SRC-DBM S.B. 1274 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 1274
76R8788  PAM-DBy: Wentworth
Economic Development
4/19/1999
As Filed


DIGEST 

Currently, the Property Code does not adequately protect subcontractors
from the ability of general contractors and owners to withhold the payment
of statutory retainage without incurring a penalty. When no legitimate
threat exists where a retainage will be used to satisfy a perfected claim
by a protected class under Chapter 53, Property Code, subcontractors are
not protected from a unilateral decision by a general contractor or owner
to withhold or delay statutory retainage payments. "Retainage" means a
percentage of the contract price is retained by an owner during the
progress of work under an original contract for which a mechanic's lien may
be claimed and for 30 days after the work is completed.  The retained funds
secure payment to those who furnish material and labor for any contractor
or subcontractor in the performance of work.  S. B. 1274 would set forth
procedures involving the retainage of payments to real property
construction subcontractors. 

PURPOSE

As proposed, S.B. 1274 sets forth procedures involving the retainage of
payments to real property construction subcontractors. 

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 Chapter 53A, Property Code, by adding Section 53.004, as
follows: 

Sec. 53.004.  RETAINAGE.  Prohibits a person contracting with a
subcontractor to perform labor or furnish labor, materials, or specially
fabricated materials under or by virtue of a contract with the owner or the
owner's agent, trustee, receiver, contractor, or subcontractor from
requiring  the subcontractor to execute an agreement providing for
retainage in a percentage greater than the retainage percentage in the
original contract.  Provides that any retainage withheld as provided by
this chapter accrues interest at six percent each year payable to the
person entitled to receive the retained funds. 

SECTION 2.  Amends Section 53.081(c), Property Code, to authorize an owner
to withhold funds immediately on receipt of the notice, if notice is sent
under Section 53.057 or 53.252(c).  Deletes text authorizing an owner to
withhold funds immediately on receipt of a copy of the claimant's affidavit
prepared in accordance with Sections 53.052 through 53.055. 

SECTION 3.  Amends Section 53.103, Property Code, to provide that a
claimant, except as provided by Subsection (b), has a lien on the retained
funds, if the claimant performs certain actions.  Provides that, if a
claimant sends notice under Section 53.057 or 53.252(c), the claimant has a
lien on retained funds. 

SECTION 4.  Amends Section 53.252(c), Property Code, to require notice to
be sent as provided by Section 53.057, if applicable, and the notice to the
owner must state certain conditions to authorize an owner to withheld funds
under Subchapter D. 

SECTION 5.Effective date: September 1, 1999.
  Makes application of this Act prospective.