With the recent conclusion of the biannual sprint that is the Texas Legislative session, Gov. Greg Abbott has started signing bills, including two that affect the construction industry: one in the area of construction defect claims on public buildings/public works projects and the second regarding the ability for parties to assign construction trust fund claims.

Accrual Date for Construction Defect Claims on Public Buildings/Public Works

HB 1922 was signed by Abbott on June 20, 2025, amending Texas Government Code Chapter 2272, which covers claims by governmental entities against contractors, subcontractors, suppliers, or design professionals for construction defects on public buildings or public works projects.

Under Chapter 2272, before a governmental entity can bring a construction defect claim, they must provide each party the governmental entity has a contract with for the design or construction of the affected building/public work with a written report by certified mail, return receipt requested, that (1) identifies the specific construction defect on which the claim is based; (2) describes the present physical conditions of the affected structure; and (3) describes any modification, maintenance, or repairs to the affected structure made by the governmental entity or others since the affected structure was initially occupied or used. A contractor who receives such a report then has five days to provide a copy of the report to each subcontractor retained on the construction of the affected structure whose work is subject to the claim.

HB 1922, which takes effect on September 1, 2025, amends Chapter 2272 to establish that a governmental entity’s construction defect claim under Chapter 2272 accrues on the date the governmental entity’s required report is postmarked by the U.S. Postal Service. HB 1922 goes on to state that for all other purposes, including the date of an occurrence under an applicable insurance policy and the date a cause of action accrues for purposes of determining whether the action is barred by a statute of limitations or repose, the date of the accrual of those causes of action is unaffected by HB 1922.

Practically, HB 1922’s intent is clarification of the accrual date for claims between governmental entities and contractors to avoid confusion, inconsistency, and disputes regarding when the government’s construction defect claim accrued. However, HB 1922’s adoption should not affect parties’ practice regarding notice to insurers, whether a claim by a governmental entity is barred by the statute of repose, or the applicable accrual date for claims arising out of the governmental entity’s defect claim between contractors, subcontractors, and suppliers (defense/indemnity/contribution, etc.).

Assignment of Trust Fund Claims

Texas Property Code Chapter 162, otherwise known as the Texas Construction Trust Fund Act, gives downstream parties, such as subcontractors and suppliers, the ability to assert claims against an upstream party, such as a general contractor, who receives payment from an owner on a construction project, and then wrongfully retains, uses, or disburses those funds without fully paying its obligations to the downstream subcontractor or supplier.

SB 841, which also takes effect on September 1, 2025, was drafted to address scenarios where general contractors received payment from an owner, passed that payment along to a first-tier subcontractor, and then that first-tier subcontractor failed to pay second-tier subcontractors or suppliers. Prior to SB 841, a general contractor in that situation could not pursue the wrongfully withheld trust funds under the Texas Construction Trust Fund Act, as that act only granted a cause of action to parties that did not receive payment.

With the adoption of SB 841, the Texas Construction Trust Fund Act has been amended to allow a second-tier subcontractor with a trust fund claim against a first-tier subcontractor to assign that claim to a general contractor or other party on the construction project.

SB 841 specifies that for the assignment to be enforceable it must:

1. Be made in writing not earlier than the date the assignee (general contractor in our scenario) has paid the beneficiary (second-tier subcontractor in our scenario) in good and sufficient funds for the assignment;
2. Not be made as part of the beneficiary’s (second-tier subcontractor) construction contract;
3. Make sure the assignee (general contractor in our scenario) is a beneficiary, trustee, or property owner under the construction contract with which the trust funds are paid (i.e., the assignee cannot be a stranger/outsider to the construction project); and
4. Provide written notice of the assignment to the property owner and the contractor on the project no later than the seventh day after the assignment is made.

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