83R507 AJA-F
By: Deuell S.B. No. 295
A BILL TO BE ENTITLED
AN ACT
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.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 28, Property Code, is amended by adding
Section 28.0091 to read as follows:
Sec. 28.0091. LENDER NOTICE OF DEFAULT TO CONTRACTORS;
SUSPENSION OF PERFORMANCE PENDING CURE. (a) This section applies
only to a lender that provides financing through a construction
loan or under a financing agreement for an improvement to real
property for which the real property or improvement is collateral.
(b) For an improvement to real property for which financing
is provided as described by Subsection (a), the contractor shall
provide to the lender:
(1) the contractor's name, physical and mailing
addresses and e-mail address, if available, and telephone number;
and
(2) the name of the person to whom any notice under
this section should be delivered.
(c) Except as provided by Subsection (f), each contractor
and subcontractor providing labor, materials, equipment, or
services for an improvement described by this section is entitled
to suspend contractually required performance without penalty or
liability for damages if the lender suspends a disbursement of loan
proceeds or ceases disbursements of loan proceeds to a borrower or
property owner under the loan or financing agreement to which this
section applies.
(d) Except as provided by Subsection (f), a lender shall
immediately notify the contractor identified under Subsection (b)
of a suspension of a disbursement of loan proceeds or cessation of
disbursements of loan proceeds described by Subsection (c).
(e) On receipt of notice under Subsection (d), a contractor
shall immediately notify each of the contractor's subcontractors of
the suspension of the disbursement of loan proceeds or cessation of
disbursements of loan proceeds and of the subcontractor's right
under this section to suspend contractually required performance
without penalty or liability for damages as a result of the
suspension of the disbursement of loan proceeds or cessation of
disbursements of loan proceeds.
(f) A lender is not required to give notice to a contractor
under Subsection (d) with respect to a suspension of a disbursement
of loan proceeds or cessation of disbursements of loan proceeds
described by Subsection (c) if, before the lender suspends the
disbursement of loan proceeds or ceases the disbursements of loan
proceeds, a written agreement exists between the lender and the
contractor that:
(1) provides for the continued performance by the
contractor and for payment to the contractor in the event of a
default by the borrower or property owner under the loan or
financing agreement;
(2) provides for notice from the lender to the
contractor that the borrower or property owner is in default under
the loan or financing agreement;
(3) requires that, on the receipt of notice under
Subdivision (2), the contractor shall immediately notify the
contractor's subcontractors of the borrower's or property owner's
default under the loan or financing agreement; and
(4) specifically states that subcontractors of the
contractor are third-party beneficiaries of the lender's
obligations under the agreement.
(g) A subcontractor is a third-party beneficiary of a
lender's obligations under Subsection (d) with equal standing to a
contractor to enforce remedies.
SECTION 2. The change in law made by this Act applies only
to a construction loan or financing agreement entered into on or
after the effective date of this Act. A construction loan or
financing agreement entered into before the effective date of this
Act is governed by the law in effect immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 3. This Act takes effect September 1, 2013.