1-1     By:  Wentworth                                        S.B. No. 1274
 1-2           (In the Senate - Filed March 11, 1999; March 11, 1999, read
 1-3     first time and referred to Committee on Economic Development;
 1-4     May 14, 1999, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 4, Nays 0; May 14, 1999,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1274                   By:  Madla
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to certain procedures involving retainage payments to real
1-11     property construction subcontractors.
1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13           SECTION 1.  Subchapter A, Chapter 53, Property Code, is
1-14     amended by adding Section 53.004 to read as follows:
1-15           Sec. 53.004.  RETAINAGE.  (a)  Any retainage withheld accrues
1-16     interest at the prime rate payable to the person entitled to
1-17     receive the retained funds. Any retainage withheld after the 45th
1-18     day after the date work is completed, as defined by Section 53.106,
1-19     accrues interest at 1-1/2 percent each month payable to the person
1-20     entitled to receive the retained funds.  In this subsection, "prime
1-21     rate" means the interest rate prevailing in the market as published
1-22     by reputable public sources on the date the work commences.
1-23           (b)  Interest on retained funds stops accruing under this
1-24     section on the earlier of:
1-25                 (1)  the date the funds are delivered;
1-26                 (2)  the date the funds are mailed, if the funds are
1-27     delivered not later than the third day after the date the funds are
1-28     mailed; or
1-29                 (3)  the date a judgment is entered in an action
1-30     brought to recover the retained funds.
1-31           SECTION 2.  (a)  This Act takes effect September 1, 1999.
1-32           (b)  The changes in law made by this Act apply only to
1-33     matters relating to or claims arising under an original contract,
1-34     as that term is defined by Section 53.001, Property Code, that is
1-35     executed on or after September 1, 1999.  Matters relating to or
1-36     claims arising under an original contract that was executed before
1-37     September 1, 1999, are governed by the law as it existed on the
1-38     date the original contract was executed, and the former law is
1-39     continued in effect for that purpose.
1-40                                  * * * * *