Texas House Bill HB3040

Texas 2011 - 82nd Regular

• Out of House Committee: 4/19/11
• Report Pass: 4/13/11

Caption

Relating to lender notice to contractors regarding a construction loan or financing agreement for the improvement of real property and related procedures for suspending contractors' and subcontractors' performance.

Impact

The implementation of HB3040 will modify the Property Code by introducing new obligations for lenders concerning contractor notifications. This change intends to enhance transparency and communication between lenders, contractors, and subcontractors, thus fostering a more structured approach to dealing with defaults and payment issues in construction financing. The timely notice requirement aims to mitigate risks for contractors who rely heavily on cash flow to maintain their operations and fulfill contractual obligations.

Summary

House Bill 3040 addresses the requirements for lenders to notify contractors regarding defaults in construction loans or financing agreements related to the improvement of real property. The bill mandates that lenders must inform contractors when they take specific actions, such as exercising a default remedy or failing to make timely payments. This written notice must be sent within a defined timeframe, aiming to ensure that contractors are aware of their rights during potential financial disputes related to construction projects.

Contention

Debate surrounding HB3040 centers around the balance of responsibilities between lenders and contractors. Supporters argue that the mandatory notification process will protect contractors from the fallout of defaults or delayed payments by ensuring they are immediately informed and can take appropriate action to suspend work if necessary. However, some stakeholders may express concerns regarding the administrative burden this places on lenders and whether such measures could lead to disputes or delays in communication, which could ultimately affect project timelines.