Are Your Contracts Up to Date?


Karen Ensley with Ensley Benitez Law, PC has created a list of requirements for residential contracts. If you have any additional questions on any of this information, please give Karen a call to discuss.



Karen Ensley

Ensley Benitez Law, PC

12222 Merit Dr, Ste 900

Dallas, Texas 75251

469-501-5561

817-538-6894

karen@eblawtexas.com


Requirements for a Residential Contract


3 day right of rescission – required for all cold calls/door knocking. May also apply to call center solicitations.

  • Immediately adjacent to the owner’s signature block, the following warning must be included in minimum 10-point bold font:

YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT.

  • Must verbally advise the property owner of their right to cancel in the language used for the sales presentation.

  • Must provide property owner with 2 paper copies of the right to cancel. Note: we recommend having the owner sign a 3rd copy acknowledging receipt of the notice. (see below)

Chapter 27 warning: This contract is subject to Chapter 27 of the Texas Property Code. The provisions of that chapter may affect your right to recover damages arising from a construction defect. If you have a complaint concerning a construction defect and that defect has not been corrected as may be required by law or by contract, you must provide the notice required by Chapter 27 of the Texas Property Code to the contractor by certified mail, return receipt requested, not later than the 60th day before the date you file suit to recover damages in a court of law or initiate arbitration. The notice must refer to Chapter 27 of the Texas Property Code and must describe the construction defect. If requested by the contractor, you must provide the contractor an opportunity to inspect and cure the defect as provided by Section 27.004 of the Texas Property Code.


This warning must be a minimum 10-point bold font and may appear anywhere in the contract. Failureto include the warning entitles the claimant/homeowner to recover a civil penalty of $500.


Chapter 41.007 warning: IMPORTANT NOTICE: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW.


The warning must be a minimum 10-point bold font and may appear anywhere in the contract. Failure to include the warning is a violation of the Texas Deceptive Trade Practices Act and if committed knowingly subjects the contractor to up to 3x damages. It does not, however, invalidate a lien filing.


As relates to contractors, here’s a short explanation of the types of damage available under the DTPA:

[a] Types of Actionable Conduct. A consumer may maintain an action under the DTPA if the consumer has suffered economic damages or damages for mental anguish produced by any one of the following four types of actions [Tex. Bus. & Com. Code § 17.50(a)]:

•The use or employment of a false, misleading, or deceptive act or practice enumerated in Section 17.46(b) and relied on by the consumer to the consumer’s detriment.

•The breach of an express or implied warranty.

•An unconscionable action or course of action.


[b] Damages for Mental Anguish. Coverage of damages for mental anguish exists under the DTPA, but it is limited to those times when a defendant’s conduct was committed “knowingly” and can result in an award three times the amount of economic damages awarded. If committed intentionally, the damages can increase to three times the amount of damages awarded for both mental anguish and economic damages.


Statutory warning re owner’s obligation to pay deductible. Must be a minimum 12-point bold font but can be located anywhere in the contract. Note the yes/no box is recommended but not required, nor is the (HB2102 effective 9-1-19).


Texas law requires a person insured under a property insurance policy to pay any deductible applicable to a claim made under the policy. It is a violation of Texas law for a seller of goods or services who reasonably expects to be paid wholly or partly from the proceeds of a property insurance claim to knowingly allow the

insured person to fail to pay, or assist the insured person’s failure to pay, the applicable insurance deductible. (TBCC 27.02, effective 9-1-19)


Insurance Claim Yes ___ No ___

Deductible: ____________


Optional but recommended: If you want to require the homeowner to submit to arbitration (recommended) that requirement must be spelled out in the contract in minimum 10-point bold font.


Optional but recommended: husband and wife both sign contract. Required if you want to file a lien against the property, whether or not their names appear on the title or any loan documents.


Optional but recommended: if you are NOT door knocking and don’t want to give the three day right to cancel, add the following to your contract and have the homeowners initial. Note that the Home Solicitation Act (3 day right to cancel) applies only to door knocking at someone’s personal home.


Owner(s) acknowledge having initiated contact with Contractor and thus agree that the Home Solicitation Act does not apply to this contract. ________ _________ (initials)




NOTICE OF CANCELLATION


(enter date of transaction)

You may cancel this transaction, without any penalty or obligation, within three business days from the above date.


If you cancel, any property traded in, any payments made by you under the contract or sale, and any negotiable instrument executed by you will be returned within 10 business days following receipt by the merchant of your cancellation notice, and any security interest arising out of the transaction will be canceled.


If you cancel, you must make available to the merchant at your residence, in substantially as good condition as when received, any goods delivered to you under this

contract or sale; or you may if you wish, comply with the instructions of the merchant

regarding the return shipment of the goods at the merchant's expense and risk.


If you do not agree to return the goods to the merchant or if the merchant does

not pick them up within 20 days of the date of your notice of cancellation, you may

retain or dispose of the goods without any further obligation.


To cancel this transaction, mail or deliver a signed and dated copy of this

cancellation notice or any other written notice, or send a telegram, to (name of

merchant), at (address of merchant's place of business) not later than midnight of

(date).


I hereby cancel this transaction.

(date)


_______________________________

(buyer's signature)




NOTICE OF CANCELLATION


(enter date of transaction)


You may cancel this transaction, without any penalty or obligation, within three business days from the above date.


If you cancel, any property traded in, any payments made by you under the contract or sale, and any negotiable instrument executed by you will be returned within 10 business days following receipt by the merchant of your cancellation notice, and any security interest arising out of the transaction will be canceled.


If you cancel, you must make available to the merchant at your residence, insubstantially as good condition as when received, any goods delivered to you under this contract or sale; or you may if you wish, comply with the instructions of the merchant regarding the return shipment of the goods at the merchant's expense and risk.


If you do not agree to return the goods to the merchant or if the merchant does

not pick them up within 20 days of the date of your notice of cancellation, you may

retain or dispose of the goods without any further obligation.


To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice or any other written notice, or send a telegram, to (name of merchant), at (address of merchant's place of business) not later than midnight of (date).


I hereby cancel this transaction.

(date)


_______________________________

(buyer's signature)



NOTICE OF CANCELLATION


(enter date of transaction)


You may cancel this transaction, without any penalty or obligation, within three

business days from the above date.


If you cancel, any property traded in, any payments made by you under the contract or sale, and any negotiable instrument executed by you will be returned within 10 business days following receipt by the merchant of your cancellation notice, and any security interest arising out of the transaction will be canceled.


If you cancel, you must make available to the merchant at your residence, in

substantially as good condition as when received, any goods delivered to you under this

contract or sale; or you may if you wish, comply with the instructions of the merchant

regarding the return shipment of the goods at the merchant's expense and risk.


If you do not agree to return the goods to the merchant or if the merchant does

not pick them up within 20 days of the date of your notice of cancellation, you may retain or dispose of the goods without any further obligation.


To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice or any other written notice, or send a telegram, to (name of merchant), at (address of merchant's place of business) not later than midnight of (date).


I hereby cancel this transaction.

(date)


_______________________________

(buyer's signature)


ACKNOWLEDGEMENT OF RECEIPT OF NOTICE:


____________________________________ ________

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