HF 590

as introduced - 87th Legislature (2011 - 2012) Posted on 02/17/2011 10:52am

A bill for an act
relating to commerce; requiring evidence of construction financing and notice
of nonpayment or default; amending Minnesota Statutes 2010, section 337.10,
subdivision 5, by adding subdivisions.

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

Section 1.

Minnesota Statutes 2010, section 337.10, is amended by adding a
subdivision to read:

new text begin Subd. 2a. new text end

new text begin Waiver of evidence of financing or notice. new text end

new text begin Provisions contained in, or
executed in connection with, a building and construction contract requiring the contractor,
subcontractor, or material supplier to waive the rights provided in subdivisions 4a, 4b, and
4c, are void and unenforceable. This provision does not affect the validity of a waiver as
to a third party who detrimentally relies upon the waiver.
new text end

Sec. 2.

Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Evidence of project financing. new text end

new text begin (a) The owner or other persons making
payment under the contract shall provide satisfactory evidence of financing to the contract
or for the work to be performed by the contractor with which it has contracted. This
evidence must be provided before the commencement of work by the contractor. If at any
time during the duration of the project, there is any material change in project financing,
the owner or other persons responsible for making payment under the contract shall notify
any contractor of the nature of that change. Within ten days after receiving evidence of
project financing or notice of material change in project financing from a building or
construction owner, a contractor shall provide this information to each subcontractor
contracted to perform work.
new text end

new text begin (b) Every contracting agreement between an owner and contractor must include
the name, mailing address, and telephone number of the lender, if any, that is providing
construction financing to the owner or other person responsible for making payment. If
there is no construction financing, the agreement must so state.
new text end

new text begin (c) Every subcontracting agreement between a contractor and subcontractor must
include the name, mailing address, and telephone number of the lender, if any, that is
providing construction financing to the owner or other person responsible for making
payment. If there is no construction financing, the agreement must so state.
new text end

new text begin (d) Evidence of project financing is a condition precedent to the contractor or
subcontractor commencing or continuing work.
new text end

new text begin (e) An owner or other person making payment under the contract that fails to provide
evidence of project financing or notice of material change is fully responsible for payment
to the contractor. A contractor that fails to provide evidence of project financing or notice
of material change is fully responsible for payment to subcontractors.
new text end

Sec. 3.

Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
to read:

new text begin Subd. 4b. new text end

new text begin Notice to lender of nonpayment. new text end

new text begin (a) Notice of nonpayment may be
given in writing by a contractor or subcontractor to a lender that is providing construction
financing to an owner or other person responsible for making payment as required by this
section or by contract, if the construction financing is secured in whole or in part by
the real property upon which the contractor or subcontractor performed, provided, or
contributed to an improvement.
new text end

new text begin (b) The notice must reasonably identify the owner or other person responsible for
making payment; the contractor; the subcontractor; the real property; the nature and dates
of the work performed, provided, or contributed by the contractor or subcontractor; the
amount due to the contractor or subcontractor; and the date upon which payment to
the contractor or subcontractor was due. A legal description of the real property is not
required.
new text end

new text begin (c) The notice to the lender is for the lender's information, and this subdivision does
not require the lender to take any action in response to the notice. A lender is not liable
under this section for any action taken or not taken as a result of receiving the notice.
new text end

new text begin (d) An owner or other person responsible for making payment shall not retaliate
against a contractor or subcontractor that provides to a lender a notice permitted by this
subdivision, and an owner that does so is liable to the contractor or subcontractor for
damages incurred as a result of the retaliation. A contractor shall not retaliate against
a subcontractor that provides to a lender a notice permitted by this subdivision, and a
contractor that does so is liable to the subcontractor for damages incurred as a result of
the retaliation.
new text end

Sec. 4.

Minnesota Statutes 2010, section 337.10, is amended by adding a subdivision
to read:

new text begin Subd. 4c. new text end

new text begin Notice of default. new text end

new text begin An owner or other person responsible for
making payment must provide to the lender a sworn construction statement or other
industry-accepted document identifying the names of the contractor and all subcontractors
and suppliers for the work. A lender that finances all or part of a building and construction
contract must give written notice to all known contractors, subcontractors, and suppliers
of a default on the building and construction contract loan or financing agreement between
the lender and the owner or person responsible for making payment within ten days of
the default.
new text end

new text begin Upon receipt of the notice of default, the contractor and subcontractors may suspend
work on the building and construction contract until the default is cured or the owner
or other person responsible for making payment provides the contractor and all known
subcontractors and suppliers adequate assurances of payment.
new text end

new text begin If the lender does not give the written notice required in this section, the lender's
security interest in the project shall be subordinate to the value provided to the project by
the contractors and subcontractors after the date the notice should have been given.
new text end

Sec. 5.

Minnesota Statutes 2010, 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 purpose of this section, "default" means when the owner or party
responsible for making payments fails to make required payments to the lender or in some
other way does not comply with the terms of the loan.
new text end