THE DEATH OF THE TRCC LEAVES BUILDERS at risk
Opinion: Texas Builders are looking at the Wild West again

June 4, 2009 (AUSTIN, TX) –Love it or hate it the Texas Residential Construction Commission is dead. The agency largely created to mediate construction defect litigation and other similar construction-related disputes is being dissolved after the Texas lawmakers failed to renew its mandated power.

“I think it's unfortunate that a lot of the consumer groups who were clamoring for the TRCC's demise will have nowhere to turn for these disputes,” said Ned Munoz, vice president of regulatory affairs and general counsel for the Texas Association of Builders, “Now all they'll have is costly legislation.”

No one is disputing that consumers need protection from poor workmanship and unscrupulous builders, but the demise of the TRCC also leaves the window open for a storm of avoidable and frivolous lawsuits. With housing values at all-time lows and perceived depreciation of their investments, homeowners may be quick to litigate over the smallest detail...even if the homeowner is potentially at fault for lack of proper home maintenance.

Now these lawsuits may not prove to be successful, but they will prove to be costly. The builder, already financially distressed by current market conditions, will be forced to spend time and considerable money defending themselves.

So what can Texas builders do to best protect themselves from the "wild west?"

Set Expectations

Expectations are strange creatures. They grow, they shrink, they change shape, they change direction. They shift constantly, and they shift easily. And how satisfied (or dissatisfied) your customers are is determined by these expectations and your performance in meeting them.

There’s an old business proverb when it comes to setting expectations…and it’s as true today as it was when first uttered back in the stone age: Tell them what your going to tell them, tell them. Tell them again, Tell them what you just told them. It’s the Art of Managing expectations.

Disputes between homebuilders and consumers are often fueled by differences of opinion between what is considered defective and covered under a warranty versus what is the result of inadequate homeowner maintenance. Smart information transfer of key documents: performance standards, maintenance guidelines and warranty information clearly and systematically define the roles and responsibilities for both builder and buyer. It sets in writing the expectations of performance and delivery.

Establish Affirmative Defense
“A homeowner’s failure to substantially comply with a stated homeowner responsibility creates an exclusion to the warranty for the performance standard.” TRCC General Provisions: Title X, Part 7, §304.1 (10)

This statement may no longer be the letter of the law, but the application of an affirmative defense through the written provision of maintenance and performance standards still holds great sway in the courts.

Affirmative defense is the ability for a builder to shield itself from liability against frivolous lawsuits. By providing (and documenting) that the homeowner received maintenance and manufactured product warranty information, builders shifts responsibility for upkeep to the homeowner. It is now the homeowner’s obligation to follow the directions of the manufacturer…any failure to do so exonerates the builder from blame (unless the issue is truly a defect, in which a builder is legally obligated to address.) Without affirmative defense, builders are more vulnerable to legal action.

Simply stated, if you told the homeowner how to maintain the component and you documented that you told them, you may be able to deflect some or all of the liability for the dispute.

And in these uncertain economic times, many builders might not have the resources or the tribal knowledge to create such documentation. That is why is is important to find companies that specialize in maintenance and warranty development and distribution like Compendia.

Listen and empathize

Of course the best lawsuit is the lawsuit avoided. An much of this can happen if you simply acknowledge the customer's issues. Every complaint or issue is valid in the perception of your customer. Treat it as such. You do not need to agree with them, but you need to acknowledge their feelings.

At some point mistakes will happen. Do not become defensive and blame a customers misconceptions as the fault of their own incompetence or relegate them as insignificant. Listen to their issue, and if the workmanship was at fault, fix it...it's much cheaper than a lawsuit.

No one knows what will come next; whether the Texas legislature will develop a replacement agency or enact a new set of laws that make it easier for homeowners to sue builders. We simply don't know yet. But, in the interim, make sure you are taking the steps to protect your business.