First Regular Session

Sixty-first General Assembly

LLS NO. 97­0196.01 JY SENATE BILL 97­079

STATE OF COLORADO

BY SENATORS Lacy, Arnold, and Tebedo;

also REPRESENTATIVES Anderson, S. Johnson, Kaufman, and Tool.

BUSINESS AFFAIRS & LABOR

A BILL FOR AN ACT

CONCERNING PAYMENTS FOR PERFORMANCE IN CONNECTION WITH CONTRACTS TO IMPROVE REAL PROPERTY.

Bill Summary

"Timely Payments To Improve Real Property"

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments which may be subsequently adopted.)

States that contractors, subcontractors, and suppliers who perform or supply certain materials in accordance with the provisions of any contract to improve real property is entitled to payment from the party with whom the contractor, subcontractor, or supplier has contracted. Specifies the manner in which an owner, contractor, or subcontractor is to pay a contractor, subcontractor, or supplier for work performed. Requires an owner, contractor, or subcontractor who fails to make payment within the required time period to pay interest to the contractor, subcontractor, or supplier at a specified rate. Specifies that any waiver of the provisions of this act is void. Allows the contractor, under certain circumstances, to withhold an application and certification to an owner of real property for payment to a subcontractor.

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.  Title 6, Colorado Revised Statutes, 1992 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW ARTICLE to read:

ARTICLE 19

Payments of Real Property Construction Contracts

6­19­101.  Definitions. AS USED IN THIS ARTICLE, UNLESS THE CONTEXT OTHERWISE REQUIRES:

(1)  "CONTRACTOR" MEANS A PERSON WHO CONTRACTS WITH AN OWNER TO IMPROVE REAL PROPERTY.

(2)  "IMPROVE" MEANS TO BUILD, EFFECT, ALTER, REPAIR, OR DEMOLISH ANY IMPROVEMENT UPON, CONNECTED WITH, OR ON OR BENEATH THE SURFACE OF ANY REAL PROPERTY; TO FURNISH MATERIALS, INCLUDING TREES AND SHRUBBERY, FOR ANY SUCH IMPROVEMENT; TO CONSTRUCT DRIVEWAYS OR PRIVATE ROADWAYS; OR TO PERFORM ANY LABOR OR OTHER SERVICES UPON SUCH IMPROVEMENTS. THE TERM SHALL ALSO MEAN AND INCLUDE ANY DESIGN OR OTHER PROFESSIONAL OR SKILLED SERVICES RELATING TO SUCH IMPROVEMENTS FURNISHED BY ARCHITECTS, ENGINEERS, LAND SURVEYORS, AND LANDSCAPE ARCHITECTS.

(3)  "IMPROVEMENT" MEANS ALL OR ANY PART OF ANY BUILDING, STRUCTURE, ERECTION, ALTERATION, DEMOLITION, EXCAVATION, CLEARING, GRADING, FILLING, LANDSCAPING, INCLUDING TREES AND SHRUBBERY, DRIVEWAYS, OR PRIVATE ROADWAYS UPON ANY REAL PROPERTY.

(4)  "OWNER" MEANS A PERSON WHO HAS AN INTEREST IN THE REAL PROPERTY BEING IMPROVED AND FOR WHOM AN IMPROVEMENT IS TO BE MADE AND WHO HAS ORDERED SUCH IMPROVEMENT. THE TERM ALSO INCLUDES SUCCESSORS IN INTEREST OF THE OWNER AND AGENTS OF THE OWNER ACTING WITHIN THEIR AUTHORITY. THE TERM DOES NOT INCLUDE A PUBLIC ENTITY FOR WHICH CONSTRUCTION CONTRACTS ARE GOVERNED BY THE PROVISIONS OF ARTICLE 91 OF TITLE 24, C.R.S.

(5)  "REAL PROPERTY" MEANS THE REAL ESTATE THAT IS IMPROVED, INCLUDING LANDS, LEASEHOLDS, TENEMENTS AND HEREDITAMENTS, AND IMPROVEMENTS PLACED THEREON.

(6)  "SUBCONTRACTOR" MEANS ANY PERSON WHO HAS CONTRACTED TO FURNISH LABOR OR MATERIALS TO, OR HAS PERFORMED LABOR FOR OR FURNISHED MATERIALS TO, A CONTRACTOR OR ANOTHER SUBCONTRACTOR IN CONNECTION WITH A CONTRACT TO IMPROVE REAL PROPERTY.

(7)  "SUPPLIER" MEANS ANY PERSON WHO HAS SUPPLIED GOODS, MATERIALS, OR EQUIPMENT TO AN OWNER, CONTRACTOR, OR SUBCONTRACTOR TO IMPROVE REAL PROPERTY.

6­19­102.  Performance by contractor, subcontractor, or supplier. A CONTRACTOR OR SUBCONTRACTOR WHO HAS PERFORMED OR A SUPPLIER WHO HAS SUPPLIED GOODS, MATERIALS, OR EQUIPMENT IN ACCORDANCE WITH THE PROVISIONS OF ANY CONTRACT TO IMPROVE REAL PROPERTY SHALL BE ENTITLED TO PAYMENT FROM THE OWNER, CONTRACTOR, OR SUBCONTRACTOR WITH WHOM THE CONTRACTOR, SUBCONTRACTOR, OR SUPPLIER HAS CONTRACTED.

6­19­103.  Payment to contractor, subcontractor, or supplier ­ when required ­ penalty. (1)  WHEN A CONTRACTOR HAS PERFORMED IN ACCORDANCE WITH THE PROVISIONS OF ANY CONTRACT WITH AN OWNER TO IMPROVE REAL PROPERTY, THE OWNER SHALL PAY TO THE CONTRACTOR EACH PERIODIC OR FINAL PAYMENT FOR WHICH THE OWNER HAS RECEIVED AN INVOICE. THE OWNER SHALL MAKE SUCH PAYMENTS TO THE CONTRACTOR WITHIN SEVEN CALENDAR DAYS OF SATISFACTORY PERFORMANCE OF THE CONTRACT TO IMPROVE REAL PROPERTY BY THE CONTRACTOR.

(2)  WHEN A CONTRACTOR HAS RECEIVED PAYMENT FROM AN OWNER PURSUANT TO SUBSECTION (1) OF THIS SECTION, THE CONTRACTOR SHALL PAY TO EACH OF THE CONTRACTOR'S SUBCONTRACTORS AND SUPPLIERS EACH PERIODIC OR FINAL PAYMENT FOR WHICH THE CONTRACTOR HAS RECEIVED AN INVOICE. IF THE SUBCONTRACTOR OR SUPPLIER IS SATISFACTORILY PERFORMING UNDER THE CONTRACT WITH THE CONTRACTOR, THE CONTRACTOR SHALL MAKE SUCH PAYMENTS WITHIN SEVEN CALENDAR DAYS OF RECEIPT OF EACH PERIODIC OR FINAL PAYMENT FROM THE OWNER.

(3)  WHEN A SUBCONTRACTOR HAS RECEIVED PAYMENT FROM A CONTRACTOR PURSUANT TO SUBSECTION (2) OF THIS SECTION, THE SUBCONTRACTOR SHALL PAY TO EACH SUPPLIER OR ANY OTHER PERSON WHO HAS PROVIDED GOODS, MATERIALS, LABOR, OR EQUIPMENT TO THE SUBCONTRACTOR EACH PERIODIC OR FINAL PAYMENT FOR WHICH THE SUBCONTRACTOR HAS RECEIVED AN INVOICE. IF THE SUPPLIER OR OTHER PERSON IS SATISFACTORILY PERFORMING UNDER THE CONTRACT WITH THE SUBCONTRACTOR, THE SUBCONTRACTOR SHALL MAKE SUCH PAYMENTS WITHIN SEVEN CALENDAR DAYS OF RECEIPT OF EACH PERIODIC OR FINAL PAYMENT FROM THE CONTRACTOR.

(4)  AN OWNER, CONTRACTOR, OR SUBCONTRACTOR WHO FAILS TO MAKE TIMELY PAYMENTS IN THE MANNER PROVIDED IN SUBSECTIONS (1) TO (3) OF THIS SECTION SHALL PAY INTEREST TO THE CONTRACTOR, SUBCONTRACTOR, OR SUPPLIER, AS APPLICABLE, AS SPECIFIED BY THE CONTRACT OR AT A RATE OF FIFTEEN PERCENT PER ANNUM, WHICHEVER IS HIGHER, ON THE AMOUNT OF ANY PAYMENT THAT IS NOT MADE WITHIN THE TIME SPECIFIED IN SUBSECTIONS (1) TO (3) OF THIS SECTION. THE INTEREST SHALL ACCRUE BEGINNING ON THE EIGHTH CALENDAR DAY FROM THE DATE THE INVOICE FOR SUCH PAYMENT WAS RECEIVED TO THE DATE ON WHICH THE PAYMENT IS MADE.

(5)  ANY WAIVER OF THE PAYMENT PROVISIONS SET FORTH IN THIS ARTICLE SHALL BE VOID.

(6)  NOTHING IN THIS ARTICLE SHALL PREVENT THE CONTRACTOR FROM WITHHOLDING AN APPLICATION AND CERTIFICATION TO THE OWNER FOR PAYMENT TO A SUBCONTRACTOR UNDER THE FOLLOWING CIRCUMSTANCES:

(a)  UNSATISFACTORY JOB PROGRESS;

(b)  DEFECTIVE CONSTRUCTION NOT REMEDIED;

(c)  DISPUTED WORK;

(d)  THIRD PARTY CLAIM FILED OR REASONABLE EVIDENCE THAT SUCH A CLAIM WILL BE FILED;

(e)  FAILURE OF THE SUBCONTRACTOR TO MAKE TIMELY PAYMENTS FOR LABOR, EQUIPMENT, AND MATERIALS;

(f)  DAMAGE TO THE CONTRACTOR OR ANOTHER SUBCONTRACTOR;

(g)  REASONABLE EVIDENCE THAT THE SUBCONTRACT MAY NOT BE COMPLETED FOR THE UNPAID BALANCE OF THE SUBCONTRACT SUM; OR

(h)  RETAINAGE BY THE CONTRACTOR OF A REASONABLE AMOUNT NOT TO EXCEED THE INITIAL PERCENTAGE RETAINED BY THE OWNER PURSUANT TO THE CONTRACT.

SECTION 2.  Effective date ­ applicability.  This act shall take effect July 1, 1997, and shall apply to contracts entered into on or after said date.

SECTION 3.  Safety clause.  The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.