Bill Text: TX HB1208 | 2015-2016 | 84th Legislature | Comm Sub

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Bill Title: Relating to lender notice of default to contractors regarding certain construction loans or financing agreements for the improvement of real property and related procedures for suspending contractors' and subcontractors' performance.

Spectrum: Moderate Partisan Bill (Republican 7-2)

Status: (Introduced - Dead) 2015-05-04 - Committee report sent to Calendars [HB1208 Detail]

Download: Texas-2015-HB1208-Comm_Sub.html

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84R23793 AJA-F
By: Bell, Leach, Simmons, Kacal, Romero, Jr. H.B. No. 1208
Substitute the following for H.B. No. 1208:
By: Simmons C.S.H.B. No. 1208

A BILL TO BE ENTITLED
AN ACT
relating to lender notice of default to contractors regarding
certain construction loans or financing agreements for the
improvement of real property and related procedures for suspending
contractors' and subcontractors' performance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 28, Property Code, is amended by adding
Section 28.0091 to read as follows:
Sec. 28.0091. LENDER NOTICE OF DEFAULT TO CONTRACTORS;
SUSPENSION OF PERFORMANCE. (a) This section applies only to a
lender that provides financing through a construction loan or under
a financing agreement for an improvement to real property for which
the real property or improvement is collateral.
(b) This section does not apply with respect to a loan or
financing agreement used primarily for:
(1) the construction or remodeling of an individual's
single-family home, townhouse, or duplex; or
(2) land development directly related to the
construction or remodeling of an individual's single-family home,
townhouse, or duplex.
(c) For an improvement to real property for which financing
is provided as described by Subsection (a), each contractor, not
later than the 30th day after the date the contractor sends the
contractor's first written pay request, shall provide a notice of
contractor identification that complies with Subsection (d) to the
lender and the borrower and, if the borrower is not the owner of the
real property, to the property owner.
(d) A notice of contractor identification provided under
Subsection (c) must:
(1) be sent certified mail, return receipt requested;
(2) be identified by the heading "Notice of Contractor
Identification" or words of similar meaning; and
(3) contain:
(A) the contractor's name, mailing address,
e-mail address if available, and telephone number;
(B) the street address or project name or other
information sufficient to describe the location of the property
being improved; and
(C) the name of each person to whom the notice is
being given.
(e) If the lender's name, a mailing address, a name of a
particular individual, and a reference to this section are provided
in the contract between the property owner and the contractor,
notice to the lender under Subsection (c) must be sent to that
mailing address and to the attention of the particular individual.
(f) Except as provided by Subsection (j), each contractor
and subcontractor providing labor, materials, equipment, or
services for an improvement to real property for which financing is
provided as described by Subsection (a) is entitled to suspend
contractually required performance without penalty or liability
for damages for suspending contractually required performance if a
contractor receives notice under Subsection (g).
(g) Except as provided by Subsection (j), a lender shall
notify each contractor identified under Subsection (c) not later
than the second business day after the date on which the lender
sends to the borrower one of the following notices in connection
with a particular default under the loan or financing agreement:
(1) a notice of acceleration;
(2) a notice of set-off; or
(3) a notice of foreclosure.
(h) A lender and a contractor may devise and agree on an
effective, efficient, and economical method for delivering any
notice required under Subsection (g). If the lender and the
contractor do not devise or agree on the method by which the notice
will be delivered, the notice must be delivered by certified mail,
return receipt requested.
(i) Not later than the second business day after the date a
contractor receives notice under Subsection (g), the contractor
shall notify each of the contractor's subcontractors of the
contractor's receipt of the notice and of the subcontractor's right
under this section as a result of the notice to suspend
contractually required performance without penalty or liability
for damages for suspending contractually required performance.
(j) A lender is not required to notify a contractor under
Subsection (g) and the contractor and the contractor's
subcontractors are not entitled to suspend performance under this
section if, before the lender sends a notice described by
Subsection (g) to the borrower, a written agreement exists between
the lender and the contractor that provides for the continued
performance by the contractor and for payment to the contractor in
the event of an acceleration, set-off, or foreclosure under the
loan or financing agreement.
(k) A lender that provides timely notice to a contractor
under Subsection (g) is not liable for damages to the contractor or
any of the contractor's subcontractors for any costs incurred to
provide labor, materials, equipment, or services contemplated
under the loan or financing agreement, except for those costs for
which the lender has expressly agreed to be obligated to pay.
(l) A notice provided by a lender to a contractor under this
section does not create a cause of action by the borrower or
property owner against the lender.
SECTION 2. The change in law made by this Act applies only
to a construction loan or financing agreement entered into on or
after the effective date of this Act.
SECTION 3. This Act takes effect September 1, 2015.