Maryland 2024 Regular Session

Maryland House Bill HB1365 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2
3	3	EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4	4	[Brackets] indicate matter deleted from existing law.
5	5	hb1365
6	6
7	7	HOUSE BILL 1365
8	8	C2, P2 4lr2371
9	9	HB 1097/23 – ECM & HGO CF SB 715
10	10	By: Delegates Valderrama and Boafo
11	11	Introduced and read first time: February 9, 2024
12	12	Assigned to: Economic Matters and Health and Government Operations
13	13
14	14	A BILL ENTITLED
15	15
16	16	AN ACT concerning 1
17	17
18	18	State and Private Construction Contracts and State Procurement Contracts – 2
19	19	Prompt Payment and Interest Requirements 3
20	20
21	21	FOR the purpose of requiring a private construction contract to include a provision 4
22	22	requiring the owner to pay the contractor within a certain period of time or, if the 5
23	23	owner withholds all or part of an amount invoiced, to send a certain notification to 6
24	24	the contractor; establishing that amounts unpaid to a contractor accrue interest at a 7
25	25	certain rate; requiring a contract between a contractor and a subcontractor to 8
26	26	perform a portion of a private or State construction contract to include a provision 9
27	27	requiring the contractor to pay the subcontractor within a certain period of time or, 10
28	28	if the contractor withholds all or part of an amount invoiced, to send a certain 11
29	29	notification to the subcontractor; establishing that amounts unpaid to a 12
30	30	subcontractor accrue interest at a certain rate; altering the interest rate for certain 13
31	31	unpaid State procurement contracts; and generally relating to prompt payment on 14
32	32	construction contracts. 15
33	33
34	34	BY repealing and reenacting, with amendments, 16
35	35	Article – Business Regulation 17
36	36	Section 17–601 18
37	37	Annotated Code of Maryland 19
38	38	(2015 Replacement Volume and 2023 Supplement) 20
39	39
40	40	BY adding to 21
41	41	Article – Business Regulation 22
42	42	Section 17–604 23
43	43	Annotated Code of Maryland 24
44	44	(2015 Replacement Volume and 2023 Supplement) 25
45	45
46	46	BY adding to 26
47	47	Article – State Finance and Procurement 27
48	48	Section 13–228 28 2 HOUSE BILL 1365
49	49
50	50
51	51	Annotated Code of Maryland 1
52	52	(2021 Replacement Volume and 2023 Supplement) 2
53	53
54	54	BY repealing and reenacting, without amendments, 3
55	55	Article – State Finance and Procurement 4
56	56	Section 15–103 5
57	57	Annotated Code of Maryland 6
58	58	(2021 Replacement Volume and 2023 Supplement) 7
59	59
60	60	BY repealing and reenacting, with amendments, 8
61	61	Article – State Finance and Procurement 9
62	62	Section 15–104 10
63	63	Annotated Code of Maryland 11
64	64	(2021 Replacement Volume and 2023 Supplement) 12
65	65
66	66	SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 13
67	67	That the Laws of Maryland read as follows: 14
68	68
69	69	Article – Business Regulation 15
70	70
71	71	17–601. 16
72	72
73	73	(a) In this subtitle the following words have the meanings indicated. 17
74	74
75	75	(b) “Construction license” means a license issued by the clerk to do construction 18
76	76	business. 19
77	77
78	78	(c) (1) “Do construction business” means to agree to: 20
79	79
80	80	(i) pave or curb a sidewalk, street, or other public or private 21
81	81	property; 22
82	82
83	83	(ii) excavate earth, rock, or other material for a foundation or other 23
84	84	purpose; or 24
85	85
86	86	(iii) do work on or in a building or other structure that requires the 25
87	87	use of a building material, including: 26
88	88
89	89	1. paint; 27
90	90
91	91	2. stone; 28
92	92
93	93	3. brick; 29
94	94
95	95	4. mortar; 30
96	96
97	97	5. wood; 31 HOUSE BILL 1365 3
98	98
99	99
100	100
101	101	6. cement; 1
102	102
103	103	7. structural iron; 2
104	104
105	105	8. structural steel; 3
106	106
107	107	9. sheet iron; 4
108	108
109	109	10. galvanized iron; 5
110	110
111	111	11. metallic piping; 6
112	112
113	113	12. tin; 7
114	114
115	115	13. lead; 8
116	116
117	117	14. electric wiring; [or] 9
118	118
119	119	15. COMPOSITE MATERIAL ; OR 10
120	120
121	121	[15.] 16. any other metal. 11
122	122
123	123	(2) “Do construction business” does not include home improvement as 12
124	124	defined in § 8–101 of this article. 13
125	125
126	126	(d) “Nonresident construction license” means a construction license issued by the 14
127	127	clerk to a person who is incorporated or has its principal office in another state. 15
128	128
129	129	17–604. 16
130	130
131	131	(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 17
132	132	INDICATED. 18
133	133
134	134	(2) (I) “CONSTRUCTION CONTRACT ” MEANS A CONTRACT TO DO 19
135	135	CONSTRUCTION BUSINES S. 20
136	136
137	137	(II) “CONSTRUCTION CONTRACT ” DOES NOT INCLUDE A 21
138	138	CONTRACT FOR FOR –SALE HOUSING OR HOME IMPROVEMENT , AS DEFINED IN § 22
139	139	8–101 OF THIS ARTICLE. 23
140	140
141	141	(3) “CONTRACTOR ” MEANS THE HOLDER OF A CONSTRUCTION 24
142	142	LICENSE WHO IS PARTY TO A CONSTRUCTION CO NTRACT. 25
143	143	4 HOUSE BILL 1365
144	144
145	145
146	146	(4) “OWNER” MEANS A PERSON OR AN ENTITY, INCLUDING A PUBLIC 1
147	147	BODY, THAT IS A PARTY TO A CONSTRUCTION CONTRAC T AND IS RESPONSIBLE FOR 2
148	148	PAYMENT OF THE CONTR ACT. 3
149	149
150	150	(5) “SUBCONTRACTOR ” MEANS A PERSON, OTHER THAN A LABORER 4
151	151	OR SUPPLIER OF MATER IALS, THAT MAKES AN OR AL OR WRITTEN AGREEM ENT WITH: 5
152	152
153	153	(I) A CONTRACTOR TO PERF ORM ALL OR PART OF A 6
154	154	CONSTRUCTION CONTRAC T; OR 7
155	155
156	156	(II) ANOTHER SUBCONTRACTO R TO PERFORM ALL OR PART OF 8
157	157	A SUBCONTRACT TO A C ONSTRUCTION CONTRACT . 9
158	158
159	159	(B) (1) A CONSTRUCTION CONTRAC T SHALL INCLUDE A PR OVISION THAT 10
160	160	REQUIRES THE OWNER T O PAY THE CONTRACTOR : 11
161	161
162	162	(I) WITHIN 45 DAYS AFTER THE RECEI PT OF A PROPER INVOI CE 12
163	163	FOLLOWING SATISFACTO RY COMPLETION OF THE PORTION OF THE WORK FOR 13
164	164	WHICH THE CONTRACTOR HAS INVOICED; AND 14
165	165
166	166	(II) INTEREST IN ACCORDAN CE WITH PARAGRAPH (4) OF THIS 15
167	167	SUBSECTION FOR ANY L ATE PAYMENTS . 16
168	168
169	169	(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 17
170	170	TO REQUIRE AN OWNER TO PAY AMOUNTS INVOI CED THAT ARE SUBJECT TO 18
171	171	WITHHOLDING AS A RES ULT OF THE CONTRACTO R’S NONCOMPLIANCE WITH THE 19
172	172	CONTRACT. 20
173	173
174	174	(3) (I) IF AN OWNER WITHHOLDS ALL OR PART OF AN AM OUNT 21
175	175	INVOICED BY A CONTRACT OR UNDER PARAGRAPH (1) OF THIS SUBSECTION , THE 22
176	176	OWNER SHALL NOTIFY T HE CONTRACTOR IN WRI TING AND WITH REASON ABLE 23
177	177	SPECIFICITY WITHIN 15 DAYS AFTER THE RECEI PT OF THE INVOICE OF : 24
178	178
179	179	1. THE OWNER’S INTENTION TO WITHH OLD ALL OR PART 25
180	180	OF THE PAYMENT; AND 26
181	181
182	182	2. THE REASON FOR THE W ITHHOLDING, INCLUDING 27
183	183	IDENTIFICATION OF TH E WORK FOR WHICH PAY MENT IS NOT BEING MA DE AND THE 28
184	184	AMOUNT BEING WITHHEL D FOR THAT WORK . 29
185	185
186	186	(II) PAYMENT WITHHELD UNDE R THIS PARAGRAPH MAY NOT 30
187	187	EXCEED TWICE THE AMO UNT IN DISPUTE. 31
188	188	HOUSE BILL 1365 5
189	189
190	190
191	191	(4) (I) IF AN OWNER DOES NOT PAY A CONTRACTOR AS REQUIRED 1
192	192	UNDER PARAGRAPH (1) OF THIS SUBSECTION , INTEREST SHALL ACCRU E AT THE 2
193	193	RATE OF 2% PER MONTH ON ANY AMO UNT THAT REMAINS UNP AID. 3
194	194
195	195	(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 4
196	196	AFTER THE OWNER RECEIVE S THE INVOICE. 5
197	197
198	198	(III) NO PARTY TO THE CONTR ACT MAY WAIVE THE 6
199	199	REQUIREMENT TO ACCRU E INTEREST UNDER THI S PARAGRAPH . 7
200	200
201	201	(IV) ANY INTEREST ACCRUED UNDER THIS PARAGRAPH SHALL 8
202	202	BE PAID TO THE CONTR ACTOR AT THE TIME OF PAYMENT OF THE INVOI CE. 9
203	203
204	204	(V) ANY INTEREST ACCRUED RECEIVED BY A CONTRA CTOR 10
205	205	UNDER THIS PARAGRAPH MAY NOT BE WITHHELD FROM A SUBCONTRACTOR . 11
206	206
207	207	(VI) NO CONTRACT PROVISION MAY ALTER THE OBLIGA TION OF 12
208	208	AN OWNER TO REMIT IN TEREST PAYMENT ON LA TE PAYMENTS. 13
209	209
210	210	(5) NOTHING IN THIS SUBSECTION MAY BE CO NSTRUED TO APPLY TO 14
211	211	OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A C ONSTRUCTION 15
212	212	CONTRACT. 16
213	213
214	214	(C) (1) A CONTRACT BETWEEN A C ONTRACTOR AND A SUBC ONTRACTOR 17
215	215	TO PERFORM A PORTION OF A CONSTRUCTION CO NTRACT SHALL INCLUDE A 18
216	216	PROVISION THAT REQUIRES THE CONTRACTOR TO PAY TH E SUBCONTRACTOR 19
217	217	WITHIN 7 DAYS AFTER RECEIPT O F PAYMENT BY THE OWN ER TO THE CONTRACTOR 20
218	218	FOR WORK PROPERLY IN VOICED BY THE SUBCON TRACTOR. 21
219	219
220	220	(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 22
221	221	TO REQUIRE A CONTRAC TOR TO PAY AMOUNTS I NVOICED THAT ARE SUB JECT TO 23
222	222	WITHHOLDING AS A RES ULT OF THE SUBCONTRA CTOR’S NONCOMPLIANCE WITH THE 24
223	223	CONTRACT. 25
224	224
225	225	(3) (I) IF A CONTRACTOR WITHH OLDS ALL OR PART OF AN AMOUNT 26
226	226	INVOICED BY A SUBCON TRACTOR UNDER PARAGR APH (1) OF THIS SUBSECTION , THE 27
227	227	CONTRACTOR SHALL NOT IFY THE SUBCONTRACTO R IN WRITING AND WIT H 28
228	228	REASONABLE SPECIFICI TY WITHIN 14 DAYS OF THE RECEIPT OF THE INVOICE OF : 29
229	229
230	230	1. THE CONTRACTOR ’S INTENTION TO WIT HHOLD ALL 30
231	231	OR PART OF THE PAYME NT; AND 31
232	232	6 HOUSE BILL 1365
233	233
234	234
235	235	2. THE REASON FOR THE W ITHHOLDING, INCLUDING 1
236	236	IDENTIFYING THE WORK FOR WHICH PAYMENT IS NOT BEING MADE AND T HE 2
237	237	AMOUNT BEING WITHHEL D FOR THAT WORK . 3
238	238
239	239	(II) PAYMENT WITHHELD UNDE R THIS PARAGRAPH MAY NOT 4
240	240	EXCEED TW ICE THE AMOUNT IN DI SPUTE. 5
241	241
242	242	(4) (I) IF A CONTRACTOR WHO H AS BEEN PAID BY THE OWNER 6
243	243	DOES NOT PAY A SUBCO NTRACTOR AS REQUIRED UNDER PARAGRAPH (1) OF THIS 7
244	244	SUBSECTION, INTEREST SHALL ACCRU E AT THE RATE OF 2% PER MONTH ON ANY 8
245	245	AMOUNT THAT REMAINS UNPAID. 9
246	246
247	247	(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 10
248	248	AFTER THE CONTRACTOR RECEIVES A PROPER IN VOICE. 11
249	249
250	250	(III) NO PARTY TO THE CONTR ACT MAY WAIVE THE 12
251	251	REQUIREMENT FOR THE ACCRUAL OF INTEREST UNDER THIS PARAGRAPH . 13
252	252
253	253	(IV) ANY INTEREST ACCRUED UNDER THIS PA RAGRAPH SHALL 14
254	254	BE PAID TO THE SUBCO NTRACTOR AT THE TIME OF PAYMENT OF THE IN VOICE. 15
255	255
256	256	(V) ANY INTEREST ACCRUED RECEIVED BY A CONTRA CTOR 16
257	257	UNDER THIS PARAGRAPH MAY NOT BE WITHHELD FROM A SUBCONTRACTOR . 17
258	258
259	259	(VI) NO CONTRACT PROVISION MAY ALTER THE OBLIGA TION OF 18
260	260	A CONTRACTOR TO REMI T INTEREST PAYMENT O N LATE PAYMENTS . 19
261	261
262	262	(5) NOTHING IN THIS SUBSE CTION MAY BE CONSTRU ED TO APPLY TO 20
263	263	OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A 21
264	264	SUBCONTRACTOR CONTRA CT. 22
265	265
266	266	Article – State Finance and Procurement 23
267	267
268	268	13–228. 24
269	269
270	270	(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 25
271	271	INDICATED. 26
272	272
273	273	(2) “CONSTRUCTION CONTRACT ” MEANS A CONTRACT TO DO 27
274	274	CONSTRUCTION BUSINES S. 28
275	275
276	276	(3) “CONTRACTOR ” MEANS THE HOLDER OF A CONSTRUCTION 29
277	277	LICENSE WHO IS PARTY TO A CONSTRUCTION CO NTRACT. 30 HOUSE BILL 1365 7
278	278
279	279
280	280
281	281	(4) “DO CONSTRUCTION BUSIN ESS” HAS THE MEANING STAT ED IN § 1
282	282	17–601 OF THE BUSINESS REGULATION ARTICLE. 2
283	283
284	284	(5) “SUBCONTRACTOR ” MEANS A PERSON , OTHER THAN A LABORER 3
285	285	OR SUPPLIER OF MATER IALS, THAT MAKES AN ORAL O R WRITTEN AGREEMENT WITH: 4
286	286
287	287	(I) A CONTRACTOR TO PERF ORM ALL OR PART OF A 5
288	288	CONSTRUCTION CONTRAC T; OR 6
289	289
290	290	(II) ANOTHER SUBCONTRACTO R TO PERFORM ALL OR PART OF 7
291	291	A SUBCONTRACT TO A C ONSTRUCTION CONTRACT . 8
292	292
293	293	(B) (1) A CONTRACT BETWEEN A C ONTRACTOR AND A SUBC ONTRACTOR 9
294	294	TO PERFORM A PORTION OF A CONSTRUCTION CO NTRACT SHALL INCLUDE A 10
295	295	PROVISION THAT REQUI RES THE CONTRACTOR T O PAY THE SUBCONTRAC TOR 11
296	296	WITHIN 7 DAYS AFTER RECEIPT O F PAYMENT BY THE OWN ER TO THE CONTRACTO R 12
297	297	FOR WORK PERFORMED B Y THE SUBCONTRACTOR . 13
298	298
299	299	(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 14
300	300	TO REQUIRE A CONTRAC TOR TO PAY AMOUNTS I NVOICED THAT ARE SUB JECT TO 15
301	301	WITHHOLDING AS A RES ULT OF THE SUBCONTRA CTOR’S NONCOMPLIANCE WITH THE 16
302	302	CONTRACT. 17
303	303
304	304	(3) IF A CONTRACTOR WITHH OLDS ALL OR PART OF AN AMOUNT 18
305	305	INVOICED BY A SUBCON TRACTOR UNDER PARAGR APH (1) OF THIS SUBSECTION , THE 19
306	306	CONTRACTOR SHALL NOT IFY THE SUBCONTRACTO R IN WRITING AND WIT H 20
307	307	REASONABLE SPECIFICI TY WITHIN 60 DAYS OF THE RECEIPT OF THE INVOIC E OF: 21
308	308
309	309	(I) THE CONTRACTOR ’S INTENTION TO WITHH OLD ALL OR PART 22
310	310	OF THE PAYMENT ; AND 23
311	311
312	312	(II) THE REASON FOR THE W ITHHOLDING, INCLUDING 24
313	313	IDENTIFICATION OF TH E WORK FOR WHICH PAY MENT IS NOT BEING MA DE AND THE 25
314	314	AMOUNT BEING WITHHEL D FOR THAT WORK . 26
315	315
316	316	(4) (I) IF A CONTRACTOR DOES NOT PAY A SUBCONTRAC TOR AS 27
317	317	REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION , INTEREST SHALL ACCRU E 28
318	318	AT THE RATE OF 2% PER MONTH ON ANY AMO UNT THAT REMAINS UNP AID. 29
319	319
320	320	(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 30
321	321	AFTER THE CONTRACTOR RECEIVES THE INVOICE . 31
322	322	8 HOUSE BILL 1365
323	323
324	324
325	325	(5) NOTHING IN THIS SUBSE CTION MAY BE CONSTRU ED TO APPLY TO 1
326	326	OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A 2
327	327	SUBCONTRACTOR CONTRA CT. 3
328	328
329	329	15–103. 4
330	330
331	331	It is the policy of the State to make a payment under a procurement contract within 5
332	332	30 days: 6
333	333
334	334	(1) after the day on which the payment becomes due under the 7
335	335	procurement contract; or 8
336	336
337	337	(2) if later, after the day on which the unit receives an invoice. 9
338	338
339	339	15–104. 10
340	340
341	341	(a) Except as provided in § 15–105 of this subtitle, interest shall accrue at the 11
342	342	rate of [9%] 2% per [annum] MONTH on any amount that: 12
343	343
344	344	(1) is due and payable by law and under the written procurement contract; 13
345	345	and 14
346	346
347	347	(2) remains unpaid more than 37 days after a unit receives an invoice. 15
348	348
349	349	(b) Interest shall accrue beginning on the 31st day after: 16
350	350
351	351	(1) the day on which payment becomes due under a procurement contract; 17
352	352	or 18
353	353
354	354	(2) if later, the day on which the unit receives an invoice. 19
355	355
356	356	SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 20
357	357	October 1, 2024. 21