Bill Text: MS HB1048 | 2015 | Regular Session | Introduced
Bill Title: Contracts; authorize retainage to be withheld in interest bearing accounts.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2015-02-03 - Died In Committee [HB1048 Detail]
Download: Mississippi-2015-HB1048-Introduced.html
MISSISSIPPI LEGISLATURE
2015 Regular Session
To: Judiciary A
By: Representative Baker
House Bill 1048
AN ACT TO AUTHORIZE RETAINAGE PROVISIONS IN CONTRACTS BETWEEN OWNERS AND CONTRACTORS; TO LIMIT THE AMOUNT OF RETAINAGE THAT MAY BE HELD IN ESCROW; TO REQUIRE AN OWNER TO DEPOSIT THE RETAINAGE IN A SEPARATE, INTEREST BEARING ACCOUNT; TO REQUIRE THE OWNER TO NOTIFY THE CONTRACTOR UPON DEPOSIT OF THE RETAINAGE; TO PROVIDE A PROCEDURE FOR RELEASING THE RETAINAGE FROM ESCROW; TO PROVIDE PENALTIES FOR VIOLATIONS OF THIS ACT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION. 1. This section shall be codified as Section 87-7-9, Mississippi Code of 1972:
87-7-9. (1) As used in this section, the following words shall have the meanings ascribed to them as follows:
(a) "Contract" means a written or oral agreement between the owner and contractor relative to the design, construction, alteration, repair, or maintenance of a building, structure, highway, appurtenance, appliance, or other improvements to real property. For purposes of this section, the term "contract" does not include (i) any public works or other building contract entered into with this state, the United States, any other state, and any municipality or other political subdivision of this state or any other state, or (ii) a contract for an amount less than One Million Dollars ($1,000,000.00), or (iii) a contract for the construction or remodeling of a single family residence.
(b) "Contractor" means any person contracting or undertaking with an owner to do any erection, building, construction, reconstruction, repair, maintenance or related work on private projects.
(c) "Owner" means any individual, corporation, nonprofit corporation, partnership, limited partnership, limited liability company or other business entity that is the owner of record or lessee of real property subject to the applicable terms of the contract.
(d) "Retainage" means that portion of the agreed upon contract price withheld by the owner that is paid to the contractor upon the contractor’s substantial completion of its duties under the contract or as otherwise provided by the terms and conditions of the contract.
(2) Any contract may provide for the withholding of retainage; provided, however, that the retainage amount may not exceed five percent (5%) of the gross amount of the contract. This limitation applies to subcontracts and sub-subcontracts as well.
(3) Whenever a contract requires a retainage, the owner shall deposit the retainage in a separate, interest-bearing escrow account with an FDIC insured financial institution qualified to do business within the state. Said retainage shall be deposited within three (3) business days of the withholding of same by the owner from the contractor in accordance with the terms of the applicable contract. All fees and expenses related to establishing and maintaining the required escrow account shall be the responsibility of the owner.
(4) (a) Upon deposit, the owner shall notify the contractor in writing of each deposit. The notice shall include the following:
(i) Identification of the name of the financial institution with whom the escrow account has been established;
(ii) Account number; and
(iii) The total amount of retainage that is deposited in the escrow account.
(b) Within ten (10) days after receipt of such notice, the contractor shall provide the same notice, with the same information to any subcontractors with an interest in the retainage deposited.
(5) If the owner fails to so deposit any retainage withheld pursuant to the terms of the applicable contract within three (3) business days, the owner shall pay the contractor an additional of penalty Five Hundred Dollars ($500.00) per day for each day that the retainage is not deposited.
(6) Upon deposit, the retainage becomes the contractor's sole property, subject to the owner's rights to use the retainage to complete the contractor's duties pursuant to the terms and conditions of the applicable contract.
(7) Upon completion of the work, or some portion thereof, that is subject to the contract, the retainage, including any related interest, shall be released from escrow under the following conditions:
(a) If there are no existing claims by the owner, the amount requested shall be paid to the contractor within three (3) business days upon receipt by the escrow agent of a written request signed by the contractor and the owner. A copy of such written request shall be sent by the contractor to all subcontractors and materialmen who have a claim to any portion of the retainage requested, contemporaneously with the request being made of the escrow agent by the owner and the contractor.
(b) Any contractor receiving the retainage from the escrow agent shall pay to any materialmen or subcontractors all retainages due the materialmen or subcontractors under contract, within fifteen (15) days after the contractor's receipt of the retainage.
(c) Any subcontractor receiving the retainage from the contractor shall pay to any sub-subcontractor or materialmen all retainages due the sub-subcontractor or materialmen within fifteen (15) days after the subcontractor's receipt of the retainage.
(d) If there is a dispute and the terms of the applicable contract do not provide for binding arbitration of such dispute:
(i) Undisputed amounts shall be released within three (3) business days of receipt of a written request signed by the contractor and owner.
(ii) Disputed amounts that are subject to a judicial proceeding shall be released by the escrow agent within three (3) business days of the receipt of a final order by the court. Upon receipt of the order of the court, the escrow agent shall pay the contractor or owner such amounts as are determined by the court.
(iii) The prevailing party in such dispute shall be entitled to its reasonable attorney's fees and expenses, awardable at the discretion of the court.
(e) If there is a dispute and the terms of the applicable contract provide for binding arbitration of such dispute, the following shall occur:
(i) Undisputed amounts shall be released by the escrow agent within three (3) business days of receipt of a written request signed by the contractor and owner.
(ii) Disputed amounts that are the subject of binding arbitration under the contract shall be released by the escrow agent within three (3) business days of the receipt of a final award by the arbitrator. Upon receipt of the award of the arbitrator, the escrow agent shall pay the contractor and owner such amounts as are determined by the arbitrator in the final award.
(iii) The prevailing party in such dispute shall be entitled to its reasonable attorney's fees and expenses, awardable at the discretion of the arbitrator.
(8) Any interest earned on escrowed retainage funds along with penalties assessed in accordance with subsection (5) of this section, shall be distributed on a pro-rata basis among the contractor, subcontractor, sub-subcontractor or materialmen based upon the amount of their respective contract, subcontract or purchase order unless otherwise ordered by a court or through arbitration.
(9) Neither the escrow agent nor the financial institution shall be liable for releasing funds from the escrow upon receipt of any one of the documents defined in subsection (7) of this section.
(10) Compliance with this section shall be mandatory, and may not be waived by contract.
SECTION 2. This act shall take effect and be in force from and after July 1, 2015.
