SRC-JXG H.B. 1522 76(R) BILL ANALYSIS
Senate Research Center H.B. 1522
By: Siebert (Armbrister)
Economic Development
5/10/1999
Engrossed
DIGEST
In the process of improving property, a general contractor pays the
involved contractors, subcontractors, and suppliers after receiving an
initial payment from an owner. Typically, the reason for any non-payment
to these involved parties is due to the general contractor not receiving
payment from the owner. In the event that payment is not received, the
subcontractors, who may be responsible for more than 80 percent of the
work, are still required to pay for labor and materials which can force the
subcontractors to borrow from a lender in order to pay workers and
suppliers. H.B. 1522 would increase the cash flow on construction projects
by requiring monthly billings, and would authorize contractors or
subcontractors to withhold work performance, if they have not yet been paid
10 days after notifying the owner or contractor.
PURPOSE
As proposed, H.B. 1522 increases prompt payment for work performed by
contractors or subcontractors on certain real property.
RULEMAKING AUTHORITY
This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 28.002, Property Code, to require an owner to pay
the amount to the contractor, less any amount withheld as authorized by
statute, rather than statutory offense, no later than the 35th day, rather
than 45th day, after the date the owner receives the request, if an owner
or a person authorized to act on behalf of the owner receives a written
payment request from a contractor for an amount that is allowed to the
contractor under the contract for properly performed work or suitably
stored or specially fabricated materials. Requires a contractor who
receives a payment under Subsection (a) or otherwise from an owner in
connection with a contract to improve real property to pay each of its
subcontractors the portion of the owner's payment, that is attributable to
work properly performed or materials suitably stored or specially
fabricated as provided under the contract by that subcontractor, rather
than if payment for stored materials is provided for in the contract.
Makes conforming changes.
SECTION 2. Amends Section 28.003, Property Code, to authorize the owner,
contractor, or subcontractor that is disputing its obligation to pay or the
amount of payment to withhold from the payment owed no more than 110
percent of the difference between the amount the obligee claims is due and
the amount the obligor claims is due, if a good faith dispute exists
concerning the amount owed for a payment requested or required by this
chapter under a contract of reconstruction of or improvements to, a
detached single-family residence, duplex, triplex, or quadruplex.
Authorizes the owner, contractor, or subcontractor that is disputing its
obligation to pay or the amount of payment to withhold from the payment
owed no more than 100 percent of the difference between the amount the
obligee claims is due and the amount the obligor claims is due, if a good
faith dispute exists concerning the amount owed for a payment requested or
required by this chapter under a contract of construction of or
improvements to real property, excluding a detached single-family
residence, duplex, triplex, or quadruplex. Makes conforming changes.
SECTION 3. Amends Section 28.008, Property Code, to require the date of
payment required of the owner pursuant to Section 28.002(a) to change from
the 35th day, rather than 45th, after the date the owner receives the
payment request to the fifth day after the date the owner receives loan
proceeds, in the event that certain conditions exist. Makes conforming
changes.
SECTION 4. Amends Chapter 28, Property Code, by adding Sections 28.009 and
28.010, as follows:
Sec. 28.009. RIGHT TO SUSPEND WORK. Authorizes the contractor or any
subcontractor to suspend contractually required performance the 10th day
after the date the contractor or subcontractor gives the owner and the
owner's lender written notice informing the owner and lender that payment
has not been received, and stating the intent of the contractor or
subcontractor to suspend performance for nonpayment, if an owner fails to
pay the contractor the undisputed amount within the time limits provided by
this chapter. Requires the contractor or subcontractor to give the owner's
lender the written notice only if certain conditions exist, for purposes of
Subsection (a). Provides that a contractor or subcontractor who suspends
performance as provided by this section is not subject to certain
conditions. Requires a notification that a good faith dispute for payment
exists provided under Subsection (c) to include a list of specific reasons
for nonpayment. Entitles the subcontractor to a reasonable opportunity to
cure the listed items, or offer a reasonable amount to compensate for
listed items that cannot be promptly cured, if a reason specified includes
labor, services, or materials provided by a subcontractor that are not
provided in compliance with the contract. Provides that this section does
not apply to a contract for the construction of or improvements to a
detached single-family residence, duplex, triplex, or quadruplex, or a
contract to improve real property for a governmental entity. Provides that
the rights and remedies provided by this section are in addition to rights
and remedies provided by this chapter or other law.
Sec. 28.010. EXEMPTION FOR MINERAL DEVELOPMENT AND OILFIELD SERVICES.
Provides that this chapter does not apply to certain agreements. Defines
"agreement," and "well or mine services."
SECTION 5. Effective date: September 1, 1999.
Makes application of this Act prospective.
SECTION 6. Emergency clause.