Texas 2015 - 84th Regular

Texas House Bill HB1966 Compare Versions

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1	1	84R393 NC-F
2	2	By: Keffer, Leach, Workman, Deshotel, et al. H.B. No. 1966
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to an account or bond for construction retainage under
8	8	certain contracts.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 162.001, Property Code, is amended by
11	11	adding Subsection (b-1) to read as follows:
12	12	(b-1) Funds required under this chapter to be deposited into
13	13	a construction trust fund account are trust funds.
14	14	SECTION 2. Section 162.003(a), Property Code, is amended to
15	15	read as follows:
16	16	(a) An artisan, laborer, mechanic, contractor,
17	17	subcontractor, or materialman who labors or who furnishes labor or
18	18	material for the construction or repair of an improvement on
19	19	specific real property in this state is a beneficiary of any trust
20	20	funds paid, [or] received, withheld as retainage, or required to be
21	21	deposited into a construction trust fund account under this chapter
22	22	in connection with the improvement.
23	23	SECTION 3. Section 162.004(a), Property Code, is amended to
24	24	read as follows:
25	25	(a) This chapter does not apply to:
26	26	(1) a bank, savings and loan, or other lender;
27	27	(2) a title company or other closing agent; or
28	28	(3) a corporate surety who issues a payment bond
29	29	covering the contract for the construction or repair of the
30	30	improvement, except as provided by Section 162.0064.
31	31	SECTION 4. Section 162.005, Property Code, is amended by
32	32	adding Subdivisions (7) and (8) to read as follows:
33	33	(7) "Construction trust fund account" means an account
34	34	in a federally insured financial institution into which are
35	35	deposited only funds required by Section 162.0061(a) to be
36	36	deposited in a construction trust fund account and other funds
37	37	deposited by the property owner that are necessary to pay charges
38	38	imposed on the account by the financial institution.
39	39	(8) "Retainage" is an amount or agreed percentage of
40	40	money in a construction contract between an owner and a contractor
41	41	that is withheld from a payment and not due to be paid until
42	42	completion of the contract or on an agreed date.
43	43	SECTION 5. Subchapter A, Chapter 162, Property Code, is
44	44	amended by adding Sections 162.0061, 162.0062, 162.0063, 162.0064,
45	45	162.008, and 162.009 to read as follows:
46	46	Sec. 162.0061. CONSTRUCTION TRUST FUND ACCOUNT REQUIRED IN
47	47	CERTAIN CIRCUMSTANCES. (a) Except as provided by this section or
48	48	Section 162.0062, a property owner who enters into a construction
49	49	loan or financing agreement to pay toward the improvement of real
50	50	property that is secured wholly or partly by a lien on the property
51	51	or improvement shall deposit in a construction trust fund account
52	52	not later than contemporaneously with payment to a contractor any
53	53	money withheld from the payment as retainage. The deposited funds
54	54	are held in trust for the benefit of a person described by Section
55	55	162.003(a). Trust funds deposited in a construction trust fund
56	56	account under this section shall be used first to satisfy the
57	57	owner's obligations and liabilities for retainage and a claimant's
58	58	rights under Chapter 53. Trust funds remaining in the construction
59	59	trust fund account after the satisfaction of those obligations,
60	60	liabilities, and rights may be used by the owner for other
61	61	construction payments under this chapter or direct costs of the
62	62	owner. Trust funds under this section are not subject to seizure,
63	63	offset, or taking by the financial institution or a creditor of the
64	64	owner. This subsection does not alter the owner's obligation or
65	65	liability under any other law.
66	66	(b) This section does not apply to a property owner who
67	67	enters into a construction loan or financing agreement to pay
68	68	toward the construction, remodeling, or repair of a single-family
69	69	house or duplex used for residential purposes or for related land
70	70	development.
71	71	(c) This section does not apply to a property owner
72	72	improving real property if the value of the improvement to be made
73	73	is $500,000 or less.
74	74	Sec. 162.0062. BOND IN LIEU OF TRUST FUND ACCOUNT. (a)
75	75	Instead of establishing a construction trust fund account under
76	76	Section 162.0061(a), a property owner may obtain or furnish a bond
77	77	as described by Subsection (b) or (c).
78	78	(b) A property owner may obtain a bond furnished by the
79	79	contractor that meets the requirements of Subchapter I, Chapter 53.
80	80	(c) A property owner may furnish a bond that:
81	81	(1) meets the requirements of Section 162.0063;
82	82	(2) is in a penal sum at least equal to 10 percent of:
83	83	(A) the value of the total of the original
84	84	contract amount; and
85	85	(B) normal and usual extras not exceeding 15
86	86	percent of the original contract amount;
87	87	(3) is conditioned on prompt payment for retainage
88	88	owed for all labor, subcontracts, materials, and specially
89	89	fabricated materials furnished by any person to accomplish work
90	90	required under a contract between a contractor and an owner; and
91	91	(4) is for the protection and use of each claimant who
92	92	is due prompt payment under Subdivision (3).
93	93	Sec. 162.0063. ADDITIONAL BOND REQUIREMENTS. A bond
94	94	furnished under Section 162.0062:
95	95	(1) must be executed by:
96	96	(A) the contractor as principal if furnished
97	97	under Section 162.0062(b) or by the owner as principal if furnished
98	98	under Section 162.0062(c); and
99	99	(B) a corporate surety authorized to execute
100	100	surety bonds in this state, as provided by Subchapter A, Chapter
101	101	3503, Insurance Code; and
102	102	(2) may not be subject to any notice or perfection
103	103	obligation other than as required by Chapter 53.
104	104	Sec. 162.0064. LIMITATION ON ACTION ON BOND. A suit may not
105	105	be filed on a bond furnished under Section 162.0062(c) after the
106	106	first anniversary of the later of:
107	107	(1) the date of completion of the contract between the
108	108	owner and contractor; or
109	109	(2) the date on which retainage is due to the
110	110	contractor.
111	111	Sec. 162.008. MANAGEMENT OF CONSTRUCTION TRUST FUND
112	112	ACCOUNTS. (a) If a property owner required to maintain a
113	113	construction trust fund account under Section 162.0061 opens and
114	114	maintains a separate construction trust fund account with the
115	115	financial institution for each project subject to this subchapter,
116	116	the periodic statement received from the financial institution
117	117	must:
118	118	(1) refer to the account as a "construction trust
119	119	fund" account; and
120	120	(2) identify the project for which the construction
121	121	trust fund account is maintained.
122	122	(b) If a property owner required to maintain a construction
123	123	trust fund account opens and maintains a construction trust fund
124	124	account with the financial institution into which funds for two or
125	125	more projects subject to this subchapter are deposited:
126	126	(1) the periodic statement received from the financial
127	127	institution must refer to the account as a "construction trust
128	128	fund" account; and
129	129	(2) the owner shall maintain an account record for the
130	130	construction trust fund account that provides information relating
131	131	to:
132	132	(A) the amount of the funds in the account for
133	133	each project and the date the funds were deposited;
134	134	(B) the date and amount of each disbursement from
135	135	the account and the person to whom the funds were disbursed; and
136	136	(C) the current balance of the account.
137	137	(c) For each construction trust fund account maintained by
138	138	the property owner under Subsection (b), the owner shall maintain
139	139	the account record for each construction project for which trust
140	140	funds have been deposited.
141	141	Sec. 162.009. DISCLOSURES TO BENEFICIARIES; SUSPENSION OF
142	142	PERFORMANCE. (a) Not later than the 14th day after a property
143	143	owner receives a written request from a person who is a beneficiary
144	144	of trust funds, the property owner shall provide the beneficiary
145	145	with:
146	146	(1) if the owner is maintaining a construction trust
147	147	fund account under Section 162.0061:
148	148	(A) a copy of the periodic statement received
149	149	from the financial institution regarding the construction trust
150	150	fund account into which the trust funds of which the person is a
151	151	beneficiary have been deposited or an original executed
152	152	authorization sufficient to allow the requesting person to obtain
153	153	the periodic statement; and
154	154	(B) the account record required to be maintained
155	155	by the owner with respect to the construction project for which the
156	156	trust funds have been deposited; or
157	157	(2) if a bond has been obtained or furnished under
158	158	Section 162.0062, proof of a bond complying with that section.
159	159	(b) If a property owner does not comply with Subsection (a)
160	160	or the information provided under that subsection does not
161	161	demonstrate that the owner has complied with Section 162.0061 or
162	162	162.0062, a beneficiary may suspend contractually required
163	163	performance the 10th day after the date the beneficiary gives the
164	164	owner written notice that states the intent of the beneficiary to
165	165	suspend performance and the reason for suspending performance if
166	166	the owner does not cure the grounds for suspension under Subsection
167	167	(c) before the beneficiary suspends performance.
168	168	(c) An owner may cure any grounds for a suspension under
169	169	Subsection (b) by complying with Section 162.0061 or 162.0062 and
170	170	providing proof of that compliance to the beneficiary.
171	171	(d) A beneficiary that has suspended performance under
172	172	Subsection (b) is not:
173	173	(1) required to supply further labor, services, or
174	174	materials before the date the owner cures the grounds for
175	175	suspension as provided by Subsection (c) and pays the beneficiary's
176	176	costs for suspending performance and for resuming performance; or
177	177	(2) responsible for damages resulting from suspending
178	178	performance, unless the beneficiary continues to suspend
179	179	performance after the 10th day after the date the owner cured the
180	180	grounds for suspension as provided by Subsection (c) and paid the
181	181	beneficiary for the costs described by Subdivision (1).
182	182	SECTION 6. Section 162.031, Property Code, is amended by
183	183	amending Subsection (b) and adding Subsection (b-1) to read as
184	184	follows:
185	185	(b) It is an affirmative defense to prosecution or other
186	186	action brought under Subsection (a) with respect to trust funds
187	187	described by Section 162.001(a) or (b) that the trust funds not paid
188	188	to the beneficiaries of the trust were used by the trustee to pay
189	189	the trustee's actual expenses directly related to the construction
190	190	or repair of the improvement.
191	191	(b-1) It is an affirmative defense to prosecution or other
192	192	action brought under Subsection (a) with respect to trust funds
193	193	described by Section 162.001(b-1) that the trust funds:
194	194	(1) [or] have been retained by the trustee, after
195	195	notice to the beneficiary who has made a request for payment, as a
196	196	result of the trustee's reasonable belief that the beneficiary is
197	197	not entitled to such funds; or
198	198	(2) have been retained as authorized or required by
199	199	Chapter 53.
200	200	SECTION 7. The change in law made by this Act applies only
201	201	to an original construction contract entered into on or after the
202	202	effective date of this Act. An original construction contract
203	203	entered into before the effective date of this Act is governed by
204	204	the law as it existed immediately before that date, and that law is
205	205	continued in effect for that purpose.
206	206	SECTION 8. This Act takes effect September 1, 2015.