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


Senate Research CenterC.S.S.B. 1274
By: Wentworth
Economic Development
5/12/1999
Committee Report (Substituted)


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.  C.S.S.B. 1274 would set forth
procedures involving the retainage of payments to real property
construction subcontractors. 

PURPOSE

As proposed, C.S.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.  Provides that any retainage withheld accrues
interest at the prime rate.  Sets forth an interest accrual rate for
retainage withheld after a certain time. Defines "prime rate."  Sets forth
provisions for the end of accrual on retained funds. 

SECTION 2.Effective date: September 1, 1999.
  Makes application of this Act prospective.