EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0453*
SENATE BILL 453
C2, P2 3lr1520
CF 3lr2098
By: Senators Kramer, Gile, Jackson, Rosapepe, Salling, Watson, and West
Introduced and read first time: February 2, 2023
Assigned to: Finance
A BILL ENTITLED
AN ACT concerning 1
State and Private Construction Contracts – Prompt Payment Requirements 2
FOR the purpose of requiring a private construction contract to include a provision 3
requiring the owner to pay the contractor within a certain period of time or, if the 4
owner withholds all or part of an amount invoiced, to send a certain notification to 5
the contractor; establishing that amounts unpaid to a contractor accrue interest at a 6
certain rate; requiring a contract between a contractor and a subcontractor to 7
perform a portion of a private or State construction contract to include a provision 8
requiring the contractor to pay the subcontractor within a certain period of time or, 9
if the contractor withholds all or part of an amount invoiced, to send a certain 10
notification to the subcontractor; establishing that amounts unpaid to a 11
subcontractor accrue interest at a certain rate; and generally relating to prompt 12
payment on construction contracts. 13
BY repealing and reenacting, without amendments, 14
Article – Business Regulation 15
Section 17–601 16
Annotated Code of Maryland 17
(2015 Replacement Volume and 2022 Supplement) 18
BY adding to 19
Article – Business Regulation 20
Section 17–604 21
Annotated Code of Maryland 22
(2015 Replacement Volume and 2022 Supplement) 23
BY adding to 24
Article – State Finance and Procurement 25
Section 13–228 26
Annotated Code of Maryland 27
(2021 Replacement Volume and 2022 Supplement) 28 2 SENATE BILL 453
BY repealing and reenacting, without amendments, 1
Article – State Finance and Procurement 2
Section 15–103 and 15–104 3
Annotated Code of Maryland 4
(2021 Replacement Volume and 2022 Supplement) 5
SECTION 1. BE IT ENACTED BY THE GENERAL AS SEMBLY OF MARYLAND, 6
That the Laws of Maryland read as follows: 7
Article – Business Regulation 8
17–601. 9
(a) In this subtitle the following words have the meanings indicated. 10
(b) “Construction license” means a license issued by the clerk to do construction 11
business. 12
(c) (1) “Do construction business” means to agree to: 13
(i) pave or curb a sidewalk, street, or other public or private 14
property; 15
(ii) excavate earth, rock, or other material for a foundation or other 16
purpose; or 17
(iii) do work on or in a building or other structure that requires the 18
use of a building material, including: 19
1. paint; 20
2. stone; 21
3. brick; 22
4. mortar; 23
5. wood; 24
6. cement; 25
7. structural iron; 26
8. structural steel; 27
9. sheet iron; 28 SENATE BILL 453 3
10. galvanized iron; 1
11. metallic piping; 2
12. tin; 3
13. lead; 4
14. electric wiring; or 5
15. any other metal. 6
(2) “Do construction business” does not include home improvement as 7
defined in § 8–101 of this article. 8
(d) “Nonresident construction license” means a construction license issued by the 9
clerk to a person who is incorporated or has its principal office in another state. 10
17–604. 11
(A) (1) IN THIS SECTION THE FOLLOWING WORDS HAVE THE MEANINGS 12
INDICATED. 13
(2) “CONSTRUCTION CONTRACT ” MEANS A CONTRACT TO DO 14
CONSTRUCTION BUSINES S. 15
(3) “CONTRACTOR ” MEANS THE HOLDER OF A CONSTRUCTION 16
LICENSE WHO IS PARTY TO A CO NSTRUCTION CONTRACT . 17
(4) “OWNER” MEANS A PERSON OR EN TITY, OTHER THAN A PUBLIC 18
BODY, RESPONSIB LE FOR CONTRACTING . 19
(5) “SUBCONTRACTOR ” MEANS A PERSON, OTHER THAN A LABORER 20
OR SUPPLIER OF MATER IALS, WHO MAKES AN ORAL OR WRITTEN AGREEMENT WI TH: 21
(I) A CONTRACTOR TO PERF ORM ALL OR PART OF A 22
CONSTRUCTION CONTRAC T; OR 23
(II) ANOTHER SUBCONTRACTO R TO PERFORM ALL OR PART OF 24
A SUBCONTRACT TO A CONSTRUCTION CONTRACT. 25
(B) (1) A CONSTRUCTION CONTRAC T SHALL INCLUDE A PR OVISION THAT 26
REQUIRES THE OWNER T O PAY THE CONTRACTOR WITHIN 60 DAYS OF THE RECEIPT 27 4 SENATE BILL 453
OF AN INVOICE FOLLOW ING SATISFACTORY COMPLETION OF THE PORTION OF THE 1
WORK FOR WHICH THE C ONTRACTOR HAS INVOIC ED. 2
(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 3
TO REQUIRE AN OWNER TO PAY AMOUNTS INVOI CED THAT ARE SUBJECT TO 4
WITHHOLDING AS A RESULT OF THE C ONTRACTOR ’S NONCOMPLIANCE WITH THE 5
CONTRACT. 6
(3) IF AN OWNER WITHHOLDS ALL OR PAR T OF AN AMOUNT INVOI CED 7
BY A CONTRACTOR UNDE R PARAGRAPH (1) OF THIS SUBSECTION , THE OWNER SHALL 8
NOTIFY THE CONTRACTO R IN WRITING AND WIT H REASONABLE SPECIFI CITY WITHIN 9
60 DAYS OF THE RECEIPT OF THE INVOICE OF: 10
(I) THE OWNER ’S INTENTION TO WITHH OLD ALL OR PART OF 11
THE PAYMENT ; AND 12
(II) THE REASON FOR THE W ITHHOLDING. 13
(4) (I) IF AN OWNER DOES NOT PAY A CONTRACTOR AS REQUIRED 14
UNDER PARAGRAPH (1) OF THIS SUBSECTION , INTEREST SH ALL ACCRUE AT THE 15
RATE OF 9% PER ANNUM ON ANY AMO UNT THAT REMAINS UNP AID. 16
(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 17
AFTER THE OWNER RECE IVES THE INVOICE. 18
(5) NOTHING IN THIS SUBSE CTION MAY BE CONSTRU ED TO APPLY TO 19
OR PROHIBIT THE INCLUSION OF ANY RET AINAGE PROVISIONS IN A CONSTRUCTION 20
CONTRACT. 21
(C) (1) A CONTRACT BETWEEN A C ONTRACTOR AND A SUBC ONTRACTOR 22
TO PERFORM A PORTION OF A CONSTRUCTION CO NTRACT SHALL INCLUDE A 23
PROVISION THAT REQUI RES THE CONTRACTOR T O PAY THE SUBCONTRAC TOR 24
WITHIN: 25
(I) 60 DAYS OF THE RECEIPT OF AN INVOIC E FOLLOWING 26
SATISFACTORY COMPLETION OF THE PO RTION OF THE WORK FO R WHICH THE 27
SUBCONTRACTOR HAS INVOI CED; OR 28
(II) 7 DAYS AFTER RECEIPT O F PAYMENT BY THE OWN ER TO THE 29
CONTRACTOR FOR WORK PERFORMED BY THE SUBCONTRACTOR . 30
(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 31
TO REQUIRE A CONTRACTOR TO PAY AMOUNTS INVOI CED THAT ARE SUBJECT TO 32 SENATE BILL 453 5
WITHHOLDING AS A RES ULT OF THE SUBCONTRACTOR ’S NONCOMPLIANCE WITH THE 1
CONTRACT. 2
(3) IF A CONTRACTOR WITHHOLDS ALL OR PART OF A N AMOUNT 3
INVOICED BY A SUBCONTRACTOR UNDER PAR AGRAPH (1) OF THIS SUBSECTION , THE 4
CONTRACTOR SHALL NOTIFY THE SUBCONTRACTOR IN WRITIN G AND WITH 5
REASONABLE SPECIFICI TY WITHIN 60 DAYS OF THE REC EIPT OF THE INVOICE OF : 6
(I) THE CONTRACTOR ’S INTENTION TO WITHHOL D ALL OR PART 7
OF THE PAYMENT ; AND 8
(II) THE REASON FOR THE W ITHHOLDING. 9
(4) PAYMENT OF A CONTRACT OR BY AN OWNER MAY N OT BE A 10
REQUIRED CONDITION F OR PAYMENT OF A SUBC ONTRACTOR UNDER PARAGRAPH 11
(1) OF THIS SUBSECTION UNLESS THE OWNER IS I NSOLVENT OR HAS FILED FOR 12
BANKRUPTCY PROTECTION UNDER TITLE 11 OF THE UNITED STATES CODE. 13
(5) (I) IF A CONTRACTOR DOES NOT PAY A SUBCONTRACTOR AS 14
REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION , INTEREST SHALL ACCRU E 15
AT THE RATE OF 9% PER ANNUM ON ANY AMO UNT THAT REMAINS UNP AID. 16
(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 17
AFTER THE CONTRACTOR RECEIVES THE INVOICE . 18
(6) NOTHING IN THIS SUBSE CTION MAY BE CONSTRU ED TO APPLY TO 19
OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A 20
SUBCONTRACTOR CONTRACT. 21
Article – State Finance and Procurement 22
13–228. 23
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 24
INDICATED. 25
(2) “CONSTRUCTION CONTRACT ” MEANS A CONTRACT TO DO 26
CONSTRUCTION BUSINES S. 27
(3) “CONTRACTOR ” MEANS THE HOLDER OF A CONSTRUCTION 28
LICENSE WHO IS PARTY TO A CONSTRUCTION CO NTRACT. 29
6 SENATE BILL 453
(4) “DO CONSTRUCTION BUSIN ESS” HAS THE MEANING STAT ED IN § 1
17–601 OF THE BUSINESS REGULATION ARTICLE. 2
(5) “SUBCONTRACTOR ” MEANS A PERSON, OTHER THAN A LABORER 3
OR SUPPLIER OF MATER IALS, WHO MAKES AN ORAL OR WRITTEN AGREEMENT WI TH: 4
(I) A CONTRACTOR TO PERF ORM ALL OR PART OF A 5
CONSTRUCTION CONTRAC T; OR 6
(II) ANOTHER SUBCONTRACTO R TO PERFORM ALL OR PART OF 7
A SUBCONTRACT TO A C ONSTRUCTION CONTRACT . 8
(B) (1) A CONTRACT BETWEEN A C ONTRACTOR AND A SUBC ONTRACTOR 9
TO PERFORM A PORTION OF A CONSTRUCTION CO NTRACT SHALL INCLUDE A 10
PROVISION THAT REQUI RES THE CONTRACTOR T O PAY THE SUBCONTRAC TOR 11
WITHIN: 12
(I) 60 DAYS OF THE RECEIPT OF AN INVOICE FOLLOW ING 13
SATISFACTORY COMPLETION OF THE PORTION OF THE W ORK FOR WHICH THE 14
SUBCONTRACTOR HAS IN VOICED; OR 15
(II) 7 DAYS AFTER RECEIPT O F PAYMENT BY THE OWN ER TO THE 16
CONTRACTOR FOR WORK PERFORMED BY THE SUB CONTRACTOR . 17
(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 18
TO REQUIRE A CONTRAC TOR TO PAY AMOUNTS I NVOICED THAT ARE SUB JECT TO 19
WITHHOLDING AS A RES ULT OF THE SUBCONTRA CTOR’S NONCOMPLIANCE WITH THE 20
CONTRACT. 21
(3) IF A CONTRACTOR WITHH OLDS ALL OR PART OF AN AMOUNT 22
INVOICED BY A SUBCON TRACTOR UNDER PARAGR APH (1) OF THIS SUBSECTION , THE 23
CONTRACTOR SHALL NOT IFY THE SUBCONTRACTO R IN WRITING AND WIT H 24
REASONABLE SPECIFICI TY WITHIN 60 DAYS OF THE REC EIPT OF THE INVOICE OF : 25
(I) THE CONTRACTOR ’S INTENTION TO WITHH OLD ALL OR PART 26
OF THE PAYMENT ; AND 27
(II) THE REASON FOR THE W ITHHOLDING. 28
(4) PAYMENT OF A CONTRACT OR BY A UNIT MAY NOT BE A REQUIRE D 29
CONDITION FOR PAYMEN T OF A SUBCONTRACTOR UNDER PARAGRAPH (1) OF THIS 30
SUBSECTION. 31
SENATE BILL 453 7
(5) (I) IF A CONTRACTOR DOES NOT PAY A SUBCONTRAC TOR AS 1
REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION , INTEREST SHALL ACCRU E 2
AT THE RATE OF 9% PER ANNUM ON ANY AMO UNT THAT REMAINS UNP AID. 3
(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 4
AFTER THE CONTRACTOR RECEIVES THE INVOICE . 5
(6) NOTHING IN THIS SUBSE CTION MAY BE CONSTRUED TO APPLY T O 6
OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A 7
SUBCONTRACTOR CONTRA CT. 8
15–103. 9
It is the policy of the State to make a payment under a procurement contract within 10
30 days: 11
(1) after the day on which the payment becom es due under the 12
procurement contract; or 13
(2) if later, after the day on which the unit receives an invoice. 14
15–104. 15
(a) Except as provided in § 15–105 of this subtitle, interest shall accrue at the 16
rate of 9% per annum on any amount that: 17
(1) is due and payable by law and under the written procurement contract; 18
and 19
(2) remains unpaid more than 45 days after a unit receives an invoice. 20
(b) Interest shall accrue beginning on the 31st day after: 21
(1) the day on which payment becomes due under a procurement contract; 22
or 23
(2) if later, the day on which the unit receives an invoice. 24
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 25
October 1, 2023. 26