It’s no secret that the laws surrounding construction payment are, at times, a jumbled mess. However, the degree of messiness varies from state to state. We often compare states to determine which state’s laws are the most burdensome, looking in depth at notice requirements and sometimes simply ranking lien law word counts. While some states are worse off than others (looking at you, Texas), it’s encouraging to see that whenever state legislations are in session, lawmakers are working to combat the issue. With that in mind, here is some of the new legislation that will affect construction payment for contractors, subs, and suppliers.
New Laws Affecting Construction Payment
For each of these legislative changes we’ll try to break it down as much as possible by stating the name of the act with a link to the full text, when it goes into effect, who should take note, and then provide a brief summary. Let’s go in alphabetical order, starting with…
Arkansas
What: Act 808
When: June 7, 2017
Who: Those providing work on residential projects
Summary: When a party is under direct contract with the property owner, or when performance and payment bonds are utilized on a residential construction project, lien rights shall not be conditioned on the delivery and execution of notice.
For more on Arkansas’ construction payment laws, here are our Arkansas Construction Payment Resources.
Indiana
What: Act 1117
When: April 24, 2017
Who: Those providing work on public projects
Summary: On Indiana public projects for the benefit of an educational institution, the institution awarding a contract may waive the need for performance and payment bonds when the contract is less than $500,000.
For more on Indiana’s construction payment laws, here are our Indiana Construction Payment Resources.
North Dakota
What: Senate Bill No. 2146
When: August 1, 2017
Who: Those providing work on public projects
Summary: Prior to this Act, public projects that exceeded $100,000 required that a general contractor provide performance and payment bonds. Under this amendment, that threshold has been raised to $150,000.
For more on North Dakota’s construction payment laws, here are our North Dakota Construction Payment Resources.
Virginia
What: House Bill 2017
When: July 1, 2017
Who: Those providing work on public projects
Summary: Under Virginia’s Little Miller Act, an awarding authority may waive bonding requirements on a nontransportation-related project if the party receiving the waiver is first pre-qualified. Under the new legislation, local awarding authorities are allowed to also waive the pre-qualification process (prior to waiving any bonding requirement) when (1) the contractor awarded the project has a current Class A contractor license and (2) when the job exceeds $100,000 but is less than $300,000. In order to waive the pre-qualification process, the governing body must provide a written determination showing that waiving the requirement is in the best interest of the locality. The locality cannot enter into more than 10 contracts in this manner per year.
For more on Virginia’s construction payment laws, here are our Virginia Construction Payment Resources.
Washington
Daily Double!
What: Senate Bill 5734 and House Bill 1538
When: July 23, 2017
Who: Those providing work on public projects
Summary, SB 5734: In Washington, a general contractor on a public project may decide to utilize 10% retainage rather than performance and payment bonds for projects that do not exceed $150,000. The top priority for the public authority’s use of the retainage will be to pay for unpaid wages. Previously, Washington law only allowed for 50% retainage in order to waive payment and performance bonds on projects of $35,000 or less.
Summary, HB 1538: Before the final acceptance of a public project, a subcontractor can request that a general contractor provide a bond for their share of the amount that is being withheld by the awarding authority as retainage. Such a bond must be provided within 30 days. However, the general contractor is entitled to withhold the premium of the bond.
For more on Washington’s construction payment laws, here are our Washington Construction Payment Resources.
Takeaway
Legislators are constantly playing whack-a-mole as issues arise in construction payment systems. However, lawmakers are also creating solutions, such as with the nationwide trend of embracing P3 Projects. Whether the above pieces of legislation are examples of merely patching holes or creating meaningful solutions remains to be seen. Laws affecting construction payment help, but in order to reach construction payment utopia, it will take the full cooperation of the industry and legislation alike.
