Rep. Norm Thurston — Voting Record

Bill

Number

S.B. 187 First Substitute (2017GS)

Sponsor

Sen. Buxton, D. G.

Final action

Governor Signed 3/24/2017

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• defines terms;
• provides a maximum rate of interest for a lien filed against project property by a person without privity of contract with the owner-builder; and
• provides the director of the Division of Occupational and Professional Licensing discretion to determine if a claimant has met certain requirements to recover from the Residence Lien Recovery Fund.

Every vote on this bill

Bill text

CONSTRUCTION TRADE AMENDMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: D. Gregg Buxton
House Sponsor: 
Mike Schultz
LONG TITLE
General Description:
This bill amends provisions related to the construction trade.
Highlighted Provisions:
This bill:
▸ defines terms;
▸ provides a maximum rate of interest for a lien filed against project property by a
person without privity of contract with the owner-builder; and
▸ provides the director of the Division of Occupational and Professional Licensing
discretion to determine if a claimant has met certain requirements to recover from
the Residence Lien Recovery Fund.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
13-8-5
, as last amended by Laws of Utah 2012, Chapters 86 and 278
38-1a-309
, as enacted by Laws of Utah 2012, Chapter 330
38-11-204
, as last amended by Laws of Utah 2016, Chapter 238
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
13-8-5
 is amended to read:
13-8-5.
Definitions -- Limitation on retention proceeds withheld -- Deposit in
interest-bearing escrow account -- Release of proceeds -- Payment to subcontractors --
Penalty -- No waiver.
(1) As used in this section:
(a) (i) "Construction contract" means a written agreement between the parties relative
to the design, construction, alteration, repair, or maintenance of a building, structure, highway,
appurtenance, appliance, or other improvements to real property, including moving,
demolition, and excavating for nonresidential commercial or industrial construction projects.
(ii) If the construction contract is for construction of a project that is part residential
and part nonresidential, this section applies only to that portion of the construction project that
is nonresidential as determined pro rata based on the percentage of the total square footage of
the project that is nonresidential.
(b) "Construction lender" means any person, including a bank, trust company, savings
bank, industrial bank, land bank, safe deposit company, private banker, savings and loan
association, credit union, cooperative bank, small loan company, sales finance company,
investment company, or any other financial institution that advances money to a borrower for
the purpose of making alterations or improvements to real property. A construction lender
does not include a person or entity who is acting in the capacity of contractor, original
contractor, or subcontractor.
(c) "Construction project" means an improvement to real property that is the subject of
a construction contract.
[
(c)
] 
(d)
 "Contractor" means a person who, for compensation other than wages as an
employee, undertakes any work in a construction trade, as defined in Section 
58-55-102
 and
includes:
(i) any person engaged as a maintenance person who regularly engages in activities set
forth in Section 
58-55-102
 as a construction trade; or
(ii) a construction manager who performs management and counseling services on a
construction project for a fee.
[
(d)
] 
(e)
 "Original contractor" [
has the same meaning as provided
] 
means the same as
that term is defined
 in Section 
38-1a-102
.
[
(e)
] 
(f)
 "Owner" means the person who holds any legal or equitable title or interest in
property. Owner does not include a construction lender unless the construction lender has an
ownership interest in the property other than solely as a construction lender.
[
(f)
] 
(g)
 "Public agency" means any state agency or a county, city, town, school district,
local district, special service district, or other political subdivision of the state that enters into a
construction contract for an improvement of public property.
[
(g)
] 
(h)
 "Retention payment" means release of retention proceeds as defined in
Subsection (1)[
(h)
]
(i)
.
[
(h)
] 
(i)
 "Retention proceeds" means money earned by a contractor or subcontractor but
retained by the owner or public agency pursuant to the terms of a construction contract to
guarantee payment or performance by the contractor or subcontractor of the construction
contract.
[
(i)
] 
(j)
 "Subcontractor" [
has the same meaning as
] 
means the same as that term is
defined in Section 
38-1a-102
.
(2) (a) This section is applicable to all construction contracts relating to construction
work or improvements entered into on or after July 1, 1999, between:
(i) an owner or public agency and an original contractor;
(ii) an original contractor and a subcontractor; and
(iii) subcontractors under a contract described in Subsection (2)(a)(i) or (ii).
(b) This section does not apply to a construction lender.
(3) (a) Notwithstanding Section 
58-55-603
, the retention proceeds withheld and
retained from any payment due under the terms of the construction contract may not exceed 5%
of the payment:
(i) by the owner or public agency to the original contractor;
(ii) by the original contractor to any subcontractor; or
(iii) by a subcontractor.
(b) The total retention proceeds withheld may not exceed 5% of the total construction
price.
(c) The percentage of the retention proceeds withheld and retained pursuant to a
construction contract between the original contractor and a subcontractor or between
subcontractors shall be the same retention percentage as between the owner and the original
contractor if:
(i) the retention percentage in the original construction contract between an owner and
the original contractor is less than 5%; or
(ii) after the original construction contract is executed but before completion of the
construction contract the retention percentage is reduced to less than 5%.
(4) (a) If any payment on a contract with a private contractor, firm, or corporation to do
work for an owner or public agency is retained or withheld by the owner or the public agency,
as retention proceeds, it shall be placed in an interest-bearing account and accounted for
separately from other amounts paid under the contract.
(b) The interest accrued under Subsection (4)(a) shall be:
(i) for the benefit of the contractor and subcontractors; and
(ii) paid after the project is completed and accepted by the owner or the public agency.
(c) The contractor shall ensure that any interest accrued on the retainage is distributed
by the contractor to subcontractors on a pro rata basis.
(d) Retention proceeds and accrued interest retained by an owner or public agency:
(i) are considered to be in a constructive trust for the benefit of the contractor and
subcontractors who have earned the proceeds; and
(ii) are not subject to assignment, encumbrance, attachment, garnishment, or execution
levy for the debt of any person holding the retention proceeds and accrued interest.
(5) Any retention proceeds retained or withheld pursuant to this section and any
accrued interest shall be released pursuant to a billing statement from the contractor within 45
days from the later of:
(a) the date the owner or public agency receives the billing statement from the
contractor;
(b) the date that a certificate of occupancy or final acceptance notice is issued to:
(i) the original contractor who obtained the building permit from the building inspector
or public agency;
(ii) the owner or architect; or
(iii) the public agency;
(c) the date that a public agency or building inspector [
having
] 
that has the
 authority to
issue [
its own
] 
a
 certificate of occupancy does not issue the certificate but permits partial or
complete occupancy [
of a newly constructed or remodeled building
] 
or use of a construction
project
; or
(d) the date the contractor accepts the final pay quantities.
(6) If only partial occupancy of a [
building
] 
construction project
 is permitted, any
retention proceeds withheld and retained pursuant to this section and any accrued interest shall
be partially released within 45 days under the same conditions as provided in Subsection (5) in
direct proportion to the value of the part of the [
building
] 
construction project
 occupied 
or
used
.
(7) The billing statement from the contractor as provided in Subsection (5)(a) shall
include documentation of lien releases or waivers.
(8) (a) Notwithstanding Subsection (3):
(i) if a contractor or subcontractor is in default or breach of the terms and conditions of
the construction contract documents, plans, or specifications governing construction of the
project, the owner or public agency may withhold from payment for as long as reasonably
necessary an amount necessary to cure the breach or default of the contractor or subcontractor;
or
(ii) if a project or a portion of the project has been substantially completed, the owner
or public agency may retain until completion up to twice the fair market value of the work of
the original contractor or of any subcontractor that has not been completed:
(A) in accordance with the construction contract documents, plans, and specifications;
or
(B) in the absence of plans and specifications, to generally accepted craft standards.
(b) An owner or public agency that refuses payment under Subsection (8)(a) shall
describe in writing within 45 days of withholding such amounts what portion of the work was
not completed according to the standards specified in Subsection (8)(a).
(9) (a) Except as provided in Subsection (9)(b), an original contractor or subcontractor
who receives retention proceeds shall pay each of its subcontractors from whom retention has
been withheld each subcontractor's share of the retention received within 10 days from the day
that all or any portion of the retention proceeds is received:
(i) by the original contractor from the owner or public agency; or
(ii) by the subcontractor from:
(A) the original contractor; or
(B) a subcontractor.
(b) Notwithstanding Subsection (9)(a), if a retention payment received by the original
contractor is specifically designated for a particular subcontractor, payment of the retention
shall be made to the designated subcontractor.
(10) (a) In any action for the collection of the retained proceeds withheld and retained
in violation of this section, the successful party is entitled to:
(i) attorney fees; and
(ii) other allowable costs.
(b) (i) Any owner, public agency, original contractor, or subcontractor who knowingly
and wrongfully withholds a retention shall be subject to a charge of 2% per month on the
improperly withheld amount, in addition to any interest otherwise due.
(ii) The charge described in Subsection (10)(b)(i) shall be paid to the contractor or
subcontractor from whom the retention proceeds have been wrongfully withheld.
(11) A party to a construction contract may not require any other party to waive any
provision of this section.
Section 2. Section 
38-1a-309
 is amended to read:
38-1a-309.
Interest rate -- Preconstruction service or construction contract --
Lien.
[
Unless otherwise specified in a lawful contract between the owner-builder and the
person claiming a lien under this chapter, the interest rate applicable to the lien is the rate
described in Subsection 
15-1-1
(2).
]
(1) Subject to Subsection (2), the interest rate that applies to a lawful contract for
preconstruction service or construction work on or for a project property, or to a lien claimed
under this chapter against the project property, is, unless otherwise provided in the lawful
contract, the rate described in Subsection 
15-1-1
(2).
(2) If a person that claims a lien against project property under this chapter is not in
privity of contract with the owner or owner-builder, the interest rate that applies to the person's
lien may not exceed the rate described in Subsection 
15-1-1
(2).
Section 3. Section 
38-11-204
 is amended to read:
38-11-204.
Claims against the fund -- Requirements to make a claim --
Qualifications to receive compensation -- Qualifications to receive a certificate of
compliance.
(1) To claim recovery from the fund a person shall:
(a) meet the requirements of Subsection (4) or (6);
(b) pay an application fee determined by the division under Section 
63J-1-504
; and
(c) file with the division a completed application on a form provided by the division
accompanied by supporting documents establishing:
(i) that the person meets the requirements of Subsection (4) or (6);
(ii) that the person was a qualified beneficiary or laborer during the construction on the
owner-occupied residence; and
(iii) the basis for the claim.
(2) To recover from the fund, the application required by Subsection (1) shall be filed
no later than one year:
(a) from the date the judgment required by Subsection (4)(d) is entered;
(b) from the date the nonpaying party filed bankruptcy, if the claimant is precluded
from obtaining a judgment or from satisfying the requirements of Subsection (4)(d) because the
nonpaying party filed bankruptcy within one year after the entry of judgment; or
(c) from the date the laborer, trying to recover from the fund, completed the laborer's
qualified services.
(3) The issuance of a certificate of compliance is governed by Section 
38-11-110
.
(4) To recover from the fund, regardless of whether the residence is occupied by the
owner, a subsequent owner, or the owner or subsequent owner's tenant or lessee, a qualified
beneficiary shall establish that:
(a) (i) the owner of the owner-occupied residence or the owner's agent entered into a
written contract with an original contractor licensed or exempt from licensure under Title 58,
Chapter 55, Utah Construction Trades Licensing Act:
(A) for the performance of qualified services;
(B) to obtain the performance of qualified services by others; or
(C) for the supervision of the performance by others of qualified services in
construction on that residence;
(ii) the owner of the owner-occupied residence or the owner's agent entered into a
written contract with a real estate developer for the purchase of an owner-occupied residence;
or
(iii) the owner of the owner-occupied residence or the owner's agent entered into a
written contract with a factory built housing retailer for the purchase of an owner-occupied
residence;
(b) the owner has paid in full the original contractor, licensed or exempt from licensure
under Title 58, Chapter 55, Utah Construction Trades Licensing Act, real estate developer, or
factory built housing retailer under Subsection (4)(a) with whom the owner has a written
contract in accordance with the written contract and any amendments to the contract;
(c) (i) the original contractor, licensed or exempt from licensure under Title 58,
Chapter 55, Utah Construction Trades Licensing Act, the real estate developer, or the factory
built housing retailer subsequently failed to pay a qualified beneficiary who is entitled to
payment under an agreement with that original contractor or real estate developer licensed or
exempt from licensure under Title 58, Chapter 55, Utah Construction Trades Licensing Act, for
services performed or materials supplied by the qualified beneficiary;
(ii) a subcontractor who contracts with the original contractor, licensed or exempt from
licensure under Title 58, Chapter 55, Utah Construction Trades Licensing Act, the real estate
developer, or the factory built housing retailer failed to pay a qualified beneficiary who is
entitled to payment under an agreement with that subcontractor or supplier; or
(iii) a subcontractor who contracts with a subcontractor or supplier failed to pay a
qualified beneficiary who is entitled to payment under an agreement with that subcontractor or
supplier;
(d) (i) unless precluded from doing so by the nonpaying party's bankruptcy filing
within the applicable time, the qualified beneficiary filed an action against the nonpaying party
to recover money owed to the qualified beneficiary within the earlier of:
(A) 180 days from the date the qualified beneficiary filed a notice of claim under
Section 
38-1a-502
; or
(B) 270 days from the completion of the original contract pursuant to Subsection
38-1a-502
(1);
(ii) the qualified beneficiary has obtained a judgment against the nonpaying party who
failed to pay the qualified beneficiary under an agreement to provide qualified services for
construction of that owner-occupied residence;
(iii) the qualified beneficiary has:
(A) obtained from a court of competent jurisdiction the issuance of an order requiring
the judgment debtor, or if a corporation any officer of the corporation, to appear before the
court at a specified time and place to answer concerning the debtor's or corporation's property;
(B) received return of service of the order from a person qualified to serve documents
under the Utah Rules of Civil Procedure, Rule 4(b);
(C) made reasonable efforts to obtain asset information from the supplemental
proceedings; and
(D) if assets subject to execution are discovered as a result of the order required under
this Subsection (4)(d)(iii) or for any other reason, obtained the issuance of a writ of execution
from a court of competent jurisdiction; and
(iv) if the nonpaying party has filed bankruptcy, the qualified beneficiary timely filed a
proof of claim where permitted in the bankruptcy action;
(e) the qualified beneficiary is not entitled to reimbursement from any other person;
and
(f) the qualified beneficiary provided qualified services to a contractor, licensed or
exempt from licensure under Title 58, Chapter 55, Utah Construction Trades Licensing Act.
(5) The requirements of Subsections (4)(d)(ii) and (iii) need not be met if the qualified
beneficiary is prevented from compliance because the nonpaying party files bankruptcy.
(6) To recover from the fund a laborer shall:
(a) establish that the laborer has not been paid wages due for the work performed at the
site of a construction on an owner-occupied residence; and
(b) provide any supporting documents or information required by rule by the division.
(7) A fee determined by the division under Section 
63J-1-504
 shall be deducted from
any recovery from the fund received by a laborer.
(8) The requirements of Subsections (4)(a) and (b) may be satisfied if an owner or
agent of the owner establishes to the satisfaction of the director that the owner of the
owner-occupied residence or the owner's agent entered into a written contract with an original
contractor who:
(a) was a business entity that was not licensed under Title 58, Chapter 55, Utah
Construction Trades Licensing Act, but was solely or partly owned by an individual who was
licensed under Title 58, Chapter 55, Utah Construction Trades Licensing Act; or
(b) was a natural person who was not licensed under Title 58, Chapter 55, Utah
Construction Trades Licensing Act, but who was the sole or partial owner and qualifier of a
business entity that was licensed under Title 58, Chapter 55, Utah Construction Trades
Licensing Act.
(9) The director shall have equitable power to determine if the requirements of
Subsections (4)(a) [
and
]
,
 (b)
, and (f)
 have been met, but any decision by the director under this
chapter shall not alter or have any effect on any other decision by the division under Title 58,
Occupations and Professions.