BILL NUMBER: SB 629	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 23, 2009
	AMENDED IN SENATE  APRIL 21, 2009

INTRODUCED BY   Senator Liu

                        FEBRUARY 27, 2009

   An act to add Section 3260.3 to the Civil Code, relating to works
of improvement.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 629, as amended, Liu. Private works of improvement: retention
proceeds.
   Existing law generally regulates the terms and conditions of
contracts for private works of improvement. Existing law requires
that, within 45 days after the date of completion, as defined,
retention proceeds withheld from any payment by the owner to the
original contractor, or by the original contractor to any
subcontractor, be released, except as specified. Existing law
provides that, if a bona fide dispute exists between an original
contractor and a subcontractor, the original contractor may withhold
from the retention payment up to 150% of the disputed amount.
   This bill, applicable to contracts entered into on or after
January 1, 2010, would prohibit retention proceeds withheld from any
payment made by the owner to the original contractor from exceeding
5% of the amount of the payment otherwise due under the contract. The
bill would prohibit the percentage of the retention proceeds
withheld from any payment made by the original contractor to any
subcontractor, or by a subcontractor to another subcontractor, from
exceeding 5% of the amount of the payment otherwise due under the
contract, or the percentage of each payment that may be withheld
under the contract between the owner and the original contractor,
whichever is less.  It would require that any retention
proceeds withheld pursuant to these provisions be deposited in an
interest-bearing escrow account and would provide for payment of that
interest, upon release of the retention proceeds, to the contractor
or subcontractor to whom the proceeds were released. The bill would
require that, with respect to a contract between an original
contractor and a subcontractor, or between two subcontractors, any
retention proceeds withheld, together with accrued interest, be
released within 45 days after the date that all line items listed
separately in any schedule of values that forms a part of the
applicable contract were completed, or the date that the original
contractor or subcontractor, as applicable, accepted the work for
those line items.   This bill would require that with
respect to a contract between an owner and an original contractor,
between an original contractor and a subcontractor, or between 2
subcontractors, any retention proceeds withheld shall be released
within 45 days after the party seeking payment serves a fully
executed conditional waiver and release, as provided.  The bill
would provide that it does not prohibit the withholding of funds
pursuant to the above provisions of law governing amounts in dispute.
 This bill would also provide that these provisions shall not
apply if the owner or original contractor provides written notice to
the original contractor  or subcontractor, prior to or at
the time that the bid is requested, that performance and payment
bonds may be required. 
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 3260.3 is added to the Civil Code, to read:
   3260.3.  (a) This section is applicable with respect to all
contracts entered into on or after January 1, 2010, between an owner
and an original contractor, between an original contractor and a
subcontractor, and between two subcontractors, relating to the
construction of any private work of improvement.
   (b) Except as otherwise provided in Section 3260, the following
provisions apply:
   (1) Retention proceeds withheld from any payment made by the owner
to the original contractor shall not exceed 5 percent of the amount
of the payment otherwise due under the contract.
   (2) Retention proceeds withheld from any payment made by the
original contractor to any subcontractor, or by a subcontractor to
another subcontractor, shall not exceed 5 percent of the amount of
the payment otherwise due under the contract, or the percentage of
each payment that may be withheld under the contract between the
owner and the original contractor, whichever is less.
   (3) In no event shall the total amount of retention proceeds
withheld under all payments made under the contract exceed 5 percent
of the total contract price. 
   (c) Any retention proceeds withheld pursuant to this section shall
be deposited in an interest-bearing escrow account. Upon the release
of any retention proceeds, the contractor or subcontractor to whom
the proceeds were released shall be entitled to any interest earned
in the escrow account.  
   (d) Notwithstanding any other provision of law, with respect to a
contract between an original contractor and a subcontractor, or
between two subcontractors, any retention proceeds withheld pursuant
to this section, together with accrued interest, shall be released
within 45 days after the date that all line items listed separately
in any schedule of values that forms a part of the applicable
contract were completed, as determined by the original contractor or
subcontractor for whom the work was performed, or the date that the
original contractor or subcontractor, as applicable, accepted the
work for those line items.  
   (c) Notwithstanding any other provision or law, with respect to a
contract between an owner and an original contractor, between an
original contractor and a subcontractor, or between two
subcontractors, any retention proceeds withheld pursuant to this
section by the owner, original contractor, or subcontractor shall be
released within 45 days after the date the party seeking payment of
retained amounts serves to the hiring party a fully executed form
entitled "Conditional Waiver and Release Upon Final Payment" as set
forth in paragraph (3) of subdivision (d) of Section 3262.
Notwithstanding any other provision of law, the party seeking payment
of the retained amounts may not serve the form upon the hiring party
until the party seeking payment of the retained amounts has
completed the scope of work in its contract with the hiring party.
 
   (e) 
    (d)  It shall be against public policy for any party to
require any other party to waive any provision of this section.

   (f) 
    (e)  This section does not prohibit the withholding of
funds pursuant to subdivisions (e) and (f) of Section 3260 in the
event of a dispute.  This section does not prohibit the
withholding of funds pursuant to subdivision (i) of Section 3260.
 
   (f) This section shall not apply if the owner or original
contractor provides written notice to the original contractor or
subcontractor, prior to or at the time that the bid is requested,
that performance and payment bonds may be required and the original
contractor or subcontractor subsequently is unable or refuses to
provide to the owner or original contractor a performance and payment
bond issued by an admitted surety insurer. If the expense of the
bond or bonds required under this section is to be borne by the
original contractor or subcontractor, the requirement shall be
specified in the written or published request for bids.