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A BILL TO BE ENTITLED
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AN ACT
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relating to trust fund protection for retainage for the benefit of |
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certain claimants under a construction loan or financing agreement. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 162.001, Property Code, is amended by |
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adding Subsections (e) and (f) to read as follows: |
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(e) Except as provided by Subsection (f), funds retained |
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under a retainage agreement or statutory retainage obligation by a |
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financial institution or other lender that provides a loan or |
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financing for improvements to specific real property in this state |
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wholly or partly secured by a lien on the property are trust funds |
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and the lender is the trustee. |
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(f) Subsection (e) does not apply to a loan or financing |
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agreement of less than $500,000 for the construction of a |
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single-family house or duplex used for residential purposes that |
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is: |
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(1) owned by one or more adult persons; |
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(2) used or intended to be used as a dwelling by one of |
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the owners; and |
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(3) wholly or partly secured by a lien on the property. |
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SECTION 2. Section 162.004(a), Property Code, is amended to |
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read as follows: |
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(a) This chapter does not apply to: |
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(1) a bank, savings and loan, or other lender, other |
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than a trustee under Section 162.001(e); |
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(2) a title company or other closing agent; or |
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(3) a corporate surety who issues a payment bond |
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covering the contract for the construction or repair of the |
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improvement. |
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SECTION 3. Section 162.005, Property Code, is amended by |
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adding Subdivision (7) to read as follows: |
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(7) "Retainage" means an amount representing part of a |
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construction contract payment that is not required to be paid to the |
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claimant within the month following the month in which labor is |
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performed, material is furnished, or specially fabricated material |
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is delivered. |
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SECTION 4. Section 162.031, Property Code, is amended by |
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amending Subsection (b) and adding Subsection (e) to read as |
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follows: |
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(b) Except for a trustee under Section 162.001(e), it [It] |
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is an affirmative defense to prosecution or other action brought |
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under Subsection (a) that the trust funds not paid to the |
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beneficiaries of the trust were used by the trustee to pay the |
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trustee's actual expenses directly related to the construction or |
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repair of the improvement or have been retained by the trustee, |
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after notice to the beneficiary who has made a request for payment, |
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as a result of the trustee's reasonable belief that the beneficiary |
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is not entitled to such funds or have been retained as authorized or |
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required by Chapter 53. |
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(e) It is not a misapplication of trust funds under this |
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chapter for a trustee under Section 162.001(e) to: |
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(1) make a payment of retainage funds to the property |
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owner or a contractor providing labor or materials to the real |
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property improvement that is security for the loan or financing |
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agreement; or |
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(2) interplead the funds into a court of competent |
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jurisdiction. |
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SECTION 5. The change in law made by this Act applies only |
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to funds retained under a loan or financing agreement made on or |
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after the effective date of this Act. Funds retained under a loan |
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or financing agreement made before the effective date of this Act |
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are governed by the law applicable to the funds immediately before |
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that date, and that law is continued in effect for that purpose. |
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SECTION 6. This Act takes effect September 1, 2011. |