SF 1095

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:18am

A bill for an act
relating to contracts; regulating construction contracts; amending Minnesota
Statutes 2008, section 337.10, subdivisions 3, 4, by adding a subdivision.

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

Section 1.

Minnesota Statutes 2008, section 337.10, subdivision 3, is amended to read:

Subd. 3.

Prompt payment to subcontractors.

A building and construction contract
shall be deemed to require the prime contractor and all subcontractors to promptly pay
any subcontractor or material supplier contract within ten days of receipt by the party
responsible for payment of payment for undisputed services provided by the party
requesting payment. The contract shall be deemed to require the party responsible for
payment to pay interest of 1-1/2 percent per month to the party requesting payment
on any undisputed amount not paid on time. 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. deleted text begin This subdivision
does not apply to construction of or improvements to residential real estate as defined in
section 326B.802, subdivision 13, or to construction of or improvements to attached
single-family dwellings, if those dwellings are used for residential purposes and have
fewer than 13 units per structure. deleted text end

Sec. 2.

Minnesota Statutes 2008, section 337.10, subdivision 4, is amended to read:

Subd. 4.

Progress payments and retainages.

(a) Unless the building and
construction contract provides otherwise, the owner or other persons making payments
under the contract 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.

new text begin (b) The contract shall be deemed to require the party responsible for payment under
this subdivision to pay interest of 1.5 percent per month to the party requesting payment
on any admitted and undisputed amount not paid on time pursuant to the statute or the
building and construction contract. 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

deleted text begin (b) deleted text end new text begin (c) new text end Unless the building and construction contract provides otherwise, an owner
or owner's agent 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.

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

deleted text begin (d) This subdivision does not apply to construction of or improvements to residential
real estate, as defined in section 326B.802, subdivision 13, or to construction of or
improvements to attached single-family dwellings, if those dwellings are used for
residential purposes and have fewer than 13 units per structure. deleted text end

Sec. 3.

Minnesota Statutes 2008, section 337.10, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Notice of loan default. new text end

new text begin Lenders who finance payment of all or part
of a building and construction contract through a loan must give written notice to all
known prime contractors and subcontractors when the lenders either do not intend to make
payments due under the building and construction contract that are to be paid from the
loan. The notice required must be made within ten calendar days of the lenders' decision
not to make payments due under the building and construction contract that are to be
paid from the loan. Upon receipt of the notice of the lenders' intent not to pay, the prime
contractors and subcontractors may suspend their work on the building and construction
contract without penalty for breach of contract until the lender or the owner provides the
prime contractors and subcontractors adequate assurances of payment under the contract.
If the lenders do not give the written notice required in this subdivision, their security
interest in the project will be subordinate to the value provided to the project by the prime
contractors and subcontractors after the date the notice should have been given.
new text end