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