By: Armbrister S.B. No. 1483
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
AN ACT
1-1 relating to prompt payment requirements for work performed by
1-2 contractors and subcontractors on certain real property.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 28.002, Property Code, is amended to read
1-5 as follows:
1-6 Sec. 28.002. Prompt Pay Required. (a) A contractor shall
1-7 submit invoices at least monthly to the owner for goods or services
1-8 provided for the owner, including goods or services provided to the
1-9 contractor by a subcontractor. A subcontractor shall submit
1-10 invoices at least monthly to the contractor for goods or services
1-11 provided to the subcontractor by another subcontractor.
1-12 (b) [(a)]If an owner or a person authorized to act on behalf
1-13 of the owner receives a written payment request from a contractor
1-14 for an amount that is allowed to the contractor under the contract
1-15 for properly performed work or suitably stored or specially
1-16 fabricated materials, the owner shall pay the amount to the
1-17 contractor, less any amount withheld as authorized by statute
1-18 [statutory offsets], not later than the 30th [45th] day after the
1-19 date the owner receives the request.
1-20 (c) [(b)] A contractor who receives a payment under
1-21 Subsection (b) [(a)] or otherwise from an owner in connection with
1-22 a contract to improve real property shall pay each of its
2-1 subcontractors the portion of the owner's payment, including
2-2 interest, if any, that is attributable to work properly performed
2-3 or materials suitably stored or specially fabricated as provided
2-4 under the contract by that subcontractor [if payment for stored
2-5 materials is provided for in the contract], to the extent of that
2-6 subcontractor's interest in the owner's payment. The payment
2-7 required by this subsection must be made not later than the seventh
2-8 day after the date the contractor receives the owner's payment.
2-9 (d) [(c)] A subcontractor who receives a payment under
2-10 Subsection (c) [(b)] or otherwise from a contractor in connection
2-11 with a contract to improve real property shall pay each of its
2-12 subcontractors the portion of the payment, including interest, if
2-13 any, that is attributable to work properly performed or materials
2-14 suitably stored or specially fabricated as provided under the
2-15 contract by that subcontractor [if payment for stored materials is
2-16 provided for in the contract], to the extent of that
2-17 subcontractor's interest in the payment. The payment required by
2-18 this subsection must be made not later than the seventh day after
2-19 the date the subcontractor receives the contractor's payment.
2-20 SECTION 2. Section 28.003, Property Code, is amended to read
2-21 as follows:
2-22 Sec. 28.003. Exception for Good Faith Dispute; Withholding.
2-23 If a good faith dispute exists concerning the amount owed for a
2-24 payment requested or required by this chapter, the owner,
2-25 contractor, or subcontractor, that is disputing its obligation to
2-26 pay or the amount of payment, may withhold from the payment owed
3-1 not more than 100 [110] percent of the difference between the
3-2 amount the obligee claims is due and the amount the obligor claims
3-3 is due. A good faith dispute includes a dispute regarding whether
3-4 the work was performed in a proper manner.
3-5 SECTION 3. Section 28.006(b), Property Code, is amended to
3-6 read as follows:
3-7 (b) A written contract between an owner and a contractor for
3-8 improvements to or construction of a single-family residence may
3-9 provide that the payment required under Section 28.002(b)
3-10 [28.002(a)] be made not later than a date that occurs before the
3-11 61st day after the date the owner receives the payment request.
3-12 Notwithstanding Section 28.004(b), an unpaid amount under contract
3-13 subject to this subsection that allows payment later than the date
3-14 otherwise required under Section 28.002(b) [28.002(a)] bears
3-15 interest at the rate of 1-1/2 percent each month.
3-16 SECTION 4. Section 28.008, Property Code, is amended to read
3-17 as follows:
3-18 Sec. 28.008. Exception for Failure of Lender To Disburse
3-19 Funds. The date of payment required of the owner pursuant to
3-20 Section 28.002(b) [28.002(a)] shall change from the 30th [45th] day
3-21 after the date the owner receives the payment request to the fifth
3-22 [5th] day after the date the owner receives loan proceeds in the
3-23 event that:
3-24 (1) the owner has obtained a loan intended to pay for all or
3-25 part of a contract to improve real property;
3-26 (2) the owner has timely and properly requested
4-1 disbursement of proceeds from that loan; and
4-2 (3) the lender is legally obligated to disburse such
4-3 proceeds to the owner, but has failed to do so within 30 [45] days
4-4 after the date the owner received the contractor's payment request.
4-5 SECTION 5. Chapter 28, Property Code, is amended by adding
4-6 Sections 28.009 and 28.010 to read as follows:
4-7 Sec. 28.009 RIGHT TO SUSPEND WORK. (a) If an owner fails
4-8 to pay the contractor the undisputed amount within the time limits
4-9 provided by this chapter, the contractor or any subcontractor may
4-10 suspend contractually required performance the 10th day after the
4-11 date the contractor or subcontractor gives the owner written
4-12 notice:
4-13 (1) informing the owner that payment has not been
4-14 received; and
4-15 (2) stating the intent of the contractor or
4-16 subcontractor to suspend performance for nonpayment.
4-17 (b) A contractor or any subcontractor who suspends
4-18 performance as provided by this section is not:
4-19 (1) required to supply further labor, services, or
4-20 materials until the person is paid the amount provided by this
4-21 chapter, plus costs for demobilization and remobilization; or
4-22 (2) responsible for damages resulting from suspending
4-23 work if the contractor or subcontractor have not been notified in
4-24 writing before suspending performance that payment has been made or
4-25 that a good faith dispute for payment exists.
4-26 (c) A notification that a good faith dispute for payment
5-1 exists provided under Subsection (b) must include a list of
5-2 specific reasons for nonpayment. If a reason specified includes
5-3 labor, services, or materials provided by a subcontractor that are
5-4 not provided in compliance with the contract, the subcontractor is
5-5 entitled to a reasonable opportunity to:
5-6 (1) cure the listed items; or
5-7 (2) offer a reasonable amount to compensate for listed
5-8 items that cannot be promptly cured.
5-9 (d) The rights and remedies provided by this section are in
5-10 addition to rights and remedies provided by this chapter or other
5-11 law.
5-12 Section 28.010. DIRECT CAUSE OF ACTION AGAINST OWNER.
5-13 (a) If an owner fails to pay the contractor the undisputed amount
5-14 within the time limits provided by this chapter, the contractor or
5-15 a subcontractor has a direct cause of action against the owner the
5-16 10th day after the date the contractor or subcontractor gives the
5-17 owner written notice stating the intent of the contractor or
5-18 subcontractor to exercise its rights under this section.
5-19 (b) The contractor or subcontractor may bring a direct cause
5-20 of action against the owner under this section to recover payment
5-21 for:
5-22 (1) labor, services, or materials provided under
5-23 contract; and
5-24 (2) all reasonable damages, including the reasonable
5-25 cost of demobilization and remobilization.
5-26 (c) In a direct action brought under this section, the owner
6-1 may offset the payment required for damages for labor, services,
6-2 and materials provided by the contractor that do not comply with
6-3 the contract requirements.
6-4 (d) An agreement by a contractor to indemnify or defend the
6-5 owner is unenforceable only to the extent that it applies to a
6-6 direct cause of action by a subcontractor under this section. An
6-7 agreement by a subcontractor to idemnify or defend the owner,
6-8 contractor, or another subcontractor is unenforceable only to the
6-9 extent that it applies to a direct cause of action by a
6-10 subcontractor under this section.
6-11 (e) The rights and remedies provided by this section are in
6-12 addition to rights and remedies provided by this chapter or other
6-13 law.
6-14 SECTION 6. Subchapter A, Chapter 2251, Government Code, is
6-15 amended by adding Sections 2251.004 and 2251.005 to read as
6-16 follows:
6-17 Sec. 2251.004. WAIVER PROHIBITED. The provisions of this
6-18 chapter may not be waived by contract or otherwise.
6-19 Sec. 2251.005. TIME FOR SUBMITTING INVOICES UNDER CERTAIN
6-20 CONTRACTS. (a) This section applies only to the submission of
6-21 invoices under a contract with a governmental entity to improve
6-22 real property or to perform construction or maintenance services.
6-23 (b) A vendor shall submit invoices to the governmental
6-24 entity periodically, but no less often than monthly, for all goods
6-25 and services provided by or through the vendor for the governmental
6-26 entity, including those goods and services provided to the vendor
7-1 by a subcontractor.
7-2 (c) A subcontractor shall submit invoices to the vendor
7-3 periodically, but no less often than monthly, for all goods and
7-4 services provided by or through the subcontractor for the vendor,
7-5 including those goods and services provided to the subcontractor by
7-6 another subcontractor.
7-7 SECTION 7. (a) This Act takes effect September 1, 1999.
7-8 (b) The changes in law made by this Act apply only to a
7-9 contract or agreement entered into on or after the effective date
7-10 of this Act. A contract or agreement entered into before the
7-11 effective date of this Act is governed by the law in effect when
7-12 the contract was entered into, and the former law is continued in
7-13 effect for that purpose.
7-14 SECTION 8. The importance of this legislation and the
7-15 crowded condition of the calendars in both houses create an
7-16 emergency and an imperative public necessity that the
7-17 constitutional rule requiring bills to be read on three several
7-18 days in each house be suspended, and this rule is hereby suspended.