82R6172 TJS-F
By: Deshotel H.B. No. 1428
A BILL TO BE ENTITLED
AN ACT
relating to trust fund protection for retainage for the benefit of
certain claimants under a construction loan or financing agreement.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 162.001, Property Code, is amended by
adding Subsections (e) and (f) to read as follows:
(e) Except as provided by Subsection (f), funds retained
under a retainage agreement or statutory retainage obligation by a
financial institution or other lender that provides a loan or
financing for improvements to specific real property in this state
wholly or partly secured by a lien on the property are trust funds
and the lender is the trustee.
(f) Subsection (e) does not apply to a loan or financing
agreement of less than $500,000 for the construction of a
single-family house or duplex used for residential purposes that
is:
(1) owned by one or more adult persons;
(2) used or intended to be used as a dwelling by one of
the owners; and
(3) wholly or partly secured by a lien on the property.
SECTION 2. Section 162.004(a), Property Code, is amended to
read as follows:
(a) This chapter does not apply to:
(1) a bank, savings and loan, or other lender, other
than a trustee under Section 162.001(e);
(2) a title company or other closing agent; or
(3) a corporate surety who issues a payment bond
covering the contract for the construction or repair of the
improvement.
SECTION 3. Section 162.005, Property Code, is amended by
adding Subdivision (7) to read as follows:
(7) "Retainage" means an amount representing part of a
construction contract payment that is not required to be paid to the
claimant within the month following the month in which labor is
performed, material is furnished, or specially fabricated material
is delivered.
SECTION 4. Section 162.031, Property Code, is amended by
amending Subsection (b) and adding Subsection (e) to read as
follows:
(b) Except for a trustee under Section 162.001(e), it [It]
is an affirmative defense to prosecution or other action brought
under Subsection (a) that the trust funds not paid to the
beneficiaries of the trust were used by the trustee to pay the
trustee's actual expenses directly related to the construction or
repair of the improvement or have been retained by the trustee,
after notice to the beneficiary who has made a request for payment,
as a result of the trustee's reasonable belief that the beneficiary
is not entitled to such funds or have been retained as authorized or
required by Chapter 53.
(e) It is not a misapplication of trust funds under this
chapter for a trustee under Section 162.001(e) to:
(1) make a payment of retainage funds to the property
owner or a contractor providing labor or materials to the real
property improvement that is security for the loan or financing
agreement; or
(2) interplead the funds into a court of competent
jurisdiction.
SECTION 5. The change in law made by this Act applies only
to funds retained under a loan or financing agreement made on or
after the effective date of this Act. Funds retained under a loan
or financing agreement made before the effective date of this Act
are governed by the law applicable to the funds immediately before
that date, and that law is continued in effect for that purpose.
SECTION 6. This Act takes effect September 1, 2011.