BILL NUMBER: AB 1119 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 5, 2009
AMENDED IN ASSEMBLY APRIL 22, 2009
INTRODUCED BY Assembly Member Emmerson
FEBRUARY 27, 2009
An act to add Section 3260.05 to the Civil Code,
relating to works of improvement.
LEGISLATIVE COUNSEL'S DIGEST
AB 1119, as amended, Emmerson. Works of improvement: payments.
Existing law requires an owner of a private work of improvement to
release retention proceeds withheld from any payment within 45 days
after the date of completion. Existing law requires a public entity
to release retention proceeds withheld from any payment by the public
entity within 60 days after the date of completion. Existing law
requires an original contractor to pay any subcontractor within 10
days from the time that all or any portion of retention proceeds are
received by the original contractor. Existing law requires an
original contractor or subcontractor to pay any subcontractor within
10 days from the time of receipt of each progress payment, unless
otherwise agreed to in writing. Existing law imposes a penalty of 2%
on the amount due per month on funds that are improperly withheld in
a contract dispute relating to public and private works of
improvement, as specified. The Contractors' State License
Law provides for the licensing and regulation of contractors by the
Contractors' State License Board.
Existing law requires any person or corporation that has
contracted to do business with a public utility to pay any
subcontractor within 15 working days of receipt of each progress
payment from the public utility, except as specified. Existing law
also requires a state agency that fails to make any progress payment
within 30 days after receipt of the payment request to pay interest
at the rate of 10% per year.
This bill would , notwithstanding any other provisions,
require the owner to pay the contractor within 30 days of a demand
for payment, except as specified, for a contract for a public or
private work of improvement with respect to contracts entered into on
or after January 1, 2010, and would subject a licensed contractor
under the Contractors' State License Law to disciplinary action by
the Contractors' State License Board for a violation of these
provisions. The bill would require all owners to release retention
proceeds withheld from any payment within a 45-day period, and, upon
receipt of all or any portion of the retention proceeds or final
payment, or any progress payment, would require an original
contractor or subcontractor to pay his or her subcontractors within a
7-day period. The bill would also make the 2% penalty described
above applicable to all owners of private and public works of
improvement. The bill would additionally provide that the prevailing
party in any action for the collection of funds wrongfully withheld
is entitled to attorney's fees and costs state the
intent of the Legislature to reconsider prompt payment statutes
regarding public and private works of improvement to aid in their
clarity and application .
Vote: majority. Appropriation: no. Fiscal committee: yes
no . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature to
reconsider prompt payment statutes regarding public and private works
of improvement to aid in their clarity and application.
SECTION 1. Section 3260.05 is added to the
Civil Code, to read:
3260.05. (a) Notwithstanding Sections 3260, 3260.1, and 3262.5 of
this code, Section 7108.5 of the Business and Professions Code, and
Sections 7107, 10261.5, 10262, and 10262.5 of the Public Contract
Code, or any other provision of law, this section applies to all
contracts entered into on or after January 1, 2010, relating to the
construction of any private or public work of improvement.
(b) This section applies to contractual obligations between all of
the following:
(1) Owners and original contractors.
(2) Original contractors and subcontractors.
(3) Subcontractors and subcontractors.
(c) The owner shall pay to the contractor, within 30 days
following receipt of a demand for payment, any progress payment due
as to which there is no good faith dispute between the parties. In
the event of a dispute between the owner and the contractor, the
owner may withhold from the progress payment an amount not to exceed
150 percent of the disputed amount. If any amount is wrongfully
withheld in violation of this subdivision, the contractor shall be
entitled to the penalty specified in subdivision (g).
(d) Subject to subdivision (f), within seven days from the date
that all or any portion of any progress payment is received by the
original contractor or subcontractor, the original contractor or
subcontractor shall pay to any subcontractor, unless otherwise agreed
to in writing, the respective amounts allowed the subcontractor on
account of the work performed by the subcontractor, to the extent of
each subcontractor's interest therein.
(e) The retention proceeds or final payment withheld from any
payment by the owner from the original contractor, or by the original
contractor from any subcontractor, shall be subject to the following
requirements:
(1) (A) Within 45 days after the date of completion, or 100 days
after cessation of labor, the retention proceeds or final payment
withheld by the owner shall be released. "Date of completion," for
purposes of this subdivision, means any of the following:
(i) The date of issuance of any certificate of occupancy covering
the work by the public agency issuing the building permit.
(ii) The date of completion indicated on a valid notice of
completion recorded pursuant to Section 3093.
(iii) The date of completion, as defined in Section 3086.
(B) Notwithstanding subparagraph (A), the release of retention
proceeds or final payments withheld for any portion of the work of
improvement that ultimately will become the property of a public
agency, may be conditioned upon the acceptance of the work by the
public agency.
(2) Subject to subdivision (f), within seven days from the date
that all or any portion of the retention proceeds or final payment is
received by the original contractor, the original contractor shall
pay, to each of its subcontractors from which the retention proceeds
or final payment has been withheld, each subcontractor's share of the
retention proceeds or final payment received. However, if the
retention proceeds or final payment received by the original
contractor is specifically designated for a particular subcontractor,
payment of the retention proceeds or final payment shall be made to
the designated subcontractor.
(f) (1) If a bona fide dispute exists between an owner and
original contractor, between the original contractor and a
subcontractor, or between two subcontractors, the owner, original
contractor, or subcontractor, as applicable, may withhold from the
party with whom the dispute exists an amount not to exceed 150
percent of the disputed amount. The amount withheld shall not exceed
150 percent of the estimated value of the disputed amount. If any
amount is wrongfully withheld in violation of this subdivision, the
aggrieved party shall be entitled to the penalty specified in
subdivision (g).
(2) Within seven days of receipt by the owner, original
contractor, or subcontractor, as applicable, of written notice from
the party with whom the dispute exists pursuant to paragraph (1),
that any work in dispute has been completed in accordance with the
terms of the contract, the owner or original contractor shall advise
the notifying party of the acceptance or rejection of the disputed
work. Within seven days of acceptance of the disputed work, the owner
or original contractor shall release the retained portion of the
disputed payment.
(g) If any payment is not made within the time periods required by
this section, the owner, original contractor, or subcontractor
withholding the unpaid amount shall be subject to a charge of 2
percent per month on the improperly withheld amount, in addition to
any interest otherwise due. Additionally, in any action for the
collection of funds wrongfully withheld, the prevailing party shall
be entitled to attorney's fees and costs.
(h) As applied to licensees under the Contractors' State License
Law (Chapter 9 (commencing with Section 7000) of Division 3 of the
Business and Professions Code), a violation of this section shall
also constitute a cause for disciplinary action under that chapter,
and the sanctions authorized under this section shall be enforced by
the Contractors' State License Board.
(i) The remedies authorized pursuant to this section are separate
from, and in addition to, any other remedy authorized by law, and
shall also be enforceable by civil, administrative, or criminal
proceedings.
(j) It shall be against public policy for any party to require any
other party to waive any provision of this section.