Bill Text: MN HF590 | 2011-2012 | 87th Legislature | Introduced
Bill Title: Construction financing evidence and notice of nonpayment or default required.
Spectrum: Slight Partisan Bill (Republican 4-2)
Status: (Introduced - Dead) 2011-02-17 - Introduction and first reading, referred to Commerce and Regulatory Reform [HF590 Detail]
Download: Minnesota-2011-HF590-Introduced.html
1.2relating to commerce; requiring evidence of construction financing and notice
1.3of nonpayment or default;amending Minnesota Statutes 2010, section 337.10,
1.4subdivision 5, by adding subdivisions.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2010, section 337.10, is amended by adding a
1.7subdivision to read:
1.8 Subd. 2a. Waiver of evidence of financing or notice. Provisions contained in, or
1.9executed in connection with, a building and construction contract requiring the contractor,
1.10subcontractor, or material supplier to waive the rights provided in subdivisions 4a, 4b, and
1.114c, are void and unenforceable. This provision does not affect the validity of a waiver as
1.12to a third party who detrimentally relies upon the waiver.
1.13 Sec. 2. Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
1.14to read:
1.15 Subd. 4a. Evidence of project financing. (a) The owner or other persons making
1.16payment under the contract shall provide satisfactory evidence of financing to the contract
1.17or for the work to be performed by the contractor with which it has contracted. This
1.18evidence must be provided before the commencement of work by the contractor. If at any
1.19time during the duration of the project, there is any material change in project financing,
1.20the owner or other persons responsible for making payment under the contract shall notify
1.21any contractor of the nature of that change. Within ten days after receiving evidence of
1.22project financing or notice of material change in project financing from a building or
2.1construction owner, a contractor shall provide this information to each subcontractor
2.2contracted to perform work.
2.3(b) Every contracting agreement between an owner and contractor must include
2.4the name, mailing address, and telephone number of the lender, if any, that is providing
2.5construction financing to the owner or other person responsible for making payment. If
2.6there is no construction financing, the agreement must so state.
2.7(c) Every subcontracting agreement between a contractor and subcontractor must
2.8include the name, mailing address, and telephone number of the lender, if any, that is
2.9providing construction financing to the owner or other person responsible for making
2.10payment. If there is no construction financing, the agreement must so state.
2.11(d) Evidence of project financing is a condition precedent to the contractor or
2.12subcontractor commencing or continuing work.
2.13(e) An owner or other person making payment under the contract that fails to provide
2.14evidence of project financing or notice of material change is fully responsible for payment
2.15to the contractor. A contractor that fails to provide evidence of project financing or notice
2.16of material change is fully responsible for payment to subcontractors.
2.17 Sec. 3. Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
2.18to read:
2.19 Subd. 4b. Notice to lender of nonpayment. (a) Notice of nonpayment may be
2.20given in writing by a contractor or subcontractor to a lender that is providing construction
2.21financing to an owner or other person responsible for making payment as required by this
2.22section or by contract, if the construction financing is secured in whole or in part by
2.23the real property upon which the contractor or subcontractor performed, provided, or
2.24contributed to an improvement.
2.25(b) The notice must reasonably identify the owner or other person responsible for
2.26making payment; the contractor; the subcontractor; the real property; the nature and dates
2.27of the work performed, provided, or contributed by the contractor or subcontractor; the
2.28amount due to the contractor or subcontractor; and the date upon which payment to
2.29the contractor or subcontractor was due. A legal description of the real property is not
2.30required.
2.31(c) The notice to the lender is for the lender's information, and this subdivision does
2.32not require the lender to take any action in response to the notice. A lender is not liable
2.33under this section for any action taken or not taken as a result of receiving the notice.
2.34(d) An owner or other person responsible for making payment shall not retaliate
2.35against a contractor or subcontractor that provides to a lender a notice permitted by this
3.1subdivision, and an owner that does so is liable to the contractor or subcontractor for
3.2damages incurred as a result of the retaliation. A contractor shall not retaliate against
3.3a subcontractor that provides to a lender a notice permitted by this subdivision, and a
3.4contractor that does so is liable to the subcontractor for damages incurred as a result of
3.5the retaliation.
3.6 Sec. 4. Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
3.7to read:
3.8 Subd. 4c. Notice of default. An owner or other person responsible for
3.9making payment must provide to the lender a sworn construction statement or other
3.10industry-accepted document identifying the names of the contractor and all subcontractors
3.11and suppliers for the work. A lender that finances all or part of a building and construction
3.12contract must give written notice to all known contractors, subcontractors, and suppliers
3.13of a default on the building and construction contract loan or financing agreement between
3.14the lender and the owner or person responsible for making payment within ten days of
3.15the default.
3.16Upon receipt of the notice of default, the contractor and subcontractors may suspend
3.17work on the building and construction contract until the default is cured or the owner
3.18or other person responsible for making payment provides the contractor and all known
3.19subcontractors and suppliers adequate assurances of payment.
3.20If the lender does not give the written notice required in this section, the lender's
3.21security interest in the project shall be subordinate to the value provided to the project by
3.22the contractors and subcontractors after the date the notice should have been given.
3.23 Sec. 5. Minnesota Statutes 2010, section 337.10, subdivision 5, is amended to read:
3.24 Subd. 5.Definition Definitions. (a) For the purpose of this section, "building and
3.25construction contract" has the meaning given the term in section337.01 .
3.26(b) For the purpose of this section, "default" means when the owner or party
3.27responsible for making payments fails to make required payments to the lender or in some
3.28other way does not comply with the terms of the loan.
1.3of nonpayment or default;amending Minnesota Statutes 2010, section 337.10,
1.4subdivision 5, by adding subdivisions.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2010, section 337.10, is amended by adding a
1.7subdivision to read:
1.8 Subd. 2a. Waiver of evidence of financing or notice. Provisions contained in, or
1.9executed in connection with, a building and construction contract requiring the contractor,
1.10subcontractor, or material supplier to waive the rights provided in subdivisions 4a, 4b, and
1.114c, are void and unenforceable. This provision does not affect the validity of a waiver as
1.12to a third party who detrimentally relies upon the waiver.
1.13 Sec. 2. Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
1.14to read:
1.15 Subd. 4a. Evidence of project financing. (a) The owner or other persons making
1.16payment under the contract shall provide satisfactory evidence of financing to the contract
1.17or for the work to be performed by the contractor with which it has contracted. This
1.18evidence must be provided before the commencement of work by the contractor. If at any
1.19time during the duration of the project, there is any material change in project financing,
1.20the owner or other persons responsible for making payment under the contract shall notify
1.21any contractor of the nature of that change. Within ten days after receiving evidence of
1.22project financing or notice of material change in project financing from a building or
2.1construction owner, a contractor shall provide this information to each subcontractor
2.2contracted to perform work.
2.3(b) Every contracting agreement between an owner and contractor must include
2.4the name, mailing address, and telephone number of the lender, if any, that is providing
2.5construction financing to the owner or other person responsible for making payment. If
2.6there is no construction financing, the agreement must so state.
2.7(c) Every subcontracting agreement between a contractor and subcontractor must
2.8include the name, mailing address, and telephone number of the lender, if any, that is
2.9providing construction financing to the owner or other person responsible for making
2.10payment. If there is no construction financing, the agreement must so state.
2.11(d) Evidence of project financing is a condition precedent to the contractor or
2.12subcontractor commencing or continuing work.
2.13(e) An owner or other person making payment under the contract that fails to provide
2.14evidence of project financing or notice of material change is fully responsible for payment
2.15to the contractor. A contractor that fails to provide evidence of project financing or notice
2.16of material change is fully responsible for payment to subcontractors.
2.17 Sec. 3. Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
2.18to read:
2.19 Subd. 4b. Notice to lender of nonpayment. (a) Notice of nonpayment may be
2.20given in writing by a contractor or subcontractor to a lender that is providing construction
2.21financing to an owner or other person responsible for making payment as required by this
2.22section or by contract, if the construction financing is secured in whole or in part by
2.23the real property upon which the contractor or subcontractor performed, provided, or
2.24contributed to an improvement.
2.25(b) The notice must reasonably identify the owner or other person responsible for
2.26making payment; the contractor; the subcontractor; the real property; the nature and dates
2.27of the work performed, provided, or contributed by the contractor or subcontractor; the
2.28amount due to the contractor or subcontractor; and the date upon which payment to
2.29the contractor or subcontractor was due. A legal description of the real property is not
2.30required.
2.31(c) The notice to the lender is for the lender's information, and this subdivision does
2.32not require the lender to take any action in response to the notice. A lender is not liable
2.33under this section for any action taken or not taken as a result of receiving the notice.
2.34(d) An owner or other person responsible for making payment shall not retaliate
2.35against a contractor or subcontractor that provides to a lender a notice permitted by this
3.1subdivision, and an owner that does so is liable to the contractor or subcontractor for
3.2damages incurred as a result of the retaliation. A contractor shall not retaliate against
3.3a subcontractor that provides to a lender a notice permitted by this subdivision, and a
3.4contractor that does so is liable to the subcontractor for damages incurred as a result of
3.5the retaliation.
3.6 Sec. 4. Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
3.7to read:
3.8 Subd. 4c. Notice of default. An owner or other person responsible for
3.9making payment must provide to the lender a sworn construction statement or other
3.10industry-accepted document identifying the names of the contractor and all subcontractors
3.11and suppliers for the work. A lender that finances all or part of a building and construction
3.12contract must give written notice to all known contractors, subcontractors, and suppliers
3.13of a default on the building and construction contract loan or financing agreement between
3.14the lender and the owner or person responsible for making payment within ten days of
3.15the default.
3.16Upon receipt of the notice of default, the contractor and subcontractors may suspend
3.17work on the building and construction contract until the default is cured or the owner
3.18or other person responsible for making payment provides the contractor and all known
3.19subcontractors and suppliers adequate assurances of payment.
3.20If the lender does not give the written notice required in this section, the lender's
3.21security interest in the project shall be subordinate to the value provided to the project by
3.22the contractors and subcontractors after the date the notice should have been given.
3.23 Sec. 5. Minnesota Statutes 2010, section 337.10, subdivision 5, is amended to read:
3.24 Subd. 5.
3.25construction contract" has the meaning given the term in section
3.26(b) For the purpose of this section, "default" means when the owner or party
3.27responsible for making payments fails to make required payments to the lender or in some
3.28other way does not comply with the terms of the loan.
