By: Wentworth S.B. No. 1425
(In the Senate - Filed March 10, 2011; March 22, 2011, read
first time and referred to Committee on Business and Commerce;
May 12, 2011, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 6, Nays 2; May 12, 2011,
sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 1425 By: Lucio
A BILL TO BE ENTITLED
AN ACT
relating to an account for construction retainage; providing a
civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 162.005, Property Code, is amended by
adding Subdivision (7) to read as follows:
(7) "Construction trust fund account" means an account
in a federally insured financial institution into which are
deposited only funds required by Section 162.0061(a) to be
deposited in a construction trust fund account and other funds
deposited by the property owner that are necessary to pay charges
imposed on the account by the financial institution.
SECTION 2. Subchapter A, Chapter 162, Property Code, is
amended by adding Sections 162.0061 and 162.008 to read as follows:
Sec. 162.0061. CONSTRUCTION TRUST FUND ACCOUNT REQUIRED IN
CERTAIN CIRCUMSTANCES. (a) Except as provided by this section, a
property owner who enters into a construction loan or financing
agreement to pay toward the improvement of real property that is
secured wholly or partly by a lien on the property or improvement
shall deposit in a construction trust fund account in a financial
institution not later than contemporaneously with payment to a
contractor the amount retained under Subchapter E, Chapter 53, and
other retainage, as defined by Section 53.001, retained by the
owner from the contractor to be held in trust for the benefit of a
person described by Section 162.003(a). Trust funds deposited in a
construction trust fund account under this section shall be used
first toward the satisfaction of the owner's obligations and a
claimant's rights under Subchapter E, Chapter 53. Trust funds
remaining in the construction trust fund account after the
satisfaction of those obligations and rights may be used by the
owner for other construction payments under this chapter or other
purposes of the owner. Trust funds under this section are not
subject to seizure, offset, or taking by the financial institution
or a creditor of the owner. This subsection does not reduce the
owner's obligation or liability under Subchapter E, Chapter 53.
(b) This section does not apply to a property owner who
enters into a construction loan or financing agreement to pay
toward the construction, remodeling, or repair of a single-family
house or duplex used for residential purposes.
(c) This section does not apply to a property owner
improving real property if the value of the improvement to be made
is $250,000 or less.
Sec. 162.008. MANAGEMENT OF CONSTRUCTION TRUST FUND
ACCOUNTS. (a) If a property owner required to maintain a
construction trust fund account under Section 162.0061 opens and
maintains a separate construction trust fund account with the
financial institution for each project subject to this subchapter,
the periodic statement received from the financial institution
must:
(1) refer to the account as a "construction trust
fund" account; and
(2) identify the project for which the construction
trust fund account is maintained.
(b) If a property owner required to maintain a construction
trust fund account opens and maintains a construction trust fund
account with the financial institution into which funds for two or
more projects subject to this subchapter are deposited:
(1) the periodic statement received from the financial
institution must refer to the account as a "construction trust
fund" account; and
(2) the owner shall maintain an account record for the
construction trust fund account that provides information relating
to:
(A) the source and amount of the funds in the
account and the date the funds were deposited;
(B) the date and amount of each disbursement from
the account and the person to whom the funds were disbursed; and
(C) the current balance of the account.
(c) For each construction trust fund account maintained by
the property owner under Subsection (b), the owner shall maintain
the account record for each construction project for which trust
funds have been deposited.
(d) A property owner shall, not later than the 14th day
after receipt of a written request, provide a person who is a
beneficiary of trust funds with a copy of:
(1) the periodic statement received from the financial
institution regarding the construction trust fund account into
which the trust funds of which the person is a beneficiary have been
deposited; and
(2) the account record required to be maintained by
the owner with respect to the construction project for which the
trust funds have been deposited.
SECTION 3. Section 162.032, Property Code, is amended by
adding Subsection (d) to read as follows:
(d) If a beneficiary of the trust funds required to be
maintained in a construction trust fund account incurs actual
damages as a result of the property owner's failure to establish or
maintain a construction trust fund account in violation of Section
162.0061 or failure to establish or maintain an account record for
the construction trust fund account in violation of Section
162.008, the beneficiary may recover the beneficiary's actual
damages, reasonable attorney's fees, and a civil penalty of $500,
in addition to any other remedy provided by law, from the property
owner and each trustee who is an owner, officer, director, or agent
of the property owner and who receives trust funds or controls or
directs trust funds.
SECTION 4. The change in law made by this Act applies only
to an amount retained under an original contract entered into on or
after the effective date of this Act. An amount retained under an
original contract entered into before the effective date of this
Act is governed by the law as it existed immediately before that
date, and that law is continued in effect for that purpose.
SECTION 5. This Act takes effect September 1, 2011.
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