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Regular Session, 2010
SENATE BILL NO. 218
BY SENATOR APPEL
CONTRACTS. Provides relative to security retainage under the Private Works Act.
(8/15/10)
AN ACT1
To enact R.S. 9:4815, relative to the Private Works Act; to provide for the escrow of funds2
due under certain contracts; to provide for the duties of an escrow agent; to provide3
for the release of funds from escrow; to provide for exceptions; and to provide for4
related matters.5
Be it enacted by the Legislature of Louisiana:6
Section 1. R.S. 9:4815 is hereby enacted to read as follows: 7
ยง4815. Escrow of funds due under contract; procedures8
A. When, under the provisions of this Part, a contract in the amount of9
fifty thousand dollars or more is entered into between an owner and a10
contractor and if in accordance with the terms of such contract funds earned by11
the contractor are withheld as retainage by the owner from periodic payments12
due to the contractor then such funds shall be deposited by the owner into an13
interest bearing escrow account. The provisions of this Section shall not apply14
to a contract for a single family residence or double family residence. The15
provisions of this Section also shall not apply to a contract for the construction16
or improvement of the following types of industrial facilities that are, or will be,17 SB NO. 218
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engaged in activities defined or classified under one or more of the following1
subsectors, industry groups, or industries of the 1997 North American Industry2
Classifications System (NAICS):3
(1) 22111 electric power generation.4
(2) 321 wood products manufacturing.5
(3) 322 paper manufacturing.6
(4) 324 petroleum and coal products manufacturing.7
(5) 325 chemical manufacturing.8
(6) 326 plastics and rubber products manufacturing.9
(7) 331 primary metals manufacturing.10
(8) 562211/562212 hazardous and solid waste landfills.11
(9) 422710 bulk stations and materials.12
(10) 486110 crude oil pipelines.13
(11) 486910 refined petroleum products pipelines.14
(12) 486210 natural gas pipelines.15
(13) 486990 other pipelines.16
(14) 211112 natural gas processing plants.17
B. An escrow account under the provisions of this Section shall be18
located at a qualified financial institution and shall be under the control of an19
escrow agent. The escrow account and escrow agent shall be selected by mutual20
agreement between the owner and the contractor.21
C. Upon completion of the work that is the subject of the contract, the22
funds, including any interest located in the escrow account shall be released23
from escrow under the following conditions:24
(1) If there are no existing claims by the owner, the whole amount shall25
be paid to the contractor within three business days upon receipt by the escrow26
agent of a written release signed by the contractor and the owner.27
(2) If there is a dispute between the owner and contractor and the28
contract does not provide for binding arbitration of such dispute:29 SB NO. 218
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(a) Undisputed amounts shall be released by the escrow agent within1
three business days of receipt of a notarized request of the contractor.2
(b) Disputed amounts that are the subject of a judicial proceeding shall3
be released by the escrow agent within three business days of the receipt of a4
final order by the court. Upon receipt of the order of the court, the escrow5
agent shall pay the contractor or owner such amounts as are determined by the6
court.7
(3) If there is a dispute between the owner and contractor and the8
contract provides for binding arbitration of such dispute: 9
(a) Undisputed amounts shall be released by the escrow agent within10
three business days of receipt of a notarized request of the contractor.11
(b) Disputed amounts that are the subject of binding arbitration under12
the contract shall be released by the escrow agent within three business days of13
the receipt of a final order by the arbitrator or arbitrators who have been14
selected by mutual agreement between the owner and the contractor. Upon15
receipt of the order of the arbitrator or arbitrators, the escrow agent shall pay16
the contractor or owner such amounts as are determined by the arbitrator or17
arbitrators under the rules as defined in the contract between the owner and the18
contractor. 19
D. Receipt by the escrow agent or the qualified financial institution in20
which the escrow account is maintained of what purports to be a written release21
signed by the contractor and owner, or an order by a court or arbitrator, shall22
be a full release and discharge of the escrow agent for transfer of funds to the23
contractor. Further, neither the escrow agent nor the qualified financial24
institution in which the escrow account is maintained shall not be held liable to25
any party based on any claim that the written release is unauthorized, forged,26
or otherwise fraudulent.27
E. Neither the escrow agent nor the qualified financial institution in28
which the escrow account is maintained pursuant to the provisions of this29 SB NO. 218
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Section shall have any liability to the owner, contractor, or any other person1
when complying with the provisions of this Section.2
The original instrument was prepared by Camille Sebastien Perry. The
following digest, which does not constitute a part of the legislative
instrument, was prepared by Christopher D. Adams.
DIGEST
Appel (SB 218)
Proposed law provides that when contracts of $50,000 or more under the Private Works Act
are entered into between an owner and a contractor and contract funds earned by the
contractor under the terms of the contract are withheld as retainage by the owner from
periodic payments due to the contractor, such funds are to be deposited into an interest
bearing escrow account. Proposed law shall not apply to a contract for a single family
residence, double family residence, or to a contract for the construction or improvement of
the following types of industrial facilities engaged in activities defined or classified under
one or more of the following subsectors, industry groups, or industries of the 1997 North
American Industry Classifications System (NAICS):
(1)22111 electric power generation.
(2)321 wood products manufacturing.
(3)322 paper manufacturing.
(4)324 petroleum and coal products manufacturing.
(5)325 chemical manufacturing.
(6)326 plastics and rubber products manufacturing.
(7)331 primary metals manufacturing.
(8)562211/562212 hazardous and solid waste landfills.
(9)422710 bulk stations and materials.
(10)486110 crude oil pipelines.
(11)486910 refined petroleum products pipelines.
(12)486210 natural gas pipelines.
(13)486990 other pipelines.
(14)211112 natural gas processing plants.
Proposed law requires the escrow account to be located at a financial institution under the
control of an escrow agent, both of which are to be mutually agreed upon by the parties to
the contract.
Proposed law requires funds, including any interest, in the escrow account to be released
upon the completion of the contract as follows:
(1)If there are no existing claims by the owner, the whole amount shall be paid to the
contractor within three business days upon receipt by the escrow agent of a written
release signed by the contractor and the owner.
(2) If there is a dispute between the owner and contractor and the contract does not
provide for binding arbitration of such dispute, undisputed amounts shall be released
by the escrow agent within three business days of receipt of a notarized request of
the contractor. Disputed amounts that are the subject of a judicial proceeding shall
be released by the escrow agent within three business days of the receipt of a final
order by the court specifying the amount of funds to be released.
(3) If there is a dispute between the owner and contractor and the contract provides for
binding arbitration of such dispute, undisputed amounts shall be released by the
escrow agent within three business days of receipt of a notarized request of the SB NO. 218
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Coding: Words which are struck through are deletions from existing law;
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contractor. Disputed amounts that are the subject of binding arbitration under the
contract shall be released by the escrow agent within three business days of the
receipt of a final order by the arbitrator specifying such amounts as are determined
by the arbitrator or arbitrators under the rules as defined in the contract.
Proposed law provides that receipt by the escrow agent or the qualified financial institution
in which the escrow account is maintained of what purports to be a written release signed
by the contractor and owner, or an order by a court or arbitrator shall be a full release and
discharge of the escrow agent or the qualified financial institution in which the escrow
account is maintained in addition to escrow agent for transfer of funds to the contractor.
Provides that the escrow agent or the qualified financial institution in which the escrow
account is maintained shall not be held liable to any party based on any claim that the written
release is unauthorized, forged, or otherwise fraudulent. Provides that neither the escrow
agent not the qualified financial institutions in which the escrow account is maintained will
have any liability to the owner, contractor, or any other person when complying with this
proposed law.
Effective August 15, 2010.
(Adds R.S. 9:4815)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Judiciary A to the
original bill.
1. Changes "non-interest" to "interest" bearing account.
2. Provides that funds include any interest.
3. Changes "three days" to "three business days"
4. Provides that undisputed amounts shall be released by the escrow agent
withing three business days of receipt of a notarized request of a contractor.
5. Provides that receipt by the escrow agent of what purports to be a written
release shall be a full release and discharge of liability of the agent.
Senate Floor Amendments to engrossed bill.
1. Adds additional exceptions to include "double family residence" and a
contract for the construction or improvement of certain of industrial facilities
engaged in activities defined or classified under certain NAICS groups.
2. Provides for release of the undisputed portion of the escrow if there is a
dispute between the owner and contractor depending on whether the contract
does or does not provide for binding arbitration of such disputes.
3. Includes "qualified financial institution in which the escrow account is
maintained" in addition to escrow agent.
4. Changes liability to provide that neither the escrow agent nor the qualified
financial institutions in which the escrow account is maintained will have
liability to the owner, contractor, or any other person with regard to this
proposed law.