Bill Text: CA AB2021 | 2011-2012 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Works of improvement: disputed amounts.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Engrossed - Dead) 2012-08-30 - Read second time. Ordered to third reading. [AB2021 Detail]

Download: California-2011-AB2021-Introduced.html

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BILL NUMBER: AB 2021	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Wagner

                        FEBRUARY 23, 2012

   An act to amend Section 7108.5 of the Business and Professions
Code, to amend Sections 3260 and 3260.1 of the Civil Code, and to
amend Sections 7107 and 10262.5 of the Public Contract Code, relating
to works of improvement.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2021, as introduced, Wagner. Works of improvement: disputed
amounts.
   Existing law contains various provisions relating to contracts for
the performance of private and public works of improvement,
including provisions for the withholding and disbursement of
retention proceeds. Existing law provides that, with respect to those
contracts for works of improvement, the retention proceeds withheld
from any payment may not exceed 150% of the disputed amount.
   This bill would increase the amount that may be withheld from
progress payments or final payments, depending on the circumstances,
to a sum of various amounts and percentages, as specified.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 7108.5 of the Business and Professions Code is
amended to read:
   7108.5.  (a) A prime contractor or subcontractor shall pay to any
subcontractor, not later than  seven   10 
days  after   of  receipt of each progress
payment, unless otherwise agreed to in writing, the respective
amounts allowed the contractor on account of the work performed by
the subcontractors, to the extent of each subcontractor's interest
therein. In the event that there is a good faith dispute over
 all or any portion of  the amount due on a progress
 payment from   payment,  the prime
contractor or subcontractor  to a subcontractor, the prime
contractor or subcontractor may withhold no more than 150 percent of
the disputed amount.   may withhold from the progress
payment an amount not to exceed the sum of the following: 
   (1) The liquidated damages owed by the subcontractor.  
   (2) One hundred fifty percent of the estimated cost of repair or
replacement of subcontract work that was not performed according to
the subcontract. 
   (b) Any violation of this section shall constitute a cause for
disciplinary action and shall subject the licensee to a penalty,
payable to the subcontractor, of 2 percent of the amount due per
month for every month that payment is not made.    In
any action for the collection of funds wrongfully withheld, the
prevailing party shall be entitled to his or her attorney's fees and
costs.  
   (c) In any action for the collection of funds wrongfully withheld,
the prevailing party shall be entitled to his or her attorney's fees
and costs.  
   (d) 
    (c)  The sanctions authorized under this section shall
be separate from, and in addition to, all other remedies, either
civil, administrative, or criminal. 
   (e) 
    (d)  This section applies to all private works of
improvement and to all public works of improvement, except where
Section 10262 of the Public Contract Code applies.
  SEC. 2.  Section 3260 of the Civil Code is amended to read:
   3260.  (a) This section is applicable with respect to all
contracts entered into on or after July 1, 1991, relating to the
construction of any private work of improvement. However, the
amendments made to this section during the 1992 portion of the
1991-92 Regular Session of the Legislature are applicable only with
respect to contracts entered into on or after January 1, 1993,
relating to the construction of any private work of improvement.
Moreover, the amendments made to this section during the 1993 portion
of the 1993-94 Regular Session of the Legislature are applicable
only with respect to contracts entered into on or after January 1,
1994, relating to the construction of any private work of
improvement.
   (b) The retention proceeds withheld from any payment by the owner
from the original contractor, or by the original contractor from any
subcontractor, shall be subject to this section.
   (c) Within 45 days after the date of completion, the retention
withheld by the owner shall be released. "Date of completion," for
purposes of this section, means any of the following:
   (1) The date of issuance of any certificate of occupancy covering
the work by the public agency issuing the building permit.
   (2) The date of completion indicated on a valid notice of
completion recorded pursuant to Section 3093.
   (3) The date of completion as defined in Section 3086.
   However, release of retentions withheld for any portion of the
work of improvement which ultimately will become the property of a
public agency, may be conditioned upon the acceptance of the work by
the public agency. In the event of a dispute between the owner and
the original contractor, the owner may withhold from the final
payment an amount not to exceed  150 percent of the disputed
amount.   the sum of all of the following:  
   (A) The liquidated damages owed by the contractor.  
   (B) The amounts that may be withheld pursuant to Section 3153.
 
   (C) One hundred fifty percent of the estimated cost of uncompleted
contract work, except for those costs that are withheld under
subparagraph (B).  
   (D) One hundred fifty percent of the estimated cost to repair or
replace contract work that was not performed according to the
contract, except for those costs that are withheld under subparagraph
(B) or (C). 
   (d) Subject to subdivision (e), within 10 days from the time that
all or any portion of the retention proceeds are received by the
original contractor, the original contractor shall pay each of its
subcontractors from whom retention has been withheld, each
subcontractor's share of the retention received. However, if a
retention payment received by the original contractor is specifically
designated for a particular subcontractor, payment of the retention
shall be made to the designated subcontractor, if the payment is
consistent with the terms of the subcontract.
   (e) If a bona fide dispute exists between a subcontractor and the
original contractor, the original contractor may withhold from that
subcontractor with whom the dispute exists its portion of the
retention proceeds. The amount withheld from the retention payment
shall not exceed  150 percent of the estimated value of the
disputed amount.   the sum of all of the following:

    (1) The liquidated damages owed by the subcontractor. 
   (2) That portion of any mechanic's lien or stop notice claim
by the subcontractor for which the subcontractor has already been
paid. 
   (3) One hundred fifty percent of the estimated cost of
uncompleted subcontract work, except for those costs that are
withheld under paragraph (2). 
    (4) One hundred fifty percent of the estimated cost to repair
or replace subcontract work that was not performed according to the
subcontract, except for those costs that are withheld under paragraph
(2) or (3). 
   (f) Within 10 days of receipt of written notice by the owner from
the original contractor or by the original contractor from the
subcontractor, as the case may be, 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 10 days of
acceptance of the disputed work, the owner or original contractor, as
the case may be, shall release the retained portion of the retention
proceeds.
   (g) In the event that retention payments are not made within the
time periods required by this section, the owner or original
contractor withholding the unpaid amounts shall be subject to a
charge of 2 percent per month on the improperly withheld amount, in
lieu of any interest otherwise due. Additionally, in any action for
the collection of funds wrongfully withheld, the prevailing party
shall be entitled to his or her attorney's fees and costs.
   (h) It shall be against public policy for any party to require any
other party to waive any provision of this section.
   (i) This section shall not be construed to apply to retentions
withheld by a lender in accordance with the construction loan
agreement.
  SEC. 3.  Section 3260.1 of the Civil Code is amended to read:
   3260.1.  (a) This section is applicable with respect to all
contracts entered into on or after January 1, 1992, relating to the
construction of any private work of improvement.
   (b) Except as otherwise agreed in writing, the owner shall pay to
the contractor, within 30 days following receipt of a demand for
payment in accordance with the contract, any progress payment due
thereunder 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) of Section 3260.   the sum of both of
the following: 
    (1) The liquidated damages owed by the contractor. 
    (2) One hundred fifty percent of the estimated cost of repair
or replacement of contract work that was not performed according to
the contract. 
    If any amount is wrongfully withheld in violation of this
subdivision, the contractor shall be entitled to the penalty
specified in subdivision (g) of Section 3260. 
   (c) Nothing in this section shall be deemed to supersede any
requirement of Section 3260 respecting the withholding of retention
proceeds.
  SEC. 4.  Section 7107 of the Public Contract Code is amended to
read:
   7107.  (a) This section is applicable with respect to all
contracts entered into on or after January 1, 1993, relating to the
construction of any public work of improvement.
   (b) The retention proceeds withheld from any payment by the public
entity from the original contractor, or by the original contractor
from any subcontractor, shall be subject to this section.
   (c)  (1)    Within 60 days after the date of
completion of the work of improvement, the retention withheld by the
public entity shall be released. In the event of a dispute between
the public entity and the original contractor, the public entity may
withhold from the final payment an amount not to exceed  150
percent of the disputed amount. For purposes of this subdivision,
"completion" means any   the sum of all  of the
following: 
   (A) The liquidated damages owed by the original contractor. 

   (B) The amounts that may be withheld pursuant to Section 3186.
 
   (C) One hundred fifty percent of the estimated cost of uncompleted
contract work, except for those costs that are withheld under
subparagraph (B).  
   (D) One hundred fifty percent of the estimated cost to repair or
replace contract work that was not performed according to the
contract, except for those costs that are withheld under subparagraph
(B) or (C).  
   (E) One hundred fifty percent of the estimated cost of claims made
by third parties for which the contractor is obligated to indemnify
the public entity.  
   (F) One hundred fifty percent of the estimated cost to be incurred
by the public entity as a result of the contractor's abandonment or
material default of the contract, except for those costs that are
withheld under subparagraph (B), (C), or (D).  
   (G) The amounts that may be withheld in accordance with other
provisions of law, including Section 1727 of the Labor Code and
Section 4110 of this code.  
   (2) For purposes of this subdivision, "completion" means any of
the following:  
   (1) 
    (A)  The occupation, beneficial use, and enjoyment of a
work of improvement, excluding any operation only for testing,
startup, or commissioning, by the public agency, or its agent,
accompanied by cessation of labor on the work of improvement.

   (2) 
    (B)  The acceptance by the public agency, or its agent,
of the work of improvement. 
   (3) 
    (C)  After the commencement of a work of improvement, a
cessation of labor on the work of improvement for a continuous period
of 100 days or more, due to factors beyond the control of the
contractor. 
   (4) 
    (D)  After the commencement of a work of improvement, a
cessation of labor on the work of improvement for a continuous period
of 30 days or more, if the public agency files for record a notice
of cessation or a notice of completion.
   (d) Subject to subdivision (e), within seven days from the time
that all or any portion of the retention proceeds are received by the
original contractor, the original contractor shall pay each of its
subcontractors from whom retention has been withheld, each
subcontractor's share of the retention received. However, if a
retention payment received by the original contractor is specifically
designated for a particular subcontractor, payment of the retention
shall be made to the designated subcontractor, if the payment is
consistent with the terms of the subcontract.
   (e) The original contractor may withhold from a subcontractor its
portion of the retention proceeds if a bona fide dispute exists
between the subcontractor and the original contractor. The amount
withheld from the retention payment shall not exceed  150
percent of the estimated value of the disputed amount.  
the sum of all of the following:  
   (1) The liquidated damages owed by the subcontractor.  
   (2) That portion of any stop notice claim by the subcontractor for
which the subcontractor has already been paid.  
   (3) One hundred fifty percent of the estimated cost of uncompleted
subcontract work, except for those costs that are withheld under
paragraph (2) or (5).  
   (4) One hundred fifty percent of the estimated cost to repair or
replace subcontract work that was not performed according to the
subcontract, except for those costs that are withheld under paragraph
(2), (3), or (5).  
   (5) The amounts withheld by the public entity on account of acts
or omissions of the subcontractor. 
   (f) In the event that retention payments are not made within the
time periods required by this section, the public entity or original
contractor withholding the unpaid amounts shall be subject to a
charge of 2 percent per month on the improperly withheld amount, in
lieu of 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.
   (g) If a state agency retains an amount greater than 125 percent
of the estimated value of the work yet to be completed pursuant to
Section 10261, the state agency shall distribute undisputed retention
proceeds in accordance with subdivision (c). However,
notwithstanding subdivision (c), if a state agency retains an amount
equal to or less than 125 percent of the estimated value of the work
yet to be completed, the state agency shall have 90 days in which to
release undisputed retentions.
   (h) Any attempted waiver of the provisions of this section shall
be void as against the public policy of this state.
  SEC. 5.  Section 10262.5 of the Public Contract Code is amended to
read:
   10262.5.  (a) Notwithstanding any other law, a prime contractor or
subcontractor shall pay to any subcontractor, not later than
 seven   10  days  after 
 of  receipt of each progress payment, the respective
amounts allowed the contractor on account of the work performed by
the subcontractors, to the extent of each subcontractor's interest
therein. In the event that there is a good faith dispute over
 all or any portion of  the amount due on a progress
 payment from   payment,  the prime
contractor or subcontractor  to a subcontractor, then the
prime contractor or subcontractor may withhold no more than 150
percent of the disputed amount.   may withhold from the
progress payment an amount not to exceed the sum of both of the
following:  
   (1) The liquidated damages owed by the subcontractor.  
   (2) One hundred fifty percent of the estimated cost of repair or
replacement of the subcontract work that was not performed according
to the subcontract. 
   Any contractor who violates this section shall pay to the
subcontractor a penalty of 2 percent of the amount due per month for
every month that payment is not made. In any action for the
collection of funds wrongfully withheld, the prevailing party shall
be entitled to his or her attorney's fees and costs.
   (b) This section shall not be construed to limit or impair any
contractual, administrative, or judicial remedies otherwise available
to a contractor or a subcontractor in the event of a dispute
involving late payment or nonpayment by a contractor or deficient
subcontract performance or nonperformance by a subcontractor.
   (c) On or before September 1 of each year, the head of each state
agency shall submit to the Legislature a report on the number and
dollar volume of written complaints received from subcontractors and
prime contractors on contracts in excess of three hundred thousand
dollars ($300,000), relating to violations of this section.