We Wrote the Book on Texas Construction Law — Literally.

At Lovein Ribman, our Texas construction attorneys specialize in reviewing, explaining and modifying residential construction contracts for homeowners across Texas. Whether you are about to sign a new home construction or remodel contract, facing a dispute with a homebuilder or remodeling contractor, or need help understanding or modifying a Texas Association of Builders (TAB) form construction contract, we provide clear legal guidance and tailored revisions to protect your investment.

For nearly two decades, we have represented the full spectrum of the construction industry in every type of dispute and transaction across commercial, residential, industrial, and public works projects throughout Texas. Our leadership in this field is well established. Managing Partner Robert M. Lovein and Senior Partner Elana M. Ribman are the co-authors of Texas Construction Law and Practice, published by LexisNexis and Matthew Bender. This legal treatise is relied upon by attorneys, judges, arbitrators, and construction professionals for guidance on filing and foreclosing mechanic’s liens, litigating defect claims, drafting construction contracts, and interpreting Texas construction statutes. The firm’s Construction Law Department is led by two of only 161 attorneys in Texas who are Board Certified in Construction Law: Robert M. Lovein and Nick Messina.

Residential construction contracts—whether for a new custom home or a remodeling project—are often complex, legally binding documents drafted by builders to protect their own interests. These agreements frequently contain one-sided provisions that shift risk to the homeowner, limit available remedies, and create ambiguity regarding scope, payment structure, and completion deadlines. Property owners should never sign a construction contract without fully understanding its terms and legal implications. The best way to avoid future disputes is to consult with a construction attorney who can assess the contract, identify areas of concern, and negotiate revisions that make the agreement more balanced and protective of the owner’s interests.

We assist homeowners throughout Texas both before and after construction contracts are signed. Before signing, we review, revise, and negotiate residential construction and remodeling contracts to ensure the terms are fair and enforceable. After execution, we advise clients on their legal rights and obligations by interpreting the contract, explaining key provisions, and assessing the builder’s performance. Whether you are about to enter into a custom home construction agreement or need help understanding a signed remodeling contract, our attorneys will help you clarify your options and minimize your exposure. Contact us to schedule a consultation by calling (888) 368-2483 or by submitting the Contact Form.

Continue reading to learn more about the structure of Texas residential new home construction contracts, commonly negotiated provisions, and problematic terms found in the Texas Association of Builders (TAB) form agreements. Find our Residential Construction Contract Guide for Texas Homeowners here.

Texas Residential Construction Project Delivery Methods for New Home Construction: Design-Bid-Build vs. Design-Build

Before selecting a builder and contract type, homeowners must choose a project delivery method. This framework defines how a residential construction project is organized, including the roles and relationships among the parties. The chosen delivery method significantly influences the project’s schedule, cost, risk allocation, and the level of collaboration between the owner, design professionals, and builder. The two most common delivery methods for Texas new home construction are design-bid-build and design-build.

A design-bid-build is a traditional project delivery method where the project is completed in three sequential phases: design, bidding, and construction. In a design-bid-build method, the homeowner hires a designer (such as an architect) to prepare detailed plans. Once finalized, the homeowner solicits bids from homebuilders and selects one to carry out the construction. This method promotes competitive bidding and clarity, as the project scope is fully developed before construction begins. However, it may involve longer timelines and offers less collaboration between design and construction teams. The homeowner must also manage separate contracts with the architect and builder.

In contrast, a design-build method combines design and construction services under one contract. This streamlines communication, accelerates timelines, and reduces the administrative burden on the homeowner. However, it can limit homeowner control over design elements and pricing transparency. Without an independent architect advocating for the owner, liability and oversight can also become more difficult to enforce. Design-build works best when speed, efficiency, and simplicity are top priorities, and when the builder is reputable and experienced.

Fixed-Price Home Construction Contracts in Texas: Risks and Protections for Homeowners

A fixed-price or lump sum contract sets a predetermined amount for a clearly defined scope of work. This structure offers cost certainty and is common in Texas residential construction. However, builders frequently insert carve-outs that undermine this predictability.

Builders often include provisions such as material cost escalation clauses, unforeseen site conditions clauses, and vague allowances. These clauses allow builders to raise prices after execution, shifting financial risk back to the homeowner. For example, escalation provisions may allow builders to increase costs if material prices rise more than 10%, with no duty to mitigate or notify in advance. Allowance provisions, if underfunded or unclear, can become a major source of conflict.

The Texas Association of Builders (TAB) Residential Construction Contract—Fixed Price (For Use with Homes Constructed on the Owner’s Property) (TAB 1.1)—is widely used by builders and heavily favors their interests. It contains escalation provisions, waiver of delay damages, and limitations on homeowner remedies. Homeowners should negotiate changes to these provisions before signing to avoid turning a fixed-price contract into an open-ended cost-plus agreement.

Cost-Plus Contracts for Texas Homeowners: Transparency and Risk Management

Under a cost-plus contract, the homeowner reimburses the builder for actual construction costs, plus an agreed fee for overhead and profit. The homeowner typically provides a budget, but there is no guarantee that the final cost will remain within that budget. While this structure can promote flexibility and quality, it creates significant risk of cost overruns. Contractors, on the other hand, face minimal risk, as they are reimbursed for all costs, and their fee—whether fixed or percentage-based—remains stable.

Homeowners should require provisions that mandate submission of supporting documentation (e.g., invoices, receipts, timecards) with each draw request. They should also retain the right to audit project records during construction and for at least two years after completion. These protections are essential for verifying costs and preventing overbilling.

TAB’s Residential Construction Contract – Cost Plus (For Use with Homes Constructed on the Owner’s Property) (TAB 2.1) Contract form includes standard language that often omits these protections. If this contract type is used, we recommend negotiating the inclusion of a Guaranteed Maximum Price (GMP), along with a savings clause that allows shared savings if the project comes in under budget. A guaranteed maximum price (GMP) is a provision used in conjunction with a cost-plus contract to cap the total project costs. Under this arrangement, the contractor is reimbursed for actual costs incurred—such as labor, materials, and equipment—plus a contractor fee, up to the agreed maximum price. If project costs exceed the GMP, the contractor absorbs the overrun unless the GMP is formally increased through a change order. This structure incentivizes the contractor to estimate costs accurately before the contract is executed and to manage expenses diligently throughout the project.

Material Price Escalation Clauses in Texas Home Construction Contracts

Many builder contracts, including TAB forms, contain material escalation clauses that allow builders to raise the contract price if certain materials exceed a 10% increase. The 2023 TAB escalation clause applies broadly to nearly all construction materials, imposes no cost-sharing, and requires the homeowner to accept and sign a Change Order or risk being in breach.

This creates significant exposure for homeowners, especially those relying on fixed construction loans. The lack of notice, approval rights, or caps on price increases converts a fixed-price agreement into a floating-price contract.

To protect against this, homeowners should negotiate to:

• Limit escalation to a defined list of materials
• Require notice and written justification before any increase
• Impose cost-sharing thresholds or caps
• Include price verification from third-party market data

Change Orders: Ensuring Fair Modifications to the Contract Scope

Change orders document alterations to the scope of work. While necessary, they are often misused by builders to impose new costs. TAB contracts give builders discretion to approve or deny changes and often require payment in full before the work proceeds.

Homeowners should insist on provisions requiring mutual written approval for all change orders, with exceptions limited to emergencies. Advance payment should only be required when both parties agree to scope, price, and schedule impact. Builders should not be allowed to unilaterally impose changes for HOA compliance, structural concerns, or code issues without proper documentation.

Liquidated Damages and Completion Dates: Holding Builders Accountable

TAB contracts often include only estimated completion dates and broad delay disclaimers. Homeowners relying on construction loans or selling a prior home face financial consequences when builders miss deadlines. These contracts also require waivers of consequential damages.

To protect against delay-related losses:

• Insert a firm completion date
• Add a “time is of the essence” clause
• Define limited delay exceptions
• Include a daily liquidated damages clause that reflects real-world loss

These terms ensure the builder is incentivized to stay on schedule and that the owner has a remedy if delays occur.

Problematic Provisions in the Texas Association of Builders (TAB) Contracts

TAB contracts are comprehensive but builder-oriented. Key provisions that should be revised or removed include:

• 5.D Final Payment: Waives the owner’s obligation to withhold the 10% reserved funds until 30 days from substantial completion as required under Chapter 53 of the Texas Property Code. Requires final payment to the builder before punch list or warranty work is completed.
• 6.C Completion of Improvements: Disclaims any firm completion date and waives delay damages. Since most new home construction projects are funded through a construction loan with a fixed maturity date, this provision fails to account for the Owner’s potential liability to the lender if the project is not completed by the loan’s maturity date.
• 7 Substantial Completion Inspection, Release and Occupancy: Requires acceptance and release of liability after a single walkthrough of the home. Additionally, the provision prohibits the Owner from taking occupancy of the Improvements upon obtaining Substantial Completion, without written consent from the Builder, until the Builder is paid the Total Contract Price, even when there is a “good faith dispute” over Final Payment or when the Owner holds title to the Improvements.
• 13.C Remedies of Owner: Severely limits homeowner remedies for builder default. These limitations fail to account for potential actual damages resulting from significant project delays, increased costs to complete the Improvements with a replacement contractor, or defective workmanship.
• 14.D Objections to Work: Requires the owner to promptly object to any work not in compliance with the Contract Documents or the work is deemed accepted; builder determines if error is within “acceptable tolerances.”
• 16.N Termination/Stipulated Damages Prior to Substantial Completion: Allows the Builder to unilaterally terminate the contract for convenience in the event of a bona fide dispute if the dispute cannot be resolved to the mutual satisfaction of both parties.
• 16.Q Mutual Limitation of Claims and Remedies: Waives the Owner’s right to recover special, indirect, or consequential damages, including mental anguish. Further, this provision reduces the four year statute of limitations to two years and one day, shortening the time frame for Owners to assert valid claims.
• 16.T Escalation of Certain Materials: Allows the builder to unilaterally increase a fixed price contract if certain categories of materials increase in price after execution of the contract without owner approval.

These provisions shift risk and liability away from the builder and onto the homeowner. We routinely revise these clauses to ensure fairness and legal protection for our clients.

Frequently Asked Questions (FAQs)

What should I look out for in a Texas home construction contract?

Watch for vague completion dates, escalation of material costs clauses, reduction of statute of limitations, waiver of remedies in the event of a builder breach, the builder’s right to unilaterally terminate the contract without cause, waiver of the obligation to withhold 10% reserved funds from progress payments, waiver of implied warranties in exchange for a limited express warranty, and broad change order provisions. Many builder contracts favor the contractor and limit homeowner remedies.

Can I modify a builder’s contract before signing?

Yes. Builders often present TAB form contracts as non-negotiable, but key provisions of any contract can and should be revised to better protect the homeowner. If a builder will not allow your construction lawyer to review and suggest modifications to the contract, then walk away from that builder. A good reliable builder should want to use a fair and neutral contract that protects both parties evenly.

What if I already signed the contract?

You still have legal rights. We can help you interpret the agreement, enforce performance, and address change order, delay, or pricing disputes.

Is the Texas Association of Builders (TAB) contract fair to homeowners?

TAB contracts are heavily builder-favorable. They require significant revisions to level the playing field. Never sign a form TAB contract without having it reviewed, explained and modified by an experienced residential construction lawyer.

Can I be charged more after signing a fixed-price contract?

Yes, the original agreed-upon price of a fixed price contract can be increased after being fully executed by the parties. The most commonly used provisions to increase the fixed price include: an escalation of material cost provision, allowance provision when the costs exceed the allotted budget, and by change order arising from necessity or owner directed modifications. These provisions should be reviewed and revised before signing.

If you are a homeowner preparing to enter into a new home construction or remodel contract, contact us before signing. We can review, explain, and modify the contract to ensure your rights are protected, the terms are clear, and that you are not exposed to unnecessary financial or legal risks.

If you have already signed a construction contract and have concerns about your rights, change orders, pricing, delays, or the builder’s obligations, we can still help. Our attorneys can review your agreement, explain your legal position, and advise you on how to enforce the contract or address any issues that have arisen during the project.