75th OREGON LEGISLATIVE ASSEMBLY--2010 Special Session

                            Enrolled

                         House Bill 3689

Sponsored by COMMITTEE ON CONSUMER PROTECTION AND GOVERNMENT
  ACCOUNTABILITY

                     CHAPTER ................

                             AN ACT

Relating to construction in connection with residential property;
  creating new provisions; amending ORS 87.007, 701.005, 701.410
  and 701.420; repealing ORS 87.091; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

  SECTION 1. ORS 87.007 is amended to read:
  87.007. (1) This section applies to a sale of the following
residential property:
  (a) A new single family residence or a single family residence
where the sales price  { + is $50,000 or more + } for original
construction or  { + the + } contract price  { + is $50,000 or
more + } for improvements to the residence completed within three
months   { - prior to - }   { + before + } the date   { - of the
sale of - }  the property   { - is $50,000 or more - }  { +  is
sold + }.
  (b) A new condominium unit or a condominium unit where the
sales price  { + is $50,000 or more + } for original construction
or  { + the + } contract price  { + is $50,000 or more + } for
improvements to the condominium unit completed within three
months   { - prior to - }   { + before + } the date   { - of the
sale of - }  the property   { - is $50,000 or more - }  { +  is
sold + }. As used in this paragraph, 'condominium unit' has the
meaning given that term in ORS 100.005.
  (c) A new residential building or a residential building where
the sales price  { + is $50,000 or more + } for original
construction or  { + the + } contract price  { + is $50,000 or
more + } for improvements to the residential building completed
within three months   { - prior to - }  { + before + } the date
 { - of the sale of - }  the property   { - is $50,000 or
more - }  { + is sold + }. As used in this paragraph,
'residential building' means a building or structure
 { - containing - }   { + that contains + } not more than four
dwelling units capable of   { - being used - }   { + use + } as
residences or homes.
  (2)   { - For purposes of protecting purchasers of residential
property with respect to claims of lien that arise before the
date the sale of the residential property is completed but may be
perfected under ORS 87.035 after the date the sale of the
property is completed, when - }  An owner of record  { + at the
time the owner of record + } sells residential property to a
purchaser  { - , the owner - } shall   { - provide such
protection - }   { + protect the purchaser from claims of lien

Enrolled House Bill 3689 (HB 3689-A)                       Page 1

that arise before the date on which the sale is complete but that
may become perfected under ORS 87.035 after the date on which the
sale is complete + } by one of the following methods:
  (a) Purchase or otherwise provide title insurance on  { + the
purchaser's + } behalf   { - of the purchaser - }  by  { + means
of + } a policy issued:
  (A) Without exception for filed and unfiled claims of
construction lien   { - existing - }   { + that exist + } at the
 { + closing + } date   { - of closing - }  of the purchase; and
  (B) On forms and at rates filed with, but not disapproved by,
the Director of the Department of Consumer and Business Services.
  (b) Retain in escrow, as defined in ORS 696.505, an amount of
funds that is not less than 25 percent of the sale price of the
residential property. The funds   { - shall - }   { + must + } be
maintained in or released from escrow   { - pursuant to - }
 { + in accordance with + } written instructions to the escrow
agent from the  { + purchaser and the + } owner that sold the
property   { - and the purchaser - } . The written instructions
shall   { - provide that any claims - }   { + require the escrow
agent to pay upon the purchaser's demand a claim + } of lien that
  { - are - }   { + is + } perfected after the date of the sale
of the property and that   { - are not paid by - }  the owner
that sold the property   { - shall be paid upon demand by the
purchaser from the amount maintained in escrow - }  { +  has not
paid. The escrow agent shall make the payment from the amount
maintained in escrow + }. The escrow agent shall release the
unused funds from escrow to the owner that sold the property if
the escrow agent receives a request from the owner that sold the
property and the owner  { + that sold the property + } provides
documentation from a title company that:
  (A)   { - Claims of lien have - }   { + A claim of lien has + }
not been perfected against the property and 90 days have passed
since the date that construction was completed; or
  (B)   { - One or more claims - }   { + A claim + } of lien
 { - have - }   { + has + } been perfected against the property,
that 135 days have passed since the date that each such claim of
lien was filed and that all
  { - such - }  perfected claims of lien have been released or
waived.
  (c) Maintain a bond or letter of credit in an amount that is
not less than 25 percent of the sale price of the property. The
Construction Contractors Board shall prescribe by rule the
amount, terms and conditions of the bond or letter of credit to
be maintained under this paragraph.
  (d) Obtain written waivers from every person   { - claiming - }
 { + that claims or perfects + } a lien or liens  { + under ORS
87.010 or 87.035 that, + } in an aggregate amount   { - that
exceeds - }  { + , exceed + } $5,000 with respect to the property
 { - under ORS 87.010, 87.021 or 87.035, - }  and provide copies
of the waivers to the purchaser not later than the date the sale
of the property is completed.
  (e) Complete the sale of the residential property after the
deadline for perfecting   { - all claims of liens - }   { + a
claim of lien + } under ORS 87.035 with respect to the property.
    { - (f) Obtain a signed written waiver from the purchaser of
the residential property. The waiver shall be in a form described
in ORS 87.091 and shall specify that the provisions of paragraphs
(a) to (e) of this subsection do not apply to the sale of the
residential property. The waiver must be printed on a form that
is separate from any residential property sales contract or

Enrolled House Bill 3689 (HB 3689-A)                       Page 2

agreement and may be signed by the purchaser at any time after
the purchaser enters into the sales contract or agreement with
respect to the residential property and before closing of the
transaction. - }
  (3) Not later than the date  { + on which + } the sale of the
residential property is completed, the owner who sold the
property shall complete, sign and deliver to the purchaser a form
  { - specifying - }   { + that specifies + } the method that the
owner has selected to comply with the requirements of subsection
(2) of this section or that  { + states that + } subsection (2)
of this section does not apply to the sale of the property. The
notice   { - shall - }   { + must + } be in a form
  { - designated by - }  the Construction Contractors Board
 { + designates + } by rule under ORS 701.235.
  (4) A real estate licensee, as defined in ORS 696.010, acting
in the professional capacity of a licensee   { - may not be - }
 { + is not + } liable in   { - any - }   { + a + } criminal,
civil or administrative proceeding
  { - arising - }   { + that arises + } out of the failure of an
owner of record to comply with subsection (2) or (3) of this
section.
  (5) Violation of subsection (3) of this section is a Class A
violation.
  (6) In addition to any other remedy or penalty provided by law,
a purchaser may bring an action to recover up to twice the amount
of actual damages caused by a violation of subsection (2) of this
section. The court may award to the prevailing party, in addition
to costs and disbursements, reasonable attorney fees. Any action
brought under this subsection must be commenced not later than
two years after the date { +  on which + } the sale of the
property is completed.
  (7) For purposes of subsections (5) and (6) of this section and
ORS 646.608:
  (a) It is a defense to a violation of subsection (2) or (3) of
this section that   { - there is - }  no enforcement or
 { - attempted enforcement of any - }   { + attempt to enforce
a + } claim of lien against the property that is the subject of
the sale   { - arising - }   { + occurred + } before the date the
sale of the property   { - is - }   { + was + } completed; and
  (b) As to   { - any - }   { + a + } claim of lien, it is a
defense to a violation of subsection (2) or (3) of this section
if the owner that sold the property:
  (A) Proves that the claim of lien against the property that is
the subject of the sale is invalid; or
  (B) Satisfies the claim of lien or obtains a release from the
claim of lien on the property that is the subject of the sale.
  (8) A violation of subsection (2) or (3) of this section
 { - is not considered to have occurred - }   { + does not
occur + } with respect to a lien described in ORS 87.010 during
the period that the validity of the lien is disputed in a
judicial proceeding or a proceeding described in ORS chapter 701.
  (9) Nothing in this section requires the payment of a lien that
is not otherwise valid. This section does not apply to claims of
lien perfected by persons   { - furnishing any - }   { + that
furnish + } materials, equipment, services or labor at the
request of the purchaser of the residential property.
  SECTION 2.  { + Section 3 of this 2010 Act is added to and made
a part of the Construction Lien Law. + }
  SECTION 3.  { + (1) A subcontractor or a person that provides
labor, materials or equipment for a project to renovate, remodel,

Enrolled House Bill 3689 (HB 3689-A)                       Page 3

repair or otherwise alter an existing owner-occupied residence
may not perfect a claim of lien against the owner's property
under ORS 87.035 if the subcontractor or the person provided or
contracted to provide services, labor, materials or equipment to
a contractor that was unlicensed at the earlier of the following
times:
  (a) The time the subcontractor or the person first contracted
with the contractor for the project; or
  (b) The time the person first delivered labor, materials or
equipment to the project site.
  (2) Subsection (1) of this section does not apply if the
services, labor, materials or equipment is purchased with cash or
consumer credit.
  (3) The Construction Contractors Board may notify a person at
the person's request of the status of a contractor's license
using any means the board uses to notify a contractor of the
contractor's license status. The board may charge the person a
fee in an amount the board specifies by rule for the cost of
providing the notice to the person. + }
  SECTION 4. ORS 701.005 is amended to read:
  701.005. As used in this chapter:
  (1) 'Board' means the Construction Contractors Board.
  (2) 'Commercial contractor' means a licensed contractor that
holds an endorsement as a:
  (a) Commercial general contractor level 1;
  (b) Commercial specialty contractor level 1;
  (c) Commercial general contractor level 2;
  (d) Commercial specialty contractor level 2; or
  (e) Commercial developer.
  (3) 'Commercial developer' means a developer of property that
is zoned for or intended for use compatible with a small
commercial or large commercial structure.
  (4) 'Construction debt' means an amount owed under:
  (a) An order or arbitration award issued by the board that has
become final by operation of law;
  (b) A judgment or civil penalty that has become final by
operation of law arising from construction activities within the
United States; or
  (c) A judgment or civil penalty that has become final by
operation of law arising from a failure to comply with ORS
656.017.
  (5) 'Contractor' means any of the following:
  (a) A person that, for compensation or with the intent to sell,
arranges or undertakes or offers to undertake or submits a bid to
construct, alter, repair, add to, subtract from, improve,
inspect, move, wreck or demolish, for another,   { - any - }
 { + a + } building, highway, road, railroad, excavation or other
structure, project, development or improvement attached to real
estate, or to do any part thereof.
  (b) A person that purchases or owns property and constructs or
for compensation arranges for the construction of one or more
residential structures or small commercial structures with the
intent of selling the structures.
  (c) A school district, as defined in ORS 332.002, that permits
students to construct a residential structure or small commercial
structure as an educational experience to learn building
techniques and sells the completed structure.
  (d) A community college district, as defined in ORS 341.005,
that permits students to construct a residential structure or

Enrolled House Bill 3689 (HB 3689-A)                       Page 4

small commercial structure as an educational experience to learn
building techniques and sells the completed structure.
  (e)   { - Any - }   { + A + } person except a landscape
contracting business, nurseryman, gardener or person engaged in
the commercial harvest of forest products, that is engaged as an
independent contractor to remove trees, prune trees, remove tree
limbs or stumps or to engage in tree or limb guying.
  (f) A business that supplies the services of a home inspector
certified under ORS 701.350 or a cross-connection inspector and
backflow assembly tester certified under ORS 448.279.
  (g) A person that for compensation arranges, undertakes, offers
to undertake or submits a bid to clean or service chimneys.
  (6) 'Developer' means a contractor that owns property or an
interest in property and engages in the business of arranging for
construction work or performing other activities associated with
the improvement of real property, with the intent to sell the
property.
  (7) { + (a) + } 'General contractor'  { - : - }
    { - (a) - }  means a contractor whose business operations
require the use of more than two unrelated building trades or
crafts that the contractor supervises or performs in whole or
part, whenever the sum of all contracts on any single property,
including materials and labor, exceeds an amount established by
rule by the board.
  (b)  { +  ' General contractor'  + }does not mean a specialty
contractor or a residential limited contractor.
   { +  (8)(a) 'Home improvement' means a renovation, remodel,
repair or alteration by a residential contractor to an existing
owner-occupied:
  (A) Residence that is a site-built home;
  (B) Condominium, rental residential unit or other residential
dwelling unit that is part of a larger structure, if the property
interest in the unit is separate from the property interest in
the larger structure;
  (C) Modular home constructed off-site;
  (D) Manufactured dwelling; or
  (E) Floating home, as defined in ORS 830.700.
  (b) 'Home improvement' does not include a renovation, remodel,
repair or alteration by a residential contractor:
  (A) To a structure that contains one or more dwelling units and
is four stories or less above grade; or
  (B) That the residential contractor performed in the course of
constructing a new residential structure. + }
    { - (8) - }   { + (9)(a) + } 'Home inspector' means a person
who, for a fee, inspects and provides written reports on the
overall physical condition of a residential structure and the
appurtenances
  { - thereto. - }  { +  of the residential structure. + }
   { +  (b) + } 'Home inspector' does not include persons
certified under ORS chapter 455 to inspect new, repaired or
altered structures for compliance with the state building code.
    { - (9) - }   { + (10) + } 'Key employee' means an employee
or owner of a contractor who is a corporate officer, manager,
superintendent, foreperson or lead person or any other employee
 { - identified by - } the board  { + identifies + } by rule.
    { - (10) - }   { + (11) + } 'Large commercial structure'
means a structure that is not a residential structure or small
commercial structure.
    { - (11) - }   { + (12) + } 'Officer' means any of the
following persons:

Enrolled House Bill 3689 (HB 3689-A)                       Page 5

  (a) A president, vice president, secretary, treasurer or
director of a corporation.
  (b) A general partner in a limited partnership.
  (c) A manager in a manager-managed limited liability company.
  (d) A member of a member-managed limited liability company.
  (e) A trustee.
  (f) A person   { - defined - }   { + the board defines by
rule + } as an officer   { - under board rules - } . The
definition of officer adopted by board rule may include persons
not listed in this subsection who may exercise substantial
control over a business.
    { - (12) - }   { + (13) + } 'Residential contractor' means a
licensed contractor that holds an endorsement as a:
  (a) Residential general contractor;
  (b) Residential specialty contractor;
  (c) Residential limited contractor; or
  (d) Residential developer.
    { - (13) - }   { + (14) + } 'Residential developer' means a
developer of property that is zoned for or intended for use
compatible with a residential or small commercial structure.
    { - (14) - }   { + (15)(a) + } 'Residential structure'
 { - : - }
    { - (a) - }  means:
  (A) A residence that is a site-built home;
  (B) A structure that contains one or more dwelling units and is
four stories or less above grade;
  (C) A condominium, rental residential unit or other residential
dwelling unit that is part of a larger structure, if the property
interest in the unit is separate from the property interest in
the larger structure;
  (D) A modular home constructed off-site;
  (E) A manufactured dwelling; or
  (F) A floating home as defined in ORS 830.700.
  (b)  { +  ' Residential structure' + } does not mean:
  (A) Subject to paragraph (a)(C) of this subsection, a structure
that contains both residential and nonresidential units;
  (B) Transient lodging;
  (C) A residential school or residence hall;
  (D) A state or local correctional facility other than a local
facility for persons enrolled in work release programs maintained
under ORS 144.460;
  (E) A youth correction facility as defined in ORS 420.005;
  (F) A youth care center operated by a county juvenile
department under administrative control of a juvenile court
pursuant to ORS 420.855 to 420.885;
  (G) A detention facility as defined in ORS 419A.004;
  (H) A nursing home;
  (I) A hospital; or
  (J) A place constructed primarily for recreational activities.
    { - (15) - }   { + (16) + } 'Responsible managing individual'
means an individual who:
  (a) Is an owner described in ORS 701.094 or an employee of the
business;
  (b) Exercises management or supervisory authority, as defined
by the board by rule, over the construction activities of the
business; and
  (c)(A)   { - Has - }  Successfully completed the training and
testing required for licensing under ORS 701.122 within a period
  { - identified by - }  the board  { + identifies + } by rule;

Enrolled House Bill 3689 (HB 3689-A)                       Page 6

  (B)   { - Has - }  Demonstrated experience   { - required
by - }  the board  { +  requires + } by rule; or
  (C)   { - Has - }  Complied with the licensing requirements of
ORS 446.395.
    { - (16) - }   { + (17) + } 'Small commercial structure'
means:
  (a) A nonresidential structure that has a ground area of 10,000
square feet or less, including exterior walls, and a height of
not more than 20 feet from the top surface of the lowest flooring
to the highest interior overhead finish of the structure;
  (b) A nonresidential leasehold, rental unit or other unit that
is part of a larger structure, if the unit has a ground area of
12,000 square feet or less, excluding exterior walls, and a
height of not more than 20 feet from the top surface of the
lowest flooring to the highest interior overhead finish of the
unit; or
  (c) A nonresidential structure of any size for which the
contract price of all construction contractor work to be
performed on the structure as part of a construction project does
not total more than $250,000.
    { - (17) - }   { + (18) + } 'Specialty contractor' means a
contractor who performs work on a structure, project, development
or improvement and whose operations as such do not fall within
the definition of ' general contractor.' 'Specialty contractor'
includes a person who performs work regulated under ORS 446.395.
    { - (18) - }   { + (19) + } 'Zero-lot-line dwelling' means a
single-family dwelling unit constructed in a group of attached
units in which:
  (a) Each attached unit extends from foundation to roof with
open space on two sides; and
  (b) Each dwelling unit is separated by a property line.
  SECTION 5.  { + Section 6 of this 2010 Act is added to and made
a part of ORS chapter 701. + }
  SECTION 6.  { + Notwithstanding the conditions specified for
probation in ORS 701.102 (3), the Construction Contractors Board
may place a contractor on probation as provided in ORS 701.102
(3) if the contractor offers to perform a home improvement,
accepts a deposit of more than 50 percent of the total contract
price and:
  (1) Fails to perform diligently and in accordance with the
contract specifications the home improvement for which the
contractor received the deposit; or
  (2) Fails to perform the home improvement for which the
contractor received the deposit and fails to return the deposit
within 10 days after a reasonable demand to return the
deposit. + }
  SECTION 7. ORS 701.410 is amended to read:
  701.410. (1) As used in ORS 279C.555, 279C.570, 701.410,
701.420, 701.430, 701.435 and 701.440  { - , unless the context
otherwise requires - } :
  (a) 'Construction'   { - includes - }  { +  means + }:
  (A) Excavating, landscaping, demolishing and detaching existing
structures, leveling, filling in and   { - doing other
preparation of - }   { + otherwise preparing + } land for the
making and placement of a building, structure or superstructure;
  (B) Creating or making a building, structure or superstructure;
and
  (C) Altering, partially constructing and doing repairs in and
upon a building, structure or superstructure.

Enrolled House Bill 3689 (HB 3689-A)                       Page 7

  (b) 'Contractor'   { - includes a person who - }   { + means a
person that + } contracts with an owner on predetermined terms to
be responsible for   { - the performance of - }
 { + performing + } all or part of a job of construction in
accordance with established specifications or plans,
 { - retaining - }   { + and that retains + } control of
 { + the + } means, method and manner of accomplishing the
desired result.
  (c) 'Owner'   { - includes a person who - }   { + means a
person that + } is or claims to be the owner in fee or a lesser
estate of the land, building, structure or superstructure on
which construction is performed and   { - who - }   { + that + }
enters into an agreement with a contractor for the construction.
  (d) 'Subcontractor'   { - includes a person who - }   { + means
a person that + } contracts with a contractor or another
subcontractor on predetermined terms to be responsible for
 { - the performance of - }  { + performing + } all or part of a
job of construction in accordance with established specifications
or plans.
  (2) As used in ORS 701.410, 701.420, 701.430, 701.435 and
701.440, 'retainage' means the difference between the amount
  { - earned by - }  a contractor or subcontractor  { + earns + }
under a construction contract and the amount   { - paid on the
contract by the owner or, in the case of a subcontractor, by a
contractor or another subcontractor - }  { +  the owner pays on
the contract to the contractor, the amount the contractor pays on
the contract to the subcontractor or the amount the subcontractor
pays on the contract to another subcontractor + }.
  SECTION 8. ORS 701.420 is amended to read:
  701.420. (1) Partial payment   { - shall be - }   { + is + }
allowed and  { + may be + } made on contracts for
construction { +  and home improvement + }. Except as provided in
ORS 701.430 (2),  { + an owner, contractor or subcontractor may
withhold as retainage + } an amount equal to not more than five
percent of the contract price of the work completed   { - may be
withheld by an owner, contractor or subcontractor as
retainage - } .  Partial payment allowed under this subsection
 { - shall not be construed as - }   { + is not + } acceptance or
approval of some of the work or
  { - as - }  a waiver of   { - any - }  defects
 { - therein - }  { +  in the work + }.
  (2) The owner, contractor or subcontractor shall pay interest
at the rate of one percent per month on the final payment due the
contractor or subcontractor. Except as provided in ORS 701.430
(2), the interest shall commence 30 days after the
 { + contractor or subcontractor has completed and the owner has
accepted the + } work under the contract for construction for
which the final payment is due   { - has been completed and
accepted and - }  { + . The interest + } shall run until the date
when final payment is tendered to the contractor or
subcontractor.  { + When + } the contractor or subcontractor
 { + considers the work that the contractor or subcontractor is
contracted to perform to be complete, the contractor or
subcontractor + } shall notify the party to whom the contractor
or subcontractor is responsible for
  { - the performance of - }   { + performing the + }
construction work under the contract   { - when the contractor or
subcontractor considers the work that the contractor or
subcontractor contracted to perform to be complete and that - }
 { + . The + } party shall, within 15 days after receiving the

Enrolled House Bill 3689 (HB 3689-A)                       Page 8

notice, either accept the work or notify the contractor or
subcontractor of work yet to be performed   { - on - }
 { + under + } the contract. If the party   { - to whom the
contractor or subcontractor is responsible for the performance of
construction work under the contract - }  does not  { + accept
the work or does not + } notify the contractor or subcontractor
of work yet to be performed within the time allowed, the interest
required under this subsection shall commence 30 days after the
end of the 15-day period.
  (3) When a contractor pays a subcontractor in full, including
the amount  { + the contractor + } withheld as retainage, the
owner with whom   { - that - }   { + the + } contractor has the
contract shall pay the contractor, out of the amount that
 { - is withheld by - }  the owner  { +  withheld + } from
 { - that - }   { + the + } contractor as retainage, a sum equal
to the amount of retainage that the contractor paid the
subcontractor. The contractor shall notify the owner when the
contractor pays a subcontractor in full under this section and
the owner shall, within 15 days after receiving the notice, pay
the contractor the amount due the contractor under this
subsection.  Interest on the amount due the contractor at the
rate of one percent per month shall commence 30 days after the
owner receives notice of full payment to the subcontractor.
  SECTION 9.  { + ORS 87.091 is repealed. + }
  SECTION 10.  { + (1) Sections 3 and 6 of this 2010 Act, the
amendments to ORS 87.007, 701.005, 701.410 and 701.420 by
sections 1, 4, 7 and 8 of this 2010 Act and the repeal of ORS
87.091 by section 9 of this 2010 Act become operative on January
1, 2011.
  (2) Sections 3 and 6 of this 2010 Act, the amendments to ORS
87.007, 701.005, 701.410 and 701.420 by sections 1, 4, 7 and 8 of
this 2010 Act and the repeal of ORS 87.091 by section 9 of this
2010 Act apply to sales of residential property and home
improvements that occur and claims of lien that are filed,
perfected or waived on or after the operative date specified in
subsection (1) of this section.
  (3) The Construction Contractors Board, before the operative
date specified in subsection (1) of this section, may adopt rules
or take any action that is necessary to enable the board to
exercise, on or after the operative date specified in subsection
(1) of this section, all the duties, functions and powers
conferred on the board by sections 3 and 6 of this 2010 Act and
the amendments to ORS 87.007, 701.005, 701.410 and 701.420 by
sections 1, 4, 7 and 8 of this 2010 Act. + }
  SECTION 11.  { + This 2010 Act being necessary for the
immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2010 Act takes effect on
its passage. + }
                         ----------

Enrolled House Bill 3689 (HB 3689-A)                       Page 9

Passed by House February 15, 2010

      ...........................................................
                                             Chief Clerk of House

      ...........................................................
                                                 Speaker of House

Passed by Senate February 20, 2010

      ...........................................................
                                              President of Senate

Enrolled House Bill 3689 (HB 3689-A)                      Page 10

Received by Governor:

......M.,............., 2010

Approved:

......M.,............., 2010

      ...........................................................
                                                         Governor

Filed in Office of Secretary of State:

......M.,............., 2010

      ...........................................................
                                               Secretary of State

Enrolled House Bill 3689 (HB 3689-A)                      Page 11