HF 2451

as introduced - 89th Legislature (2015 - 2016) Posted on 03/17/2016 05:04pm

A bill for an act
relating to contracts; regulating building and construction contracts; providing
for certain progress payments and retainages; amending Minnesota Statutes
2014, section 337.10, subdivisions 4, 5.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2014, section 337.10, subdivision 4, is amended to read:

Subd. 4.

Progress payments and retainages.

(a) deleted text begin Unless the building and
construction contract provides otherwise, deleted text end The owner new text begin , prime contractor, new text end or other persons
making payments under the new text begin building and construction new text end contract new text begin or a subcontract of any
tier new text end must make progress payments monthly as the work progresses. Payments shall be
based upon estimates of work completed as approved by the owner or the owner's agent.
A progress payment shall not be considered acceptance or approval of any work or waiver
of any defects therein.

(b) deleted text begin Unless the building and construction contract provides otherwise, an deleted text end new text begin The new text end owner
or owner's agent new text begin , prime contractor, or other persons making payments under a building
and construction contract or a subcontract of any tier new text end may reserve as retainage from any
progress payment on a building and construction contract an amount not to exceed five
percent of the payment. An owner or owner's agent may reduce the amount of retainage
and may eliminate retainage on any monthly contract payment if, in the owner's opinion,
the work is progressing satisfactorily.

(c) new text begin The owner or owner's agent shall release and pay retainage to the prime contractor
for work completed on any construction contract no later than 60 days after substantial
completion of the project. The prime contractor and all subcontractors shall release and
pay retainage to their subcontractors within ten days of receipt by the party responsible for
payment of the payment for services provided by the party requesting payment.
new text end

new text begin (d) Nothing in this subdivision limits or alters the paying party's right to withhold or
not approve payment for work not properly performed or payment not earned.
new text end

new text begin (e) The contract shall be deemed to require the party responsible for payment of
retainage to pay interest of 1-1/2 percent per month to the party requesting payment on
any undisputed amount not paid as required in this subdivision. The minimum monthly
interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid
balance of less than $100, the party responsible for payment shall pay the actual penalty
due to the party requesting payment. A party requesting payment who prevails in a civil
action to collect interest penalties from a party responsible for payment must be awarded
its costs and disbursements, including attorney fees incurred in bringing the action.
new text end

new text begin (f) new text end This subdivision does not apply to contracts for professional services as defined
in sections 326.02 to 326.15.

Sec. 2.

Minnesota Statutes 2014, section 337.10, subdivision 5, is amended to read:

Subd. 5.

deleted text begin Definition deleted text end new text begin Definitions new text end .

new text begin (a) new text end For the purpose of this section, "building and
construction contract" has the meaning given the term in section 337.01.

new text begin (b) For the purposes of this section, "retainage" means money or other security as
agreed to by the parties to a construction contract, which is withheld and conditioned
on completion and acceptance of work in connection with a project by the contractor,
subcontractor or lower tier sub-subcontractor, or supplier, and which is earned by the
contractor, subcontractor or lower tier sub-subcontractor, or supplier for:
new text end

new text begin (1) work performed; or
new text end

new text begin (2) materials stored, if payment for stored materials is provided for in the contract.
new text end

new text begin (c) For the purposes of this section, "substantial completion" means the date when
construction is sufficiently completed so that the owner or the owner's representative can
occupy or use the improvement for the intended purpose.
new text end