HB 1107 – AS INTRODUCED
HOUSE BILL 1107
This bill regulates commercial construction contracts by establishing requirements for timely payment under the contract, limiting and regulating retainage practices, prohibiting blanket “no-lien” clauses, and requiring certain job site postings for purposes of registering a lien for material or labor.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [
in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Six
AN ACT relative to requirements for commercial construction contracts.
Be it Enacted by the Senate and House of Representatives in General Court convened:
359-I:1 Definitions. In this chapter:
I. “Owner” means any individual, corporation, nonprofit corporation, partnership, limited partnership, limited liability company, or other business entity that is the owner of record or lessee of real property upon which construction, renovation, or rehabilitation is to be or is being performed pursuant to a construction contract regarding such real property.
II. “Construction contract” or “contract” means any contract for the construction, renovation, or rehabilitation in this state on or after January 1, 2007, including any improvements to real property that are associated with such construction, renovation, or rehabilitation, or any subcontract for construction, renovation, or rehabilitation between an owner and a contractor, or between a contractor and a subcontractor or subcontractors, or between a subcontractor and any other subcontractor. “Construction contract” or “contract” does not include:
(a) Any public works or other building contract entered into with this state, the United States, any other state, and any municipality or other political subdivision of this state or any other state.
(b) A contract or project funded or insured by the United States Department of Housing and Urban Development.
(c) A contract between an owner and a contractor for an amount of $25,000 or less or a subcontract which results from such a contract.
(d) A contract for a building intended for residential occupancy containing 4 or fewer units.
III. “Retainage” means a sum withheld from progress payments to the contractor or subcontractor, otherwise payable to a contractor or subcontractor by an owner conditioned on substantial or final completion of all work in accordance with the terms of a written or verbal construction contract, but does not include any sum withheld due to the contractor’s or subcontractor’s failure to comply with construction plans and specifications.
359-I:2 Required Contract Provisions; Escrow Accounts; Rights of Action.
I. Each construction contract shall contain the following provisions:
(a) A requirement that the owner pay any amounts due any contractor, subcontractor, or supplier in a direct contractual relationship with the owner, whether for labor performed or materials furnished, not later than 30 days after the date any written request for payment has been made by such contractor, subcontractor, or supplier.
(b) A requirement that the contractor pay any amounts due any subcontractor or supplier, whether for labor performed or materials furnished, not later than 30 days after the date the contractor receives payment from the owner which encompasses labor performed or materials furnished by such subcontractor or supplier.
(c) A requirement that the contractor shall include in each of its subcontracts a provision requiring each subcontractor and supplier to pay any amounts due any of its subcontractors or suppliers, whether for labor performed or materials furnished, not later than 30 days after the date such subcontractor or supplier receives a payment from the contractor which encompasses labor performed or materials furnished by such subcontractor or supplier.
II.(a) If payment is not made by an owner in accordance with the requirements of subparagraph I(a) or any applicable construction contract, such contractor, subcontractor, or supplier shall set forth its claim against the owner through notice by registered or certified mail.
(b) If payment is not made by a contractor in accordance with the requirements of subparagraph I(b) or any applicable construction contract, the subcontractor or supplier shall set forth its claim against the contractor through notice by registered or certified mail.
(c) If payment is not made by a subcontractor or supplier in accordance with subparagraph I(c), the subcontractor or supplier to whom money is owed shall set forth its claim against the subcontractor or supplier who has failed to comply with the provisions of subparagraph I(c) through notice by registered or certified mail.
(d) Ten days after the receipt of any notice under this paragraph, the owner, contractor, subcontractor, or supplier, as the case may be, shall be liable for interest on the amount due and owing at the rate of one percent per month. Such interest shall accrue beginning on the date any such notice is received. In addition, such owner, contractor, subcontractor, or supplier, upon written demand from the party providing such notice, shall be required to place funds in the amount of the claim, plus such interest of one percent per month, in an interest-bearing escrow account in a bank in this state, provided such owner, contractor, subcontractor, or supplier may refuse to place the funds in escrow on the grounds that the party making such demand has not substantially performed the work or supplied the materials according to the terms of the construction contract. In the event that such owner, contractor, subcontractor, or supplier refuses to place such funds in escrow and such owner, contractor, subcontractor, or supplier is found to have unreasonably withheld payment due a party providing such notice, such owner, contractor, subcontractor, or supplier shall be liable to the party making demand for payment of such funds and for reasonable attorneys’ fees, plus interest, on the amount due and owing at the rate of one percent per month. In addition, any owner, contractor, subcontractor, or supplier who is found to have withheld payments to a party providing such notice in bad faith shall be liable for 10 percent damages.
III. No payment may be withheld from a subcontractor or supplier for work performed or materials furnished because of a dispute between a contractor and another contractor, subcontractor, or supplier.
IV. This section shall not be construed to prohibit progress payments prior to final payment of the contract and is applicable to all subcontractors and suppliers for material or labor whether they have contracted directly with the contractor or with some other subcontractor on the work. Each owner that enters into a contract under this section and fails or neglects to make payment to a contractor for labor and materials supplied under a contract, as required pursuant to this section, shall, upon demand of any person who has not been paid by the contractor for such labor and materials supplied in the performance of the work under the contract, promptly pay the person for such labor or materials. Demand for payment shall be served on the owner and a copy of each demand shall be sent to the contractor by certified mail, return receipt requested, to any address at which the owner and contractor conduct business. If the owner fails to make such payment, the person shall have a direct right of action against the owner in the superior court for the judicial district in which the project is located. The owner’s obligations for direct payments to the contractor, subcontractors, or suppliers giving notice pursuant to this section shall be limited to the amount owed to the contractor by the owner for work performed under the contract at the date such notice is provided.
359-I:3 Retainage Limitation. No construction contract may provide for any retainage in an amount that exceeds 7.5 percent of the estimated amount of a progress payment for the life of the construction project.
359-I:4 Clauses Waiving Right to Claim for Labor and Materials or Claim Against a Payment Bond Void.
I. Any provision in a construction contract or any periodic lien waiver issued pursuant to a construction contract that purports to waive or release the right of a contractor, subcontractor, or supplier engaged to perform services, perform labor, or furnish materials under the construction contract to claim a lien pursuant to RSA 447, or make a claim against a payment bond, for services, labor, or materials which have not yet been performed and paid for shall be void and of no effect.
II. Notwithstanding paragraph I, this section shall not be construed to prohibit the subordination of a lien for labor and materials under RSA 447 to the lien of a mortgage or security interest, or the enforcement of an agreement to subordinate a lien for labor and materials to the lien of a mortgage or security interest.
359-I:5 Adjudication in this State. Any provision in a construction contract for the performance of work on a construction site located in this state that purports to require that any dispute arising under the construction contract be adjudicated in or under the laws of a state other than New Hampshire shall be void and of no effect, regardless of whether the construction contract was executed in this state.
359-I:6 Required Job Site Postings. At or before the commencement of any work under a construction contract, the owner shall post and maintain in a conspicuous place at the construction site:
I. The name and address of the owner and any agent authorized to accept service of a certificate of lien for labor and materials on behalf of the owner in any action for the enforcement of any obligation of the owner arising out of the construction contract.
II. The volume and page number of the land records of the town in which such property is located.
III. If a payment bond exists, the name and address of the surety that issued the payment bond.
359-I:7 Surety Obligations. No surety shall be obligated to include in the payment of a bond issued by such surety any interest, costs, penalties, or attorneys’ fees imposed on the principal of such bond under any provision of this chapter, unless the terms of the bond expressly reference said sections and subsection and state that such surety is obligated to pay such interest, costs, penalties or attorneys’ fees.
359-I:8 Retainage Escrow Accounts. An escrow account shall be established for all retainage, subject to the following:
I. An escrow account shall be established in state or national banks domiciled in this state or in savings and loan associations domiciled in this state.
II. The owner shall provide a monthly report to the contractor as to the value of the retainage being held in the escrow account and any additions to or payments from the escrow account. Upon request by a subcontractor, the contractor shall make such monthly report available for review by the subcontractor. Withdrawals from the escrow account shall be made only subject to approval of the owner.
III. If the owner has entered into more than one construction contract with the same contractor requiring the maintenance of escrow accounts, the owner may elect to combine the amounts held as retainage under each contract into one or more escrow accounts or may establish a separate escrow account for each contract.
IV. The escrow account shall be terminated upon substantial or final completion of all work in accordance with the terms of the construction contract and full payment to the contractor.
V. All fees and expenses related to maintaining the escrow account shall be paid by the owner.
VI. The form and provisions of the escrow account shall be included in all solicitations for construction services and shall be provided to the contractor and subcontractor prior to entering into a contract with the owner. Upon request by a subcontractor, the contractor shall make such form and provisions available for review by the subcontractor. Failure to comply with the provisions of this paragraph shall not give rise to a defense to the enforcement of a contract.
VII. An owner may accept securities in lieu of retainage from a contractor and a contractor may accept securities in lieu of retainage from a subcontractor.
359-I:9 Escrow Account Exclusions. The provisions of RSA 359-I:8 shall not apply to construction contracts for residential property containing 4 or fewer dwelling units or to construction contracts of less than $25,000 total value or to construction contracts relating to any public building or public work of the state, municipality, or other political subdivision of the state.
359-I:10 Enforcement of Retainage and Adjudication in this State. In any enforcement action under this chapter, a court may award court costs and reasonable attorney’s fees to the prevailing party.
2 Effective Date. This act shall take effect January 1, 2007.