August through October marks the peak of hurricane season along the Texas Gulf Coast. Nearly every year, at least some part of the Texas coast feels the impact of a named storm during these months, either by flood, wind, rain, or all three. The resulting damage can create an immediate and dramatic need for contractors and other tradesman to help get communities back on their feet. This demand often outstrips the available resources in the community, prompting the need for other contractors and laborers to travel from other parts of the state or country to assist.
Unfortunately, it also attracts scammers who take upfront payment and either do shoddy work or no work at all before vanishing and leaving their victims with little recourse. To protect consumers and the scrupulous contractors who lose business from these fly-by-night scammers, the Texas Legislature passed the Texas Disaster Remediation Act (“the Act”), contained in Chapter 58 of the Texas Business and Commerce Code. This post highlights the provisions both consumers and contractors should be aware of when entering into contracts to repair storm damage.
Determine if the Project is Covered by the Texas Disaster Remediation Act
First, it is critical to determine if your repair project is covered by the Act. The Act applies to “disaster remediation contracts.” Disaster remediation has a broad definition, and includes “the removal, cleaning, sanitizing, demolition, reconstruction, or other treatment of improvements to real property performed because of damage or destruction to that property caused by a natural disaster.” A natural disaster is “the occurrence of widespread or severe damage, injury, or loss of life or property related to any natural cause, including fire, flood, earthquake, wind, storm, or wave action, that results in a disaster declaration by the governor or a local disaster declaration by a county judge.” This would include, for example, hurricanes, severe winter storms, tornadoes, fires, and in some cases severe thunderstorms that cause widespread damage. In other words, if you are dealing with an event that results in a disaster declaration, you are likely covered by the Act.
Exception for Local Contractors
However, the Texas Legislature created an exception for local contractors. Specifically, the Act does not apply if the contractor maintains, for at least one year preceding the date of the parties’ contract, a physical business address in:
- The county in which the property is located; or
- A county adjacent to the county in which the property is located.
This exception allows local businesses to carry out business operations as normal, while placing the more onerous requirements on contractors traveling from further distances to perform the work.
What are the Contract Requirements?
Contracts covered by the Act have the following requirements:
- It must be in writing;
- It cannot require full or partial payment upfront before a contractor begins work;
- It cannot require a partial payment that exceeds “an amount reasonably proportionate to the work performed, including any materials delivered;” and
- It must contain the following language in “conspicuous, boldfaced type of at least 10 points in size:”
This contract is subject to Chapter 58, Business & Commerce Code. A contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered.
What are the Penalties for Violating the Law?
If a remediation contract does not contain this required language, the law states that the contractor has engaged in a deceptive trade practice.1 This could expose the contractor to not only economic damages, but in some cases mental anguish damages, attorneys’ fees, or even treble (triple) damages if the contractor acted knowingly or intentionally. In other words, the penalties for violating this law are significant, and provide property owners with some protection from bad actors after a major storm like a hurricane.
In the aftermath of a major storm, it can be difficult to stop and make sure everything is being done in compliance with the law. But that does not excuse contractors from a failure to follow the requirements of the Act. Therefore, as with all storm preparation, the time to act is now. Contractors that anticipate performing remediation work after a storm, and in particular those who plan to travel to do so, should prepare a form agreement now that includes the required language. Consumers, on the other hand, should keep these requirements in mind so they can know their rights when seeking help to clean up after a storm.
1 Tex. Bus. & Comm. Code, § 58.004.
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