EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*hb1365*
HOUSE BILL 1365
C2, P2 4lr2371
HB 1097/23 – ECM & HGO CF SB 715
By: Delegates Valderrama and Boafo
Introduced and read first time: February 9, 2024
Assigned to: Economic Matters and Health and Government Operations
A BILL ENTITLED
AN ACT concerning 1
State and Private Construction Contracts and State Procurement Contracts – 2
Prompt Payment and Interest Requirements 3
FOR the purpose of requiring a private construction contract to include a provision 4
requiring the owner to pay the contractor within a certain period of time or, if the 5
owner withholds all or part of an amount invoiced, to send a certain notification to 6
the contractor; establishing that amounts unpaid to a contractor accrue interest at a 7
certain rate; requiring a contract between a contractor and a subcontractor to 8
perform a portion of a private or State construction contract to include a provision 9
requiring the contractor to pay the subcontractor within a certain period of time or, 10
if the contractor withholds all or part of an amount invoiced, to send a certain 11
notification to the subcontractor; establishing that amounts unpaid to a 12
subcontractor accrue interest at a certain rate; altering the interest rate for certain 13
unpaid State procurement contracts; and generally relating to prompt payment on 14
construction contracts. 15
BY repealing and reenacting, with amendments, 16
Article – Business Regulation 17
Section 17–601 18
Annotated Code of Maryland 19
(2015 Replacement Volume and 2023 Supplement) 20
BY adding to 21
Article – Business Regulation 22
Section 17–604 23
Annotated Code of Maryland 24
(2015 Replacement Volume and 2023 Supplement) 25
BY adding to 26
Article – State Finance and Procurement 27
Section 13–228 28 2 HOUSE BILL 1365
Annotated Code of Maryland 1
(2021 Replacement Volume and 2023 Supplement) 2
BY repealing and reenacting, without amendments, 3
Article – State Finance and Procurement 4
Section 15–103 5
Annotated Code of Maryland 6
(2021 Replacement Volume and 2023 Supplement) 7
BY repealing and reenacting, with amendments, 8
Article – State Finance and Procurement 9
Section 15–104 10
Annotated Code of Maryland 11
(2021 Replacement Volume and 2023 Supplement) 12
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 13
That the Laws of Maryland read as follows: 14
Article – Business Regulation 15
17–601. 16
(a) In this subtitle the following words have the meanings indicated. 17
(b) “Construction license” means a license issued by the clerk to do construction 18
business. 19
(c) (1) “Do construction business” means to agree to: 20
(i) pave or curb a sidewalk, street, or other public or private 21
property; 22
(ii) excavate earth, rock, or other material for a foundation or other 23
purpose; or 24
(iii) do work on or in a building or other structure that requires the 25
use of a building material, including: 26
1. paint; 27
2. stone; 28
3. brick; 29
4. mortar; 30
5. wood; 31 HOUSE BILL 1365 3
6. cement; 1
7. structural iron; 2
8. structural steel; 3
9. sheet iron; 4
10. galvanized iron; 5
11. metallic piping; 6
12. tin; 7
13. lead; 8
14. electric wiring; [or] 9
15. COMPOSITE MATERIAL ; OR 10
[15.] 16. any other metal. 11
(2) “Do construction business” does not include home improvement as 12
defined in § 8–101 of this article. 13
(d) “Nonresident construction license” means a construction license issued by the 14
clerk to a person who is incorporated or has its principal office in another state. 15
17–604. 16
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 17
INDICATED. 18
(2) (I) “CONSTRUCTION CONTRACT ” MEANS A CONTRACT TO DO 19
CONSTRUCTION BUSINES S. 20
(II) “CONSTRUCTION CONTRACT ” DOES NOT INCLUDE A 21
CONTRACT FOR FOR –SALE HOUSING OR HOME IMPROVEMENT , AS DEFINED IN § 22
8–101 OF THIS ARTICLE. 23
(3) “CONTRACTOR ” MEANS THE HOLDER OF A CONSTRUCTION 24
LICENSE WHO IS PARTY TO A CONSTRUCTION CO NTRACT. 25
4 HOUSE BILL 1365
(4) “OWNER” MEANS A PERSON OR AN ENTITY, INCLUDING A PUBLIC 1
BODY, THAT IS A PARTY TO A CONSTRUCTION CONTRAC T AND IS RESPONSIBLE FOR 2
PAYMENT OF THE CONTR ACT. 3
(5) “SUBCONTRACTOR ” MEANS A PERSON, OTHER THAN A LABORER 4
OR SUPPLIER OF MATER IALS, THAT MAKES AN OR AL OR WRITTEN AGREEM ENT WITH: 5
(I) A CONTRACTOR TO PERF ORM ALL OR PART OF A 6
CONSTRUCTION CONTRAC T; OR 7
(II) ANOTHER SUBCONTRACTO R TO PERFORM ALL OR PART OF 8
A SUBCONTRACT TO A C ONSTRUCTION CONTRACT . 9
(B) (1) A CONSTRUCTION CONTRAC T SHALL INCLUDE A PR OVISION THAT 10
REQUIRES THE OWNER T O PAY THE CONTRACTOR : 11
(I) WITHIN 45 DAYS AFTER THE RECEI PT OF A PROPER INVOI CE 12
FOLLOWING SATISFACTO RY COMPLETION OF THE PORTION OF THE WORK FOR 13
WHICH THE CONTRACTOR HAS INVOICED; AND 14
(II) INTEREST IN ACCORDAN CE WITH PARAGRAPH (4) OF THIS 15
SUBSECTION FOR ANY L ATE PAYMENTS . 16
(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 17
TO REQUIRE AN OWNER TO PAY AMOUNTS INVOI CED THAT ARE SUBJECT TO 18
WITHHOLDING AS A RES ULT OF THE CONTRACTO R’S NONCOMPLIANCE WITH THE 19
CONTRACT. 20
(3) (I) IF AN OWNER WITHHOLDS ALL OR PART OF AN AM OUNT 21
INVOICED BY A CONTRACT OR UNDER PARAGRAPH (1) OF THIS SUBSECTION , THE 22
OWNER SHALL NOTIFY T HE CONTRACTOR IN WRI TING AND WITH REASON ABLE 23
SPECIFICITY WITHIN 15 DAYS AFTER THE RECEI PT OF THE INVOICE OF : 24
1. THE OWNER’S INTENTION TO WITHH OLD ALL OR PART 25
OF THE PAYMENT; AND 26
2. THE REASON FOR THE W ITHHOLDING, INCLUDING 27
IDENTIFICATION OF TH E WORK FOR WHICH PAY MENT IS NOT BEING MA DE AND THE 28
AMOUNT BEING WITHHEL D FOR THAT WORK . 29
(II) PAYMENT WITHHELD UNDE R THIS PARAGRAPH MAY NOT 30
EXCEED TWICE THE AMO UNT IN DISPUTE. 31
HOUSE BILL 1365 5
(4) (I) IF AN OWNER DOES NOT PAY A CONTRACTOR AS REQUIRED 1
UNDER PARAGRAPH (1) OF THIS SUBSECTION , INTEREST SHALL ACCRU E AT THE 2
RATE OF 2% PER MONTH ON ANY AMO UNT THAT REMAINS UNP AID. 3
(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 4
AFTER THE OWNER RECEIVE S THE INVOICE. 5
(III) NO PARTY TO THE CONTR ACT MAY WAIVE THE 6
REQUIREMENT TO ACCRU E INTEREST UNDER THI S PARAGRAPH . 7
(IV) ANY INTEREST ACCRUED UNDER THIS PARAGRAPH SHALL 8
BE PAID TO THE CONTR ACTOR AT THE TIME OF PAYMENT OF THE INVOI CE. 9
(V) ANY INTEREST ACCRUED RECEIVED BY A CONTRA CTOR 10
UNDER THIS PARAGRAPH MAY NOT BE WITHHELD FROM A SUBCONTRACTOR . 11
(VI) NO CONTRACT PROVISION MAY ALTER THE OBLIGA TION OF 12
AN OWNER TO REMIT IN TEREST PAYMENT ON LA TE PAYMENTS. 13
(5) NOTHING IN THIS SUBSECTION MAY BE CO NSTRUED TO APPLY TO 14
OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A C ONSTRUCTION 15
CONTRACT. 16
(C) (1) A CONTRACT BETWEEN A C ONTRACTOR AND A SUBC ONTRACTOR 17
TO PERFORM A PORTION OF A CONSTRUCTION CO NTRACT SHALL INCLUDE A 18
PROVISION THAT REQUIRES THE CONTRACTOR TO PAY TH E SUBCONTRACTOR 19
WITHIN 7 DAYS AFTER RECEIPT O F PAYMENT BY THE OWN ER TO THE CONTRACTOR 20
FOR WORK PROPERLY IN VOICED BY THE SUBCON TRACTOR. 21
(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 22
TO REQUIRE A CONTRAC TOR TO PAY AMOUNTS I NVOICED THAT ARE SUB JECT TO 23
WITHHOLDING AS A RES ULT OF THE SUBCONTRA CTOR’S NONCOMPLIANCE WITH THE 24
CONTRACT. 25
(3) (I) IF A CONTRACTOR WITHH OLDS ALL OR PART OF AN AMOUNT 26
INVOICED BY A SUBCON TRACTOR UNDER PARAGR APH (1) OF THIS SUBSECTION , THE 27
CONTRACTOR SHALL NOT IFY THE SUBCONTRACTO R IN WRITING AND WIT H 28
REASONABLE SPECIFICI TY WITHIN 14 DAYS OF THE RECEIPT OF THE INVOICE OF : 29
1. THE CONTRACTOR ’S INTENTION TO WIT HHOLD ALL 30
OR PART OF THE PAYME NT; AND 31
6 HOUSE BILL 1365
2. THE REASON FOR THE W ITHHOLDING, INCLUDING 1
IDENTIFYING THE WORK FOR WHICH PAYMENT IS NOT BEING MADE AND T HE 2
AMOUNT BEING WITHHEL D FOR THAT WORK . 3
(II) PAYMENT WITHHELD UNDE R THIS PARAGRAPH MAY NOT 4
EXCEED TW ICE THE AMOUNT IN DI SPUTE. 5
(4) (I) IF A CONTRACTOR WHO H AS BEEN PAID BY THE OWNER 6
DOES NOT PAY A SUBCO NTRACTOR AS REQUIRED UNDER PARAGRAPH (1) OF THIS 7
SUBSECTION, INTEREST SHALL ACCRU E AT THE RATE OF 2% PER MONTH ON ANY 8
AMOUNT THAT REMAINS UNPAID. 9
(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 10
AFTER THE CONTRACTOR RECEIVES A PROPER IN VOICE. 11
(III) NO PARTY TO THE CONTR ACT MAY WAIVE THE 12
REQUIREMENT FOR THE ACCRUAL OF INTEREST UNDER THIS PARAGRAPH . 13
(IV) ANY INTEREST ACCRUED UNDER THIS PA RAGRAPH SHALL 14
BE PAID TO THE SUBCO NTRACTOR AT THE TIME OF PAYMENT OF THE IN VOICE. 15
(V) ANY INTEREST ACCRUED RECEIVED BY A CONTRA CTOR 16
UNDER THIS PARAGRAPH MAY NOT BE WITHHELD FROM A SUBCONTRACTOR . 17
(VI) NO CONTRACT PROVISION MAY ALTER THE OBLIGA TION OF 18
A CONTRACTOR TO REMI T INTEREST PAYMENT O N LATE PAYMENTS . 19
(5) NOTHING IN THIS SUBSE CTION MAY BE CONSTRU ED TO APPLY TO 20
OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A 21
SUBCONTRACTOR CONTRA CT. 22
Article – State Finance and Procurement 23
13–228. 24
(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 25
INDICATED. 26
(2) “CONSTRUCTION CONTRACT ” MEANS A CONTRACT TO DO 27
CONSTRUCTION BUSINES S. 28
(3) “CONTRACTOR ” MEANS THE HOLDER OF A CONSTRUCTION 29
LICENSE WHO IS PARTY TO A CONSTRUCTION CO NTRACT. 30 HOUSE BILL 1365 7
(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, THAT MAKES AN ORAL O R WRITTEN AGREEMENT WITH: 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 7 DAYS AFTER RECEIPT O F PAYMENT BY THE OWN ER TO THE CONTRACTO R 12
FOR WORK PERFORMED B Y THE SUBCONTRACTOR . 13
(2) PARAGRAPH (1) OF THIS SUBSECTION M AY NOT BE CONSTRUED 14
TO REQUIRE A CONTRAC TOR TO PAY AMOUNTS I NVOICED THAT ARE SUB JECT TO 15
WITHHOLDING AS A RES ULT OF THE SUBCONTRA CTOR’S NONCOMPLIANCE WITH THE 16
CONTRACT. 17
(3) IF A CONTRACTOR WITHH OLDS ALL OR PART OF AN AMOUNT 18
INVOICED BY A SUBCON TRACTOR UNDER PARAGR APH (1) OF THIS SUBSECTION , THE 19
CONTRACTOR SHALL NOT IFY THE SUBCONTRACTO R IN WRITING AND WIT H 20
REASONABLE SPECIFICI TY WITHIN 60 DAYS OF THE RECEIPT OF THE INVOIC E OF: 21
(I) THE CONTRACTOR ’S INTENTION TO WITHH OLD ALL OR PART 22
OF THE PAYMENT ; AND 23
(II) THE REASON FOR THE W ITHHOLDING, INCLUDING 24
IDENTIFICATION OF TH E WORK FOR WHICH PAY MENT IS NOT BEING MA DE AND THE 25
AMOUNT BEING WITHHEL D FOR THAT WORK . 26
(4) (I) IF A CONTRACTOR DOES NOT PAY A SUBCONTRAC TOR AS 27
REQUIRED UNDER PARAG RAPH (1) OF THIS SUBSECTION , INTEREST SHALL ACCRU E 28
AT THE RATE OF 2% PER MONTH ON ANY AMO UNT THAT REMAINS UNP AID. 29
(II) INTEREST SHALL ACCRUE BEGINNING ON THE 60TH DAY 30
AFTER THE CONTRACTOR RECEIVES THE INVOICE . 31
8 HOUSE BILL 1365
(5) NOTHING IN THIS SUBSE CTION MAY BE CONSTRU ED TO APPLY TO 1
OR PROHIBIT THE INCL USION OF ANY RETAINA GE PROVISIONS IN A 2
SUBCONTRACTOR CONTRA CT. 3
15–103. 4
It is the policy of the State to make a payment under a procurement contract within 5
30 days: 6
(1) after the day on which the payment becomes due under the 7
procurement contract; or 8
(2) if later, after the day on which the unit receives an invoice. 9
15–104. 10
(a) Except as provided in § 15–105 of this subtitle, interest shall accrue at the 11
rate of [9%] 2% per [annum] MONTH on any amount that: 12
(1) is due and payable by law and under the written procurement contract; 13
and 14
(2) remains unpaid more than 37 days after a unit receives an invoice. 15
(b) Interest shall accrue beginning on the 31st day after: 16
(1) the day on which payment becomes due under a procurement contract; 17
or 18
(2) if later, the day on which the unit receives an invoice. 19
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 20
October 1, 2024. 21