Minnesota Session Laws - 1997, Regular Session

                            CHAPTER 127-S.F.No. 256 
                  An act relating to commerce; regulating building and 
                  construction contracts; regulating payments and 
                  retainages; proposing coding for new law in Minnesota 
                  Statutes, chapter 337. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  [337.10] [BUILDING AND CONSTRUCTION CONTRACTS; 
        PROHIBITED PROVISIONS.] 
           Subdivision 1.  [APPLICATION OF LAWS OF ANOTHER 
        STATE.] Provisions contained in, or executed in connection with, 
        a building and construction contract to be performed in 
        Minnesota making the contract subject to the laws of another 
        state or requiring that any litigation, arbitration, or other 
        dispute resolution process on the contract occur in another 
        state are void and unenforceable. 
           Subd. 2.  [WAIVER OF LIEN OR CLAIM.] Provisions contained 
        in, or executed in connection with, a building and construction 
        contract requiring a contractor, subcontractor, or material 
        supplier to waive the right to a mechanics lien or to a claim 
        against a payment bond before the person has been paid for the 
        labor or materials or both that the person furnished are void 
        and unenforceable.  This provision shall not affect the validity 
        of the lien waiver as to any third party who detrimentally 
        relies upon the lien waiver. 
           Subd. 3.  [PROMPT PAYMENT TO SUBCONTRACTORS.] A building 
        and construction contract must require the prime contractor and 
        all subcontractors to promptly pay any subcontractor or material 
        supplier contract within ten days of the prime contractor's 
        receipt of payment from the owner or owner's agent for 
        undisputed services provided by the subcontractor.  The contract 
        must require the prime contractor to pay interest of 1-1/2 
        percent per month to the subcontractor on any undisputed amount 
        not paid on time to the subcontractor.  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 prime 
        contractor shall pay the actual penalty due to the 
        subcontractor.  A subcontractor who prevails in a civil action 
        to collect interest penalties from a prime contractor must be 
        awarded its costs and disbursements, including attorney fees 
        incurred in bringing the action.  This subdivision does not 
        apply to construction of or improvements to residential real 
        estate as defined in section 326.83, subdivision 17, 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. 
           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. 
           (b) 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. 
           (c) This subdivision does not apply to construction of or 
        improvements to residential real estate, as defined in section 
        326.83, subdivision 17, 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. 
           Subd. 5.  [DEFINITION.] For the purpose of this section, 
        "building and construction contract" has the meaning given the 
        term in section 337.01. 
           Sec. 2.  [EFFECTIVE DATE.] 
           Section 1 is effective August 1, 1997, and applies to 
        contracts or agreements entered into on or after that date. 
           Presented to the governor May 8, 1997 
           Signed by the governor May 9, 1997, 8:15 a.m.