Amends TCA Title 62, Chapter 6; Title 66, Chapter 11 and Title 66, Chapter 34.

This bill makes several changes and additions to present law concerning payment rights of contractors and subcontractors, as follows:<br /> <br /> (1) Present law defines "remote contractor" to include land surveyors, architects, and engineers. This bill expands the definition of "remote contractor", for purposes of mechanic's and materialman's liens, to include contractors who perform work on behalf of other contractors in the construction or remodeling of a structure (a "subcontractor");<br /> (2) This bill extends the time period within which a sworn statement may be recorded in order to preserve the priority of a mechanic's and materialman's lien from no later than 90 days after the date the improvement is complete or is abandoned to no later than 12 months after the date the improvement is complete or is abandoned;<br /> (3) Under present law, a remote contractor's lien continues for 90 days from the date of service of notice in favor of the remote contractor, and until the final termination of any suit for its enforcement properly brought within that 90-day period. This bill instead provides that the remote contractor's lien continues for 12 months from the date of completion of the work or for the period of 12 months after substantial completion of the project for work completed, whichever occurs first, and until the final termination of any suit for the lien's enforcement within that 12-month period. For purposes of determining the period when a lien continues under this bill, "work completed" means the completion of the scope of the work and all terms and conditions covered by the contract under which the lien is being held;<br /> (4) As a precondition to claiming a mechanic's and materialman's lien, present law requires that a remote contractor with respect to an improvement, except one-family, two-family, three-family and four-family residential units, serve a notice of nonpayment on the owner and prime contractor within 90 days of the last day of each month within which work or labor was provided or materials, services, equipment, or machinery furnished. This bill extends the period within which a notice of nonpayment may be served to 12 months;<br /> (5) Under present law, the Prompt Pay Act of 1991 authorizes property owners to withhold up to 5 percent of the amount of a construction contract as retainage. The owner must pay all retainages for work completed pursuant to the terms of any contract to the prime contractor within 90 days after completion of the work or within 90 days after substantial completion of the project for work completed, whichever occurs first. Under present law, "work completed" means the completion of the scope of the work and all terms and conditions covered by the contract under which the retainage is being held. Present law further specifies that the owner must pay all retainage to the contractor within 90 days of the owner receiving a use and/or occupancy permit for an improvement, receiving a certificate of substantial completion from an architect charged with supervision of the construction of an improvement, or beginning to use or could have begun to use an improvement. The prime contractor is required to pay all retainages due any subcontractor within 10 days after receipt of the retainages from the owner. Any subcontractor receiving the retainage from the prime contractor must pay to any subsubcontractor or material supplier all retainages due the subsubcontractor or material supplier within 10 days after receipt of the retainages.<br /> <br /> This bill changes present law concerning retainages in construction contracts by requiring that the owner pay all retainages for work completed pursuant to the terms of any contract to the prime contractor within 30 days from the last day of the month within which the owner receives the use or occupancy permit, if applicable, or work is completed or substantial completion of the project for work is completed, if the project is not subject to a use or occupancy permit requirement by a permitting authority of the jurisdiction in which the project is located. This bill removes receipt of a certificate of substantial completion from an architect and beginning use as specific triggering events for payment of retainage. This bill does not change the 10-day period time limit for paying retainages to subcontractors, subsubcontractors, and material suppliers;<br /> <br /> (6) For contracts entered on or after the date that this bill becomes a law, this bill prohibits the inclusion of a condition precedent for payment clause in construction contracts that precludes a prime contractor from having to pay a remote contractor for services rendered until the prime contractor is paid by the construction owner client; and<br /> (7) For contracts entered on or after the date that this bill becomes a law, this bill authorizes contractors and subcontractors to suspend performance without penalty if they are not paid pursuant to a construction contract.<br /> <br />