Bill Text: CA AB396 | 2009-2010 | Regular Session | Amended
Bill Title: Works of improvement: liens.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-02-02 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB396 Detail]
Download: California-2009-AB396-Amended.html
BILL NUMBER: AB 396 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 14, 2009
AMENDED IN ASSEMBLY MAY 5, 2009
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Fuentes
FEBRUARY 23, 2009
An act to amend Sections 3186 and 3252 of the Civil Code, and to
amend Section 10261 of, and to add Section 7201 to, the Public
Contract Code, relating to works of improvement.
LEGISLATIVE COUNSEL'S DIGEST
AB 396, as amended, Fuentes. Works of improvement: liens.
(1) Existing law provides that all persons and laborers of every
class, except for an original contractor, performing labor upon,
bestowing skill or other necessary services on, furnishing materials
or leasing equipment to be used or consumed in, or furnishing
appliances, teams, or power contributing to, a public work of
improvement may serve a stop notice upon the public entity
responsible for the public work, as specified. Existing law imposes a
duty on a public entity to withhold money or bonds due or to become
due to the original contractor in an amount sufficient to answer the
claim stated in the stop notice and to provide for the public entity'
s reasonable cost of any litigation on the matter, as specified.
This bill would qualify the requirement that the public entity
withhold money or bonds sufficient to provide for reasonable
litigation costs to make it applicable only if the original
contractor fails to promptly accept a tender of defense of the public
entity in the litigation.
(2) Existing law requires that a 20-day public work preliminary
bond notice be given under specified circumstances. If the notice is
not given, a claimant may enforce a claim by giving written notice to
the surety and the bond principal within 15 days after recordation
of a notice of completion. If no notice of completion has been
recorded, the time for giving written notice to the surety and the
bond principal is extended to 75 days after completion of the work of
improvement.
This bill would provide, instead, if no notice is given, a
claimant may enforce a claim by giving written notice to the surety
and the bond principal prior to the completion of the project or
recordation of a notice of completion.
(3) Existing law imposes a penalty of 2% per month on funds that
are improperly withheld in a contract dispute relating to public and
private works of improvement, as specified. 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 or an owner 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 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.
(4) Existing law provides that in a contract between the original
contractor and a subcontractor, and in a contract between a
subcontractor and any subcontractor thereunder, the percentage of
retention proceeds withheld cannot exceed the percentage specified in
the contract between the public entity and the original contractor.
This bill would instead require that retention proceeds not exceed
an unspecified percentage 5% of the
payment, as specified, for all contracts entered into on or after
January 1, 2010, between a public entity, as defined, and an original
contractor, between an original contractor and a subcontractor, and
between all subcontractors thereunder.
(5) Existing law requires the Department of General Services to
withhold not less than 5% of the contract price for a public work of
improvement until final completion and acceptance of the project.
This bill would require the Department of General Services to
withhold not more than an unspecified percentage
5% of the contract price until final completion and
acceptance of the project.
Vote: majority. Appropriation: no. Fiscal committee: yes.
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.
SEC. 2. Section 3186 of the Civil Code is amended to read:
3186. It shall be the duty of the public entity, upon receipt of
a stop notice pursuant to this chapter, to withhold from the original
contractor, or from any person acting under his or her authority,
money or bonds, if bonds are to be issued in payment for the work of
improvement, that are due or to become due to that contractor in an
amount sufficient to (a) answer the claim stated in the stop notice
and (b) provide for the public entity's reasonable cost of any
litigation thereunder, if the original contractor fails to promptly
accept a tender of defense of the public entity in the litigation.
The public entity may satisfy this duty by refusing to release money
held in escrow pursuant to Section 10263 or 22300 of the Public
Contract Code.
SEC. 3. Section 3252 of the Civil Code is amended to read:
3252. (a) With regard to a contract entered into on or after
January 1, 1995, in order to enforce a claim upon any payment bond
given in connection with a public work, a claimant shall give the
20-day public works preliminary bond notice as provided in Section
3098.
(b) If the 20-day public work preliminary bond notice was not
given as provided in Section 3098, a claimant may enforce a claim by
giving written notice to the surety and the bond principal as
provided in Section 3227 prior to the completion of the project, as
defined in Section 3086, or recordation of a notice of completion.
SEC. 4. Section 7201 is added to the Public Contract Code, to
read:
7201. (a) (1) This section shall apply with respect to all
contracts entered into on or after January 1, 2010, between a public
entity and an original contractor, between an original contractor and
a subcontractor, and between all subcontractors thereunder, relating
to the construction of any public work of improvement.
(2) Under no circumstances shall any provision of this section be
construed to limit the ability of any public entity to withhold 150
percent of the value of any disputed amount of work from the final
payment, as provided for in subdivision (c) of Section 7107. In the
event of a good faith dispute, nothing in this section shall be
construed to require a public entity to pay for work that is not
approved or accepted in accordance with the proper plans or
specifications.
(3) For purposes of this section, "public entity" means the state,
including every state agency, office, department, division, bureau,
board, or commission, the California State University, the University
of California, a city, county, city and county, including chartered
cities and chartered counties, district, special district, public
authority, political subdivision, public corporation, or nonprofit
transit corporation wholly owned by a public agency and formed to
carry out the purposes of the public agency.
(b) (1) The retention proceeds withheld from any payment by a
public entity from the original contractor, by the original
contractor from any subcontractor, and by a subcontractor from any
subcontractor thereunder shall not exceed ____
5 percent of the payment. In no event shall the total
retention proceeds withheld exceed ____ 5
percent of the contract price. In a contract between the
original contractor and a subcontractor, and in a contract between a
subcontractor and any subcontractor thereunder, the percentage of the
retention proceeds withheld may not exceed the percentage specified
in the contract between the public entity and the original
contractor.
(2) This subdivision shall not apply if the contractor provides
written notice to the subcontractor, pursuant to Section 4108 of the
Public Contract Code, prior to or at the time that the bid is
requested, that bonds may be required and the subcontractor
subsequently is unable or refuses to furnish to the contractor a
performance and payment bond issued by an admitted surety insurer.
(c) A party identified in subdivision (a) shall not require any
other party to waive any provision of this section.
SEC. 5. Section 10261 of the Public Contract Code is amended to
read:
10261. Payments upon contracts shall be made as the department
prescribes upon estimates made and approved by the department, but
progress payments shall not be made in excess of 95 percent of the
percentage of actual work completed plus a like percentage of the
value of material delivered on the ground or stored subject to or
under the control of the state, and unused, except as otherwise
provided in this section. The department shall withhold not more than
____ 5 percent of the contract price
until final completion and acceptance of the project. However, at any
time after 95 percent of the work has been completed, the department
may reduce the funds withheld to an amount not less than 125 percent
of the estimated value of the work yet to be completed, as
determined by the department, if the reduction has been approved, in
writing, by the surety on the performance bond and by the surety on
the payment bond. The Controller shall draw his or her warrants upon
estimates so made and approved by the department and the Treasurer
shall pay them. The funds may be released by electronic transfer if
that procedure is requested by the contractor, in writing, and if the
public entity has, in place at the time of the request, the
mechanism for the transfer.
