Second Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 12-0776.01 Chuck Brackney x2295 SENATE BILL 12-181 SENATE SPONSORSHIP Tochtrop, HOUSE SPONSORSHIP Kerr J., Senate Committees House Committees Business, Labor and Technology A BILL FOR AN ACT Concerning building and construction contracts. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill defines "building and construction contract" as any contract subject to statutory provisions regarding mechanics' liens. Any provision in a building and construction contract that is performed in Colorado making the contract subject to the laws of another state or requiring dispute resolution in another state is void. Any provision requiring a contractor, subcontractor, or material supplier to waive a right to a mechanics' lien is void. Contractors and subcontractors must pay subcontractors and material suppliers within 7 days after completion of the work under a building and construction contract. The owner of the property for which the work is performed must make monthly progress payments to the contractor unless the building and construction contract provides otherwise. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add 38-22-134 as follows: 38-22-134. Building and construction contracts - definition. (1) As used in this section, "building and construction contract" means any contract subject to this article and excludes any public works contract as defined in section 24-91-103.5 (1) (b), C.R.S. (2) Any provision contained in, or executed in connection with, a building and construction contract performed, or to be performed, in Colorado that makes the contract subject to the laws of another state, or that requires any litigation, arbitration, or other dispute resolution process regarding the contract to occur in another state, is void and unenforceable. (3) Any provision contained in, or executed in connection with, a building and construction contract that requires a contractor, subcontractor, or material supplier to waive the right to a mechanics' lien or to a claim against a payment bond before the contractor, subcontractor, or material supplier has been paid for the labor or materials that they furnished is void and unenforceable. (4) (a) Notwithstanding any provision in a building and construction contract to the contrary: (I) The principal or prime contractor and all subcontractors shall promptly pay any subcontractor or material supplier within seven days after receipt by the contractor or subcontractor responsible for payment of undisputed services provided by the subcontractor or material supplier requesting payment. (II) The owner of the property, contractor, or subcontractor responsible for payment shall pay interest of one and one-half percent per month to the party requesting payment on any undisputed amount not paid on time. (b) The contractor, subcontractor, or material supplier requesting payment that prevails in a civil action to collect interest penalties from the owner of the property, contractor, or subcontractor responsible for payment must be awarded its costs and disbursements, including reasonable attorney fees, incurred in bringing the action. Additionally, any party who remains unpaid after providing seven days' written notice to the offending party is excused, along with its surety, if any, from any further obligations under the building and construction contract. (5) (a) Unless the building and construction contract provides otherwise, the owner of the property, the owner's agent, or any other person making payments under the contract shall make monthly progress payments to the contractor as the work progresses. Payments are based on estimates of work completed as approved by the owner or owner's agent. A progress payment is not considered acceptance or approval of any work or waiver of any defects. (b) An owner or owner's agent may reserve as retainage from any progress payment an amount not to exceed five percent of the payment. An owner or owner's agent may reduce the amount of retainage or may eliminate retainage on any progress payment if, in the owner's opinion, the work is progressing satisfactorily. (6) Pursuant to a building and construction contract, the owner of the property may issue a written order directing a change in the work prior to reaching agreement with the contractor on the adjustment, if any. The owner and contractor shall negotiate expeditiously and in good faith for appropriate adjustments, as applicable, to the building and construction contract. As the changed work is performed, the contractor shall submit its costs for such work within thirty days after the issuance of the directed change. If there is a dispute as to the cost to the owner, the owner shall pay the contractor fifty percent of the estimated cost to perform the work. In such event, the parties reserve their rights as to the disputed amount. SECTION 2. Act subject to petition - effective date - applicability. (1) This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 8, 2012, if adjournment sine die is on May 9, 2012); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2012 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor. (2) The provisions of this act apply to building and construction contracts executed on or after the applicable effective date of this act.