By Siebert H.B. No. 1522
Substitute the following for H.B. No. 1522:
By Siebert C.S.H.B. No. 1522
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to prompt payment requirements for work performed by
1-3 contractors and subcontractors on certain real property.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 28.002, Property Code, is amended to read
1-6 as follows:
1-7 Sec. 28.002. PROMPT PAY REQUIRED. (a) A contractor shall
1-8 submit invoices at least monthly to the owner for goods or services
1-9 provided for the owner, including goods or services provided to the
1-10 contractor by a subcontractor. A subcontractor shall submit
1-11 invoices at least monthly to the contractor for goods or services
1-12 provided to the subcontractor by another subcontractor. This
1-13 subsection does not apply to a contractor or subcontractor
1-14 providing goods or services for an owner under a contract for
1-15 construction of or improvements to a detached single-family
1-16 residence, duplex, triplex, or quadruplex.
1-17 (b) If an owner or a person authorized to act on behalf of
1-18 the owner receives a written payment request from a contractor for
1-19 an amount that is allowed to the contractor under the contract for
1-20 properly performed work or suitably stored or specially fabricated
1-21 materials, the owner shall pay the amount to the contractor, less
1-22 any amount withheld as authorized by statute [statutory offsets],
1-23 not later than the 35th [45th] day after the date the owner
1-24 receives the request.
2-1 (c) [(b)] A contractor who receives a payment under
2-2 Subsection (b) [(a)] or otherwise from an owner in connection with
2-3 a contract to improve real property shall pay each of its
2-4 subcontractors the portion of the owner's payment, including
2-5 interest, if any, that is attributable to work properly performed
2-6 or materials suitably stored or specially fabricated as provided
2-7 under the contract by that subcontractor [if payment for stored
2-8 materials is provided for in the contract], to the extent of that
2-9 subcontractor's interest in the owner's payment. The payment
2-10 required by this subsection must be made not later than the seventh
2-11 day after the date the contractor receives the owner's payment.
2-12 (d) [(c)] A subcontractor who receives a payment under
2-13 Subsection (c) [(b)] or otherwise from a contractor in connection
2-14 with a contract to improve real property shall pay each of its
2-15 subcontractors the portion of the payment, including interest, if
2-16 any, that is attributable to work properly performed or materials
2-17 suitably stored or specially fabricated as provided under the
2-18 contract by that subcontractor [if payment for stored materials is
2-19 provided for in the contract], to the extent of that
2-20 subcontractor's interest in the payment. The payment required by
2-21 this subsection must be made not later than the seventh day after
2-22 the date the subcontractor receives the contractor's payment.
2-23 SECTION 2. Section 28.003, Property Code, is amended to read
2-24 as follows:
2-25 Sec. 28.003. EXCEPTION FOR GOOD FAITH DISPUTE; WITHHOLDING.
2-26 (a) If a good faith dispute exists concerning the amount owed for
2-27 a payment requested or required by this chapter under a contract
3-1 for construction of or improvements to a detached single-family
3-2 residence, duplex, triplex, or quadruplex, the owner, contractor,
3-3 or subcontractor that is disputing its obligation to pay or the
3-4 amount of payment may withhold from the payment owed not more than
3-5 110 percent of the difference between the amount the obligee claims
3-6 is due and the amount the obligor claims is due. A good faith
3-7 dispute includes a dispute regarding whether the work was performed
3-8 in a proper manner.
3-9 (b) If a good faith dispute exists concerning the amount
3-10 owed for a payment requested or required by this chapter under a
3-11 contract for construction of or improvements to real property,
3-12 excluding a detached single-family residence, duplex, triplex, or
3-13 quadruplex, the owner, contractor, or subcontractor that is
3-14 disputing its obligation to pay or the amount of payment may
3-15 withhold from the payment owed not more than 100 percent of the
3-16 difference between the amount the obligee claims is due and the
3-17 amount the obligor claims is due. A good faith dispute includes a
3-18 dispute regarding whether the work was performed in a proper
3-19 manner.
3-20 SECTION 3. Section 28.006(b), Property Code, is amended to
3-21 read as follows:
3-22 (b) A written contract between an owner and a contractor for
3-23 improvements to or construction of a single-family residence may
3-24 provide that the payment required under Section 28.002(b)
3-25 [28.002(a)] be made not later than a date that occurs before the
3-26 61st day after the date the owner receives the payment request.
3-27 Notwithstanding Section 28.004(b), an unpaid amount under contract
4-1 subject to this subsection that allows payment later than the date
4-2 otherwise required under Section 28.002(b) [28.002(a)] bears
4-3 interest at the rate of 1-1/2 percent each month.
4-4 SECTION 4. Section 28.008, Property Code, is amended to read
4-5 as follows:
4-6 Sec. 28.008. EXCEPTION FOR FAILURE OF LENDER TO DISBURSE
4-7 FUNDS. The date of payment required of the owner pursuant to
4-8 Section 28.002(b) [28.002(a)] shall change from the 35th [45th] day
4-9 after the date the owner receives the payment request to the fifth
4-10 [5th] day after the date the owner receives loan proceeds, in the
4-11 event that:
4-12 (1) the owner has obtained a loan intended to pay for
4-13 all or part of a contract to improve real property;
4-14 (2) the owner has timely and properly requested
4-15 disbursement of proceeds from that loan; and
4-16 (3) the lender is legally obligated to disburse such
4-17 proceeds to the owner, but has failed to do so within 35 [45] days
4-18 after the date the owner received the contractor's payment request.
4-19 SECTION 5. Chapter 28, Property Code, is amended by adding
4-20 Sections 28.009 and 28.010 to read as follows:
4-21 Sec. 28.009. RIGHT TO SUSPEND WORK. (a) If an owner fails
4-22 to pay the contractor the undisputed amount within the time limits
4-23 provided by this chapter, the contractor or any subcontractor may
4-24 suspend contractually required performance the 10th day after the
4-25 date the contractor or subcontractor gives the owner and the
4-26 owner's lender written notice:
4-27 (1) informing the owner and lender that payment has
5-1 not been received; and
5-2 (2) stating the intent of the contractor or
5-3 subcontractor to suspend performance for nonpayment.
5-4 (b) For purposes of Subsection (a), the contractor or
5-5 subcontractor must give the owner's lender the written notice only
5-6 if:
5-7 (1) the owner has obtained a loan intended to pay for
5-8 all or part of the construction project;
5-9 (2) the lender has remitted funds, including
5-10 acquisition funds, for construction purposes;
5-11 (3) the loan obtained:
5-12 (A) is evidenced by a promissory note secured by
5-13 a deed of trust recorded in the real property records of the county
5-14 in which the real property that is the subject of the contract is
5-15 located; and
5-16 (B) is not only for the acquisition of personal
5-17 property or secured only by a security instrument;
5-18 (4) the owner or lender, at the lender's option:
5-19 (A) securely posts not later than the 10th day
5-20 after the date construction commences a sign on the project site in
5-21 a prominent place accessible to each contractor, subcontractor, and
5-22 supplier that states the lender's name, address, and the person to
5-23 whom any notice should be sent; and
5-24 (B) maintains the sign during the pendency of
5-25 the construction project;
5-26 (5) not later than the 10th day after the date
5-27 construction commences, the owner or lender, at the lender's
6-1 option, provides a written copy of the notice prescribed by
6-2 Subdivision (4) to the contractor and any subcontractor or supplier
6-3 identified by the contractor by depositing the notice properly
6-4 addressed in the United States mail, first class, postage paid; and
6-5 (6) not later than the 10th day after the date a
6-6 subcontractor or supplier performing labor or furnishing materials
6-7 or equipment for the construction project, the owner, contractor,
6-8 or subcontractor provides a written copy of the notice prescribed
6-9 by Subdivision (4) to the subcontractor or supplier.
6-10 (c) A contractor or subcontractor who suspends performance
6-11 as provided by this section is not:
6-12 (1) required to supply further labor, services, or
6-13 materials until the person is paid the amount provided by this
6-14 chapter, plus costs for demobilization and remobilization; or
6-15 (2) responsible for damages resulting from suspending
6-16 work if the contractor or subcontractor has not been notified in
6-17 writing before suspending performance that payment has been made or
6-18 that a good faith dispute for payment exists.
6-19 (d) A notification that a good faith dispute for payment
6-20 exists provided under Subsection (c) must include a list of
6-21 specific reasons for nonpayment. If a reason specified includes
6-22 labor, services, or materials provided by a subcontractor that are
6-23 not provided in compliance with the contract, the subcontractor is
6-24 entitled to a reasonable opportunity to:
6-25 (1) cure the listed items; or
6-26 (2) offer a reasonable amount to compensate for listed
6-27 items that cannot be promptly cured.
7-1 (e) This section does not apply to:
7-2 (1) a contract for the construction of or improvements
7-3 to a detached single-family residence, duplex, triplex, or
7-4 quadruplex; or
7-5 (2) a contract to improve real property for a
7-6 governmental entity.
7-7 (f) The rights and remedies provided by this section are in
7-8 addition to rights and remedies provided by this chapter or other
7-9 law.
7-10 Sec. 28.010. DIRECT CAUSE OF ACTION AGAINST OWNER. (a) If
7-11 an owner fails to pay the contractor the undisputed amount within
7-12 the time limits provided by this chapter, the contractor or a
7-13 subcontractor has a direct cause of action against the owner to
7-14 recover payment for:
7-15 (1) labor, services, or materials provided under
7-16 contract; and
7-17 (2) all reasonable damages, including the reasonable
7-18 cost of demobilization and remobilization.
7-19 (b) The contractor or subcontractor may bring a direct cause
7-20 of action against the owner under this section beginning on the
7-21 10th day after the date the contractor or subcontractor gives the
7-22 owner written notice that the contractor or subcontractor intends
7-23 to exercise the rights and remedies provided by this section.
7-24 (c) In a direct action brought under this section, the owner
7-25 may offset the payment required for damages for labor, services, or
7-26 materials provided by the contractor that do not comply with the
7-27 contract requirements.
8-1 (d) An agreement by a contractor to indemnify or defend the
8-2 owner is unenforceable only to the extent that it applies to a
8-3 direct cause of action by a subcontractor under this section. An
8-4 agreement by a subcontractor to indemnify or defend the owner,
8-5 contractor, or another subcontractor is unenforceable only to the
8-6 extent that it applies to a direct cause of action by a
8-7 subcontractor under this section.
8-8 (e) This section does not apply to:
8-9 (1) a contract for the construction of or improvements
8-10 to a detached single-family residence, duplex, triplex, or
8-11 quadruplex; or
8-12 (2) a contract to improve real property for a
8-13 governmental entity.
8-14 (f) This section does not affect the requirements for
8-15 perfecting or enforcing a lien under Chapter 53.
8-16 (g) The rights and remedies provided by this section are in
8-17 addition to rights and remedies provided by this chapter or other
8-18 law.
8-19 SECTION 6. Subchapter A, Chapter 2251, Government Code, is
8-20 amended by adding Sections 2251.004 and 2251.005 to read as
8-21 follows:
8-22 Sec. 2251.004. WAIVER PROHIBITED. The provisions of this
8-23 chapter may not be waived by contract or otherwise.
8-24 Sec. 2251.005. TIME FOR SUBMITTING INVOICES UNDER CERTAIN
8-25 CONTRACTS. (a) This section applies only to the submission of
8-26 invoices under a contract with a governmental entity to improve
8-27 real property or to perform construction or maintenance services.
9-1 (b) A vendor shall submit invoices to the governmental
9-2 entity periodically, but no less often than monthly, for all goods
9-3 and services provided by or through the vendor for the governmental
9-4 entity, including those goods and services provided to the vendor
9-5 by a subcontractor.
9-6 (c) A subcontractor shall submit invoices to the vendor
9-7 periodically, but no less often than monthly, for all goods and
9-8 services provided by or through the subcontractor for the vendor,
9-9 including those goods and services provided to the subcontractor by
9-10 another subcontractor.
9-11 SECTION 7. (a) This Act takes effect September 1, 1999.
9-12 (b) The changes in law made by this Act apply only to a
9-13 contract or agreement involving work performed on real property by
9-14 a contractor or subcontractor that is entered into on or after the
9-15 effective date of this Act. A contract or agreement entered into
9-16 before the effective date of this Act is governed by the law in
9-17 effect when the contract was entered into, and the former law is
9-18 continued in effect for that purpose.
9-19 SECTION 8. The importance of this legislation and the
9-20 crowded condition of the calendars in both houses create an
9-21 emergency and an imperative public necessity that the
9-22 constitutional rule requiring bills to be read on three several
9-23 days in each house be suspended, and this rule is hereby suspended.