Texas 2011 - 82nd Regular

Texas House Bill HB3040 Compare Versions

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1	1	82R19560 AJA-F
2	2	By: Chisum H.B. No. 3040
3	3	Substitute the following for H.B. No. 3040:
4	4	By: Quintanilla C.S.H.B. No. 3040
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to lender notice to contractors regarding a construction
10	10	loan or financing agreement for the improvement of real property
11	11	and related procedures for suspending contractors' and
12	12	subcontractors' performance.
13	13	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
14	14	SECTION 1. Chapter 28, Property Code, is amended by adding
15	15	Section 28.0091 to read as follows:
16	16	Sec. 28.0091. LENDER NOTICE OF DEFAULT TO CONTRACTORS;
17	17	SUSPENSION OF PERFORMANCE PENDING CURE. (a) This section applies
18	18	only to a lender that provides financing through a construction
19	19	loan or under a financing agreement for an improvement to real
20	20	property for which the real property or improvement is collateral.
21	21	(b) For an improvement to real property for which financing
22	22	is provided as described by Subsection (a), not later than the 30th
23	23	day after the date a contractor begins work to improve the real
24	24	property or otherwise provides construction services for the
25	25	improvement, the contractor shall provide to the lender the
26	26	contractor's name and address and the name of the person to whom any
27	27	notice under this section should be sent.
28	28	(c) Except as provided by Subsection (e), not later than the
29	29	seventh day after the date a lender takes an action for which notice
30	30	is required by this subsection in response to a particular event
31	31	described by this subsection, the lender must give written notice
32	32	of the action, including the date of the action, to the property
33	33	owner and to each contractor providing labor, materials, equipment,
34	34	or services for the improvement. Notice under this subsection is
35	35	required if the lender:
36	36	(1) exercises a default remedy provided by statute or
37	37	the loan or financing agreement;
38	38	(2) gives a notice of default to the borrower; or
39	39	(3) fails to timely fund, wholly or partly, a payment
40	40	request submitted in proper form by the borrower or a contractor.
41	41	(d) Notice to a contractor under Subsection (c) must be sent
42	42	by certified mail to the person identified under Subsection (b) and
43	43	state that the lender has provided notice to the owner under
44	44	Subsection (c) and that the contractor is required by this section
45	45	to provide a copy of the notice to each of the contractor's
46	46	subcontractors for the purpose of notifying each subcontractor of
47	47	the subcontractor's right under this section to suspend
48	48	contractually required performance without penalty or liability
49	49	for damages until the default is cured or the requested payment is
50	50	fully or substantially funded, as applicable.
51	51	(e) A lender is not required to give notice under Subsection
52	52	(c) with respect to an event described by that subsection if, on or
53	53	before the seventh day after the date of the occurrence of the
54	54	event:
55	55	(1) the default is cured; or
56	56	(2) the payment request is fully or substantially
57	57	funded.
58	58	(f) Not later than the third day after the date a contractor
59	59	receives a notice from a lender under Subsection (c), the
60	60	contractor shall give a copy of the written notice to each of the
61	61	contractor's subcontractors of the action taken by the lender.
62	62	(g) Not later than the third day after the date a
63	63	subcontractor receives a notice from a contractor under Subsection
64	64	(f), the subcontractor shall give a copy of the notice to each of
65	65	the subcontractor's subcontractors.
66	66	(h) If the default for which notice is required by
67	67	Subsection (c) is cured or the requested payment described by
68	68	Subsection (c) is fully or substantially funded, the lender shall,
69	69	not later than the third day after the date the default is cured or
70	70	the payment is funded, as applicable, give written notice of the
71	71	cure or payment to each contractor.
72	72	(i) Not later than the third day after the date a contractor
73	73	receives a notice of cure or payment under Subsection (h), the
74	74	contractor shall give written notice of the cure or payment to each
75	75	of the contractor's subcontractors.
76	76	(j) Not later than the third day after the date a
77	77	subcontractor receives a notice of cure or payment under Subsection
78	78	(i), the subcontractor shall give written notice of the cure or
79	79	payment to each of the subcontractor's subcontractors.
80	80	(k) After the 10th day after the earliest date on which the
81	81	lender takes an action for which notice is required by Subsection
82	82	(c), a contractor or subcontractor may suspend contractually
83	83	required performance without penalty or liability for damages on
84	84	giving the owner written notice of the contractor's or
85	85	subcontractor's intent to suspend performance and, if the notice is
86	86	given by a subcontractor, to the subcontractor's contractor. The
87	87	contractor or subcontractor may suspend performance under this
88	88	subsection until:
89	89	(1) the contractor and subcontractor receive a notice
90	90	of cure or payment under Subsection (h), (i), or (j); or
91	91	(2) the lender or the borrower provides the contractor
92	92	and subcontractor a written payment guarantee acceptable to the
93	93	contractor and subcontractor for all labor, materials, equipment,
94	94	or services provided or to be provided for the improvement to real
95	95	property after the action is taken.
96	96	(l) A contractor or subcontractor that has suspended
97	97	performance in accordance with this section is entitled to a
98	98	reasonable period without penalty to remobilize and recommence
99	99	performance after receipt of a notice or payment guarantee
100	100	described by Subsection (k).
101	101	(m) A subcontractor is a third-party beneficiary of a
102	102	lender's obligations under Subsection (c) with equal standing to a
103	103	contractor to enforce remedies.
104	104	SECTION 2. The change in law made by this Act applies only
105	105	to a construction loan or financing agreement entered into on or
106	106	after the effective date of this Act. A construction loan or
107	107	financing agreement entered into before the effective date of this
108	108	Act is governed by the law in effect immediately before the
109	109	effective date of this Act, and that law is continued in effect for
110	110	that purpose.
111	111	SECTION 3. This Act takes effect September 1, 2011.