I am sorry if you flooded. I flooded, and so did my parents. I now know more than I wanted about residential construction law, and am sharing the misery. I do not practice in this area, and you must look elsewhere to learn more. Consult a construction or real estate lawyer or an AIA architect. Visit the Texas Attorney General’s Home Remodeling and Repair page. Your banker’s home improvement loan requirements may be a good discipline, if not education.
If you’re a lawyer, gather your friends and read them the Texas Real Estate Forms Manual 2017. Chapters 17 and 18 address insurance and residential construction. Chapter 20 discusses construction loans, Chapter 21 involuntary mechanic’s liens.
Think twice before you repair. Do you have good title to the house? Can you afford to repair? Can you afford to flood again? What’s your elevation? Your flood risk? If you repair, can you afford insurance? Could a buyer, now or later?
Has it been 60 days since you cleaned out the house? Homeowners building coverage may have lapsed. Talk to your agent about a vacancy endorsement. Before signing a contract, ask about builder’s risk. If your agent doesn’t know, talk to one with a designation such as a CPCU, CIC, ARM, or CRM.
You might flood again. Keep all plans, drawings, and specifications, if only to help claim your losses next time. Renew your flood insurance, and never let it lapse.
A construction contract should specify what the contractor will do, when the work will start, and when it will be completed. Address change orders, sales tax, insurance, and utilities. A lump sum or stipulated sum is the simplest type of contract price. The contractor agrees to build or repair according to the plans and specifications, and the owner agrees to a fixed price.
Involuntary mechanic’s liens. Unpaid subcontractors and suppliers can file a lien affidavit against the home. To avoid personal liability, owners must withhold 10 percent from the original contractor (statutory “retainage”), more if a lien notice is received (“trapped funds”).
Construction Trust Fund Statute. Residential projects over $5,000 require a construction account at a bank. It’s a crime for the contractor to skip this step, to use the funds for another project, or to provide a false bills-paid affidavit.
Beware the residential construction contract that doesn’t address statutory retainage or mention trust fund accounts. Contracts should allow if not require owners to withhold retainage. Trust fund deposits and disbursements records should be available on request.
