BILL ANALYSIS

C.S.S.B. 841

By: Hughes

Trade, Workforce & Economic Development

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Under current law, certain payments in a construction project are considered trust funds to ensure that contractors and suppliers are paid properly. The bill sponsor has informed the committee that when a subcontractor or supplier fails to pay their vendors after receiving payment from the general contractor, the unpaid party has a claim against the trust funds to recover money. However, the bill sponsor has also informed the committee that recent court rulings have overturned the longstanding practice of reassigning such claims and allowing the affected party to legally recover funds that should have been paid to vendors, creating confusion and leaving contractors and suppliers without a clear path to recover unpaid funds. C.S.S.B. 841 seeks to restore the ability of affected contractors and suppliers to recover unpaid funds by providing for a qualified assignee of a trust fund claim to recover unpaid funds.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.S.B. 841 amends the Property Code to include a person who is the qualified assignee, as established under the bill's provisions, of an artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or who furnishes labor or material for the construction or repair of an improvement on specific real property in Texas among the beneficiaries of any trust funds paid or received in connection with the improvement.

C.S.S.B. 841 prohibits an assignment by a beneficiary of the beneficiary's interest in unpaid trust funds from being enforced unless the following conditions are satisfied:

· the assignment is made in writing not earlier than the date the assignee has paid the beneficiary in good and sufficient funds for the assignment and is not made as part of the beneficiary's construction contract;

· the assignee is a beneficiary, trustee, or property owner under the contract for the construction or repair of an improvement on real property in connection with which the payment of trust funds is made; and

· written notice of the assignment is provided to the property owner and the contractor on the project not later than the seventh day after the date the assignment is made.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF SENATE ENGROSSED AND SUBSTITUTE

While C.S.S.B. 841 may differ from the engrossed in minor or nonsubstantive ways, the following summarizes the substantial differences between the engrossed and committee substitute versions of the bill.

With respect to the assignee of an artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or who furnishes labor or material for the construction or repair of an improvement on specific real property in Texas, the substitute specifies that the assignee is a qualified assignee under the bill's provisions, whereas the engrossed did not.

With respect to the prohibition against an assignment by a beneficiary of the beneficiary's interest in unpaid trust funds from being enforced unless certain conditions are satisfied, the substitute includes a condition absent from the engrossed that written notice of the assignment is provided to the property owner and the contractor on the project not later than the seventh day after the date the assignment is made.