THE SHORT HISTORY OF HOW TEXAS HOME BUILDERS AND REALTORS DESTROYED TEXAS CONSUMER RIGHTS
In Texas, you have more rights buying a loaf of bread than you do a home. When you buy a loaf of bread, you don't have to navigate the defenses inherent for builders in the Texas Residential Liability Act or RCLA. Or if you are buying a used home in Texas, you are now buying that house "as is" which effectively means that you can not complain about the house after you purchase it. Think Caveat Emptor. Buyer beware. While the rest of society abandoned this draconian principal hundreds of years ago, in Texas, we are only making it stronger. A loaf of bread, you say? Why of course it is not sold "As is". Texas houses are sold "As is". You still have rights if you buy a loaf of bread.
So how did Texas get to this place where Texas home buyers have less rights than other states?
It started with the Residential Constrution Liability Act. This act allows builders to do what no other party to any other kind of civil litigation can do in any other case. It allows Texas Home Builders to introduce evidence that centuries of jurisprudence has kept out of every other case filed in every other court in every other state in the country. In other words, home builders can literally violate the Rules of Evidence that apply to every other civil litigation case in the state of Texas.
The Texas Rules of Evidence are for all practical purposes, identical to the Ruies of Evidence found in all 50 states and in Federal Courts. Rule 408 is a sacrosanct principal of evidence that was created so that parties could fairly negotiate before trial and not worrry that their settlement attempts would ever be considered by juries. So if you buy a car, a multi-billion dollar business, a chemical factory, a railroad, a dog, a couch, a loaf of bread or Google, and you have a dispute later that results in a lawsuit, you can make offers to settle the claim and you can receive offers to settle the claim and regardless of what those offers to settle are, you will never have to worry that your offers will ever be know by the jurors in your case. If, on the other hand, you buy a house from home builder and it is your prized investment that you labored for and have your life savings invested in, you don't have that Rule of Evidence.
That is because of the Texas Residential Construction Liability Act or RCLA for short. This law actually requires you to give notice to any homebuilder that you hold responsible for construction defects. The notice has to be in writing and you have to allow the home builder to inspect the defects you are claiming. Within 45 days, that home builder has the right to make a written offer of repair to you. Here is where the centuries of jurisprudence that evolved to protect settlement offers in every other case gets trampled on by the RCLA.
If you don't accept the offer to repair, then the home builder gets to introduce at trial his offer to repair and your refusal to accept. If the jury finds that the repair offer was reasonable, then you can only get what was offered originally. So unlike every other case in the history of law and jurisprudence over the last few hundred years, if you bought a house in Texas, you have dramatically fewer rights. If you had bought Microsoft or Google, you would be protected. In fact, you have more rights in a loaf of bread than you do buying a house in Texas. At least with a loaf of bread if the breadmaker makes you an offer, the Rules of Evidence are not changed in the breadmaker's favor.
But Texas home builders were not satisfied. It was not enough that they had managed to destroy one of the tenets of civil law giving them a disproportionate advantage at trial over home buyers. They wanted to eliminate complaints altogether. So the general counsel for Perry Homes wrote the law that created the Texas Residential Construction Commission or TRCC. What better way to discourage home buyers from making complaints than to create a state agency with tons of bureaucratic hurdles to navigate and no means for attorneys to recover legal fees from the process. It was brilliant. They would get rid of the lawyers by eliminating the opportunity for legal fees. The administrative process would take six months to a year or more and until the case was filed in state court or on its way to arbitration, there was no provision or way for a Texas home buyer to recover any legal expenses. If a home buyer wanted to have an attorney through the process they would have to pay for it out of their own pocket. With regard to eliminating the lawyers, it worked.
But Texas' Home Builder giants David Weekley and Bob Perry underestimated the initiative, determination and resolve of Texas home buyers. They were resiliant, steadfast and resourceful and they learned how to work the system succesfully, But what really mattered more than eliminating lawyers from the mix was allowing engineers to inspect these houses as independent third parties. I have seen civil engineers hired by home builders declare muitiple times that a foundation is performing or fine. Then, the home buyer gets their own engineer and the builder's engineer suddenly agrees with the new engineer's findings. The TRCC introduced something new altogether. The independent third party engineer who was pure scientist with no stake in the outcome. Now, engineers were finding muitiple faults with these homes and the flood gates were open.
You see, engineers were better for consumers than lawyers. The engineers were being paid by the state (and uiltimately the home builders) to essentially grade the work of Texas home builders and the big ones were failing badly. Engineers were failing foundations, failing roof systems, failing structural members and it was costing Texas home builders. It was great for consumers. Even without lawyers, the home buyers were winning and getting resolution for their muitiple construction defects. So can you guess what happened next?
Texas home builders then lobbied the Texas legislature to end this onerous program that helped consumers get real resolution to their construction defects. Legislative hearings repeatedly demonstrated that the TRCC was good for consumers. But Texas home builders realized it was better to go back to the lawyers than let engineers find more problems than the homeowners even thought they had.
And so they did. The Texas Residential Construction Commission was "sunseted" which means it was not funded and it was forced to wind down and cease helping Texas Homeowners.
Strike Two Against Texas Homeowners.
The RCLA still applies.
And now we have strike three against Texas Homeowners that buy "used" homes or previously lived in homes.
The Texas Real Estate Commission or TREC, has now declared war on Texas home buyers. The Texas Real Estate Commission has now inserted the “AS IS” disclaimer of liability in the earnest money contract used by virtually every Texas home buyer. The new TREC One to Four Family Residential Contract, Form 20-12, now makes every house bought in Texas that uses a licensed realtor an “AS IS” sale.
While there are myriad reasons why this clause does not mean what the Texas Real Estate Commission and the broker defense attorneys think it means, the message is clear. The Texas Real Estate Commission wants every house sold in Texas to be sold without any recourse against the sellers, brokers or sellers’ agents.
A true and legitimate “AS IS” clause defeats a buyer’s claim of reliance on representations made by the seller. So in Texas, where the Texas Property Code, §5.008, requires that every seller of used residential property make truthful disclosures about the amenities and conditions on the property, the Texas Real Estate Commission has now attempted to overcome that liability and burden on sellers and agents by inserting the “AS IS” clause attempting to negate the reliance a buyer has on those statutorily required disclosures.
What that means to you in real terms is that sellers, agents and brokers can now lie with impunity. They can make false representations and non-disclosures on the required Sellers’ Disclosure Notice and then, if after purchase, you discover that there were previous floods into the house or termite damage that was not repaired, there will be nothing you can do about it. The Texas Real Estate Commission and all of the brokers and real estate agents in Texas can now assert the “AS IS” clause and deny that you could have or should have relied on that Sellers’ Disclosure Notice. Remember, an “AS IS” clause means that you are buying the thing and not relying on anything the seller has disclosed about that thing.
This arises from the world of commercial trade. Sometimes, when a manufacturer or distributor needs to sell 200,000 widgets, he might sell them “AS IS”. That means the buyer is completely and entirely responsible for discovering any defects or problems with those widgets. If the buyer either does not inspect and find them or inspects but does not do a good enough job to find the defects and later, it turns out the widgets have a defect, then the buyer has NO RIGHTS TO COMPLAIN AGAINST THE SELLER.
And that is exactly what the Texas Real Estate Commission has enacted against all Texas Home Buyers. The Texas Real Estate Commission now wants and expects that every Texas Home Buyer has bought their home “AS IS” when using this new form as of June 1, 2014. If you buy a house in Texas after June 1, 2014, then you have no right to complain against any undisclosed or falsely disclosed conditions unless you can show the seller or realtor committed actual fraud, meaning they intended to cheat you on the transaction.
Sound harsh? Wake up. Don't be fooled. This is Texas and in our business friendly, anti-consumer state, home ownership is not valued. But protecting the interests of real estate agents and brokers is. So congratulations Texas Real Estate Commission. You have successfully destroyed the fundamental rights of Texas Home buyers in one fell swoop. You must be so proud.