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SENATE BILL NO. 490
INTRODUCED BY B. GLASER
AN ACT REQUIRING PROMPT PAYMENT FOR CONSTRUCTION CONTRACTORS AND SUBCONTRACTORS; PROVIDING FOR THE PAYMENT OF INTEREST FOR DELAYED PAYMENTS; ALLOWING COSTS AND ATTORNEY FEES IN CIVIL ACTIONS TO ENFORCE PAYMENT; ALLOWING OTHER REMEDIES; PROVIDING EXCEPTIONS; SUPERCEDING THE UNFUNDED MANDATE LAW; AMENDING SECTION 18-2-101, MCA; AND PROVIDING AN APPLICABILITY DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Payment of contractors and subcontractors. Notwithstanding any other provision of this title, payment of a construction contractor or subcontractor, as those terms are defined in [section 3], for services performed by a construction contractor or subcontractor is governed by the provisions of [sections 3 through 9].
Section 2. Section 18-2-101, MCA, is amended to read:
"18-2-101. Definitions of building, costs, and construction. In part 1 of this chapter, with the exception of 18-2-104, 18-2-107, [section 1], 18-2-113, 18-2-114, and 18-2-122:
(1) "building" includes a building, facility, or structure:
(a) constructed or purchased wholly or in part with state money;
(b) at a state institution;
(c) owned or to be owned by a state agency, including the department of transportation;
(d) constructed for the use or benefit of the state with federal or private money as provided in 18-2-102(2)(d);
(2) "building" does not include a building, facility, or structure:
(a) owned or to be owned by a county, city, town, school district, or special improvement district;
(b) used as a component part of an environmental remediation or abandoned mine land reclamation project, a highway, or a water conservation project, unless the building will require a continuing state general fund financial obligation after the environmental remediation or abandoned mine land reclamation project is completed;
(c) leased or to be leased by a state agency;
(3) "construction" includes the construction, alteration, repair, maintenance, and remodeling of a building and the equipping and furnishing of a building during construction, alteration, repair, maintenance, and remodeling;
(4) "costs" means those expenses defined in 17-5-401 and 17-5-801."
Section 3. Definitions. As used in [sections 3 through 9], unless the context requires otherwise, the following terms apply:
(1) "Construction contract" means a written agreement between an owner and a contractor for the contractor to construct or improve or to provide construction management for the construction or improvement of an improvement to real property.
(2) "Contractor" means a person who has signed a construction contract with an owner.
(3) "Government entity" means a city, town, county, consolidated municipal-county government, school district, or other special district.
(4) "Improve" means to build, alter, demolish, repair, construct, expand, cover, excavate, grade, fill, clear, plant, landscape, or furnish material or labor, or both for an improvement.
(5) "Improvement" means all or a part of a residential or commercial building, structure, area of real property, quantity of earth or fill material, tree or shrubbery, driveway, roadway, or parking area.
(6) "Owner" means a governmental entity or private entity that has a legal interest in the real property improved or to be improved by the performance of the construction contract.
(7) "Owner's representative" means an architect, engineer, or other person who represents the owner and is designated in the contract as the person representing the owner for the purposes of the administration or oversight of the performance of the construction contract.
(8) "Receipt" or "receive" means actual receipt.
(9) "Subcontract" means a contract between a contractor and a subcontractor or between a subcontractor and another subcontractor, the purpose of which is the performance of all or a part of the construction contract.
(10) "Subcontractor" means a person who has contracted with a contractor or another subcontractor for the purposes of performance of all or a part of a subcontract.
Section 4. Performance entitles contractor or subcontractor to payment. (1) Performance by a contractor of a construction contract in accordance with the provisions of the contract entitles a contractor to payment from the owner.
(2) Performance by a subcontractor of a subcontract entitles the subcontractor to payment from the contractor.
Section 5. Payment to contractor and subcontractor. (1) If a contractor performs a construction contract according to the terms of the contract and requests, either directly to the owner or to owner's representative, payment for performance of the contract, the owner shall pay the contractor, within 30 days after receipt by the owner or the owner's representative of the request for payment, for work performed or materials provided in accordance with the contract.
(2) Within 3 working days after a contractor receives a periodic or final payment from an owner or a state agency, the contractor shall pay the subcontractor, if any, the full amount due the subcontractor in accordance with the subcontract for work performed or materials provided in accordance with that subcontract.
(3) Within 3 working days after a subcontractor receives a periodic or final payment from a contractor, the subcontractor shall pay another subcontractor, if any, the full amount due the subcontractor under the subcontract for work performed or materials provided in accordance with that subcontract.
Section 6. Obligations upon delay of payment. (1) If a periodic or final payment that is required by a construction contract to be paid by an owner to a contractor is delayed by more than 30 days from the date the payment is required by the contract to be made, the owner shall pay to the contractor interest, beginning on the day following the date when the payment is due, at the rate of 1 1/2% a month or a pro rata fraction of that amount on the unpaid balance. If the contractor receives interest from the owner for a delayed payment by the owner, the contractor shall ensure that any interest accrued on a delayed payment is distributed by the contractor to subcontractors on a pro rata basis.
(2) If a periodic or final payment required by a subcontract to be paid by a contractor to a subcontractor is delayed for more than 30 days plus 3 working days from the date the payment is required by the subcontract to be made, the contractor shall pay to the subcontractor interest beginning on the day following the date when the payment is due, at the rate of 1 1/2% a month or a pro rata fraction of that amount on the unpaid balance. If a subcontractor receives interest from the contractor for a delayed payment by the contractor, the subcontractor shall ensure that any interest accrued on the delayed payment is distributed by the subcontractor to other subcontractors, if any, on a pro rata basis. (3) Interest is not required to be paid pursuant to this section unless the owner, contractor, or subcontractor, as appropriate, has been notified of the requirements of this section at the time the request for payment is made. Acceptance of progress payments or final payment releases any claim for interest on the payment.
Section 7. Prevailing party entitled to costs and attorney fees. In a civil action on a contract to enforce an obligation imposed by [sections 3 through 9], the prevailing party is entitled to reasonable attorney fees and costs, both for trial and appeal. If the parties to a construction contract or subcontract use arbitration, the arbitrator may award fees and costs as the arbitrator may determine.
Section 8. Remedies not exclusive. The remedies provided by [sections 3 through 9] are not exclusive of any other remedy provided by law or contract.
Section 9. Exception for certain residential dwellings. The provisions of [sections 3 through 9] do not apply to improvements to real property intended for residential purposes that consist of four or fewer residential units.
Section 10. Unfunded mandate law superceded. The provisions of [this act] expressly supercede and modify the requirements of 1-2-112 through 1-2-116.
Section 11. Codification instructions. (1) [Section 1] is intended to be codified as an integral part of Title 7, chapter 1, and the provisions of Title 7, chapter 1, apply to [section 1].
(2) [Section 1] is intended to be codified as an integral part of Title 18, chapter 2, and the provisions of Title 18, chapter 2, apply to [section 1].
(3) [Sections 3 through 9] are intended to be codified as an integral part of Title 28, chapter 2, and the provisions of Title 28, chapter 2, apply to [sections 3 through 9].
Section 12. Applicability. [This act] applies to contracts agreed to on or after July 1, 1999.
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Latest Version of SB 490 (SB0490.ENR)
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