspect the property, and the current statute allows up to three inspections within the applicable time period. A contractor may then make a written offer of settlement. 

The offer may take different forms. Broadly speaking, it may include an agreement to make some or all repairs, an agreement to have repairs made by another contractor, a monetary offer, or, in some situations, an offer to purchase the residence. If the offer includes repairs, the offer should identify the repairs in reasonable detail and address timing where appropriate. The claimant then has a statutory period to accept the offer or explain why it is considered unreasonable, and the process may include a supplemental offer. 

Why Does the Notice-and-Offer Process Matter?

The notice-and-offer process matters because failure to follow it can affect both timing and recovery. If a claimant files suit without first complying with the Chapter 27 notice requirements, the contractor can seek abatement so the parties can complete the statutory process before the case proceeds. In that sense, the RCLA can delay litigation if the required pre-suit steps are skipped.

The process can also affect damages more directly. If repairs are made too early, before notice is given, inspection is allowed, and the contractor has the opportunity to respond, the claimant may create an argument that some damages have been waived or materially compromised because the original condition was changed before the statutory process could be completed. In residential defect disputes, preserving the ability to inspect the condition at issue can be important. 

There is also a separate consequence tied to the settlement-offer stage. If the ultimate factfinder determines that a claimant rejected a reasonable offer of settlement, the claimant’s recovery may be limited to the fair market value of the contractor’s last offer, and attorney’s fees and costs may be limited to those incurred before the reasonable offer was rejected. That makes the notice-and-offer process important not only procedurally, but also in evaluating litigation risk and potential recovery. 

How Can the RCLA Affect Damages?

The RCLA can significantly affect what damages are recoverable in a residential construction dispute. Under Texas Property Code § 27.004(g), in an action subject to the Act, a claimant may recover only certain categories of economic damages proximately caused by a construction defect.

Those generally include:

• the reasonable cost of repairs necessary to cure the construction defect, 

• the reasonable and necessary cost to repair or replace damaged goods in the residence, 

• reasonable and necessary engineering and consulting fees, 

• the reasonable expenses of temporary housing reasonably necessary during the repair period, 

• the reduction in current market value, if any, after the defect is repaired, if the defect is a structural failure, 

• reasonable and necessary attorney’s fees, and 

• reasonable and necessary arbitration filing fees and the claimant’s share of arbitrator compensation. 

That is important because the RCLA is not just about notice before suit. It also limits the categories of damages generally available in a covered residential construction defect case. In other words, even if a claimant proves liability on an underlying cause of action, Chapter 27 may still shape what types of damages can actually be recovered. 

The notice-and-offer process can narrow recovery even further. If the ultimate factfinder determines that a claimant rejected a reasonable offer of settlement, recovery may be limited to the value of that offer, and attorney’s fees and costs may be limited to those incurred before the offer was rejected. That is one reason the RCLA’s pre-suit procedure can have a direct effect not only on timing, but also on the value of the case. 

Does the RCLA Allow Parties to Waive It by Contract?

No. The current statute expressly provides that an attempted waiver of the RCLA is void. Chapter 27 also contains a required contract disclosure provision in Texas Property Code § 27.007 for written contracts subject to the Act, informing the parties that Chapter 27 may affect the right to recover damages arising from a construction defect and that notice is required before suit. 

That is another reason it is important to identify early whether the RCLA applies. It is a statutory framework that can shape a dispute whether or not the parties focused on it at the beginning of the project. 

Learn More About the RCLA

The RCLA is an important part of many Texas residential construction disputes. It can determine whether notice is required before suit, whether inspections must be allowed, whether a settlement process must occur first, whether a case may be delayed through abatement, and whether damages may later be limited if the statutory process is not followed or a reasonable offer is rejected. 

If you have questions about the Residential Construction Liability Act, pre-suit notice, settlement offers, or how Chapter 27 may affect a dispute, contact our office to discuss your circumstances and learn more about your options at verplankiorio.com.