83R24788 NC-F
By: Keffer H.B. No. 3316
Substitute the following for H.B. No. 3316:
By: Oliveira C.S.H.B. No. 3316
A BILL TO BE ENTITLED
AN ACT
relating to an account or bond for construction retainage under
certain contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 162.001, Property Code, is amended by
adding Subsection (b-1) to read as follows:
(b-1) Funds required under this chapter to be deposited into
a construction trust fund account are trust funds.
SECTION 2. Section 162.003(a), Property Code, is amended to
read as follows:
(a) An artisan, laborer, mechanic, contractor,
subcontractor, or materialman who labors or who furnishes labor or
material for the construction or repair of an improvement on
specific real property in this state is a beneficiary of any trust
funds paid, [or] received, withheld as retainage, or required to be
deposited into a construction trust fund account under this chapter
in connection with the improvement.
SECTION 3. 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;
(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, except as provided by Section 162.0064.
SECTION 4. Section 162.005, Property Code, is amended by
adding Subdivisions (7) and (8) 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.
(8) "Retainage" is an amount or agreed percentage of
money in a construction contract between an owner and a contractor
that is withheld from a payment and not due to be paid until
completion of the contract or on an agreed date.
SECTION 5. Subchapter A, Chapter 162, Property Code, is
amended by adding Sections 162.0061, 162.0062, 162.0063, 162.0064,
162.008, and 162.009 to read as follows:
Sec. 162.0061. CONSTRUCTION TRUST FUND ACCOUNT REQUIRED IN
CERTAIN CIRCUMSTANCES. (a) Except as provided by this section or
Section 162.0062, 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
not later than contemporaneously with payment to a contractor any
money withheld from the payment as retainage. The deposited funds
are 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 to satisfy the
owner's obligations and liabilities for retainage and a claimant's
rights under Chapter 53. Trust funds remaining in the construction
trust fund account after the satisfaction of those obligations,
liabilities, and rights may be used by the owner for other
construction payments under this chapter or direct costs 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 alter the owner's obligation or
liability under any other law.
(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 or for related land
development.
(c) This section does not apply to a property owner
improving real property if the value of the improvement to be made
is $500,000 or less.
Sec. 162.0062. BOND IN LIEU OF TRUST FUND ACCOUNT. (a)
Instead of establishing a construction trust fund account under
Section 162.0061(a), a property owner may obtain or furnish a bond
as described by Subsection (b) or (c).
(b) A property owner may obtain a bond furnished by the
contractor that meets the requirements of Subchapter I, Chapter 53.
(c) A property owner may furnish a bond that:
(1) meets the requirements of Section 162.0063;
(2) is in a penal sum at least equal to 10 percent of:
(A) the value of the total of the original
contract amount; and
(B) normal and usual extras not exceeding 15
percent of the original contract amount;
(3) is conditioned on prompt payment for retainage
owed for all labor, subcontracts, materials, and specially
fabricated materials furnished by any person to accomplish work
required under a contract between a contractor and an owner; and
(4) is for the protection and use of each claimant who
is due prompt payment under Subdivision (3).
Sec. 162.0063. ADDITIONAL BOND REQUIREMENTS. A bond
furnished under Section 162.0062:
(1) must be executed by:
(A) the contractor as principal if furnished
under Section 162.0062(b) or by the owner as principal if furnished
under Section 162.0062(c); and
(B) a corporate surety authorized to execute
surety bonds in this state, as provided by Subchapter A, Chapter
3503, Insurance Code; and
(2) may not be subject to any notice or perfection
obligation other than as required by Chapter 53.
Sec. 162.0064. LIMITATION ON ACTION ON BOND. A suit may not
be filed on a bond furnished under Section 162.0062(c) after the
first anniversary of the later of:
(1) the date of completion of the contract between the
owner and contractor; or
(2) the date on which retainage is due to the
contractor.
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 amount of the funds in the account for
each project 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.
Sec. 162.009. DISCLOSURES TO BENEFICIARIES; SUSPENSION OF
PERFORMANCE. (a) Not later than the 14th day after a property
owner receives a written request from a person who is a beneficiary
of trust funds, the property owner shall provide the beneficiary
with:
(1) if the owner is maintaining a construction trust
fund account under Section 162.0061:
(A) a copy of 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 or an original executed
authorization sufficient to allow the requesting person to obtain
the periodic statement; and
(B) the account record required to be maintained
by the owner with respect to the construction project for which the
trust funds have been deposited; or
(2) if a bond has been obtained or furnished under
Section 162.0062, proof of a bond complying with that section.
(b) If a property owner does not comply with Subsection (a)
or the information provided under that subsection does not
demonstrate that the owner has complied with Section 162.0061 or
162.0062, a beneficiary may suspend contractually required
performance the 10th day after the date the beneficiary gives the
owner written notice that states the intent of the beneficiary to
suspend performance and the reason for suspending performance if
the owner does not cure the grounds for suspension under Subsection
(c) before the beneficiary suspends performance.
(c) An owner may cure any grounds for a suspension under
Subsection (b) by complying with Section 162.0061 or 162.0062 and
providing proof of that compliance to the beneficiary.
(d) A beneficiary that has suspended performance under
Subsection (b) is not:
(1) required to supply further labor, services, or
materials before the date the owner cures the grounds for
suspension as provided by Subsection (c) and pays the beneficiary's
costs for suspending performance and for resuming performance; or
(2) responsible for damages resulting from suspending
performance, unless the beneficiary continues to suspend
performance after the 10th day after the date the owner cured the
grounds for suspension as provided by Subsection (c) and paid the
beneficiary for the costs described by Subdivision (1).
SECTION 6. Section 162.031, Property Code, is amended by
amending Subsection (b) and adding Subsection (b-1) to read as
follows:
(b) It is an affirmative defense to prosecution or other
action brought under Subsection (a) with respect to trust funds
described by Section 162.001(a) or (b) 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.
(b-1) It is an affirmative defense to prosecution or other
action brought under Subsection (a) with respect to trust funds
described by Section 162.001(b-1) that the trust funds:
(1) [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
(2) have been retained as authorized or required by
Chapter 53.
SECTION 7. The change in law made by this Act applies only
to an original construction contract entered into on or after the
effective date of this Act. An original construction 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 8. This Act takes effect September 1, 2013.