News Maker – California, Arizona, Nevada, New Mexico, Washington - Stop Notice Challenge

Mississippi's Fifth Circuit Court of Appeals' decision last month that rendered its Stop Notice statute unconstitutional could very well foster challenges in other states such as Arizona, California, Nevada, New Mexico and Washington that have similar Stop Notice statutes.

"I'm sure some GC will take a shot at it," said James Reed, Esq., partner at Baird Williams & Greer LLP. However, Reed is confident that any challenge would be extremely unlikely to gain traction as most of these states have preliminary notice language (e.g., 20 days in California and Arizona, 31 days in Nevada). This language distinguishes them from the Mississippi statute, which the court ruling noted as having a "profound" lack of procedural safeguards, in an important way. "The basis for the decision doesn't apply in the southwest," Reed said. "I don't see dominos tipping."

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News Maker – Mississippi

The United States District Court for the Northern District of Mississippi has ruled that Mississippi's Stop Notice statue is unconstitutional. The fallout from the decision is unclear, but it could make it more difficult to get lines of credit from suppliers and contractors.

The state's Fifth Circuit Court of Appeals affirmed a 2012 lower court ruling in the case Noatex Corp. v. King Construction of Houston, LLC that the Stop Notice statute, as written, violated the due process of companies. Therein, the court decision released in October included the following:

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New North Carolina P3 Law Includes Payment Bond Requirement

A new North Carolina law (Ch. SL 2013-401) authorizing the use of public-private partnerships and design-build on non-transportation public work in the state includes payment assurances for construction subcontractors and suppliers. The new law, which becomes effective on Sept. 22, 30 days after North Carolina Gov. Pat McCrory (R) signed the legislation (HB 857) on Aug. 23, 2013, requires payment bonds in the amount of 100 percent of the "total anticipated amount of the construction contracts to be entered into between the private developer and the contractors." North Carolina joins a growing list of states that have enacted laws to help assure that subcontractors and suppliers will be paid for work they perform and services they provide on construction components of projects financed through P3s. Depending on how a construction project funded by both public and private sources is structured, the project may be exempt from both payment bond requirements and mechanic's liens, leaving subcontractors and suppliers without payment assurances. In April, ASA unveiled a legislative work kit containing model state legislation to help ASA chapters address the lack of payment assurances for subcontractors working on P3 projects. The legislative work kit is available in the Government Advocacy section of the ASA Chapter Toolbox. ASA is also leading efforts before Congress to ensure that subcontractors and suppliers have the same payment rights on federal projects financed through P3s as they do on more traditional federal projects.

Source: ASA Today, the weekly news bulletin of the American Subcontractors Association

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Disclosure Requirement Legislation Introduced.

In a recent American Subcontractor Association (ASA) edition of Contractor's Compass, ASA reported that Legislation has been introduced that will require General Contracts who bid and accept Federal Construction projects in excess of $1,000,000 disclose any subcontractor hired by that General Contractor who completes any subcontract work in excess of $100,000.

http://www.asaonline.com/eweb/TCC/TCCSept2013/index.html

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News Maker - IOWA

Mechanic's Notice and Lien Registry Changes

Iowa's Mechanic's Notice and Lien Registry, which launched on January 1, is up-and-running without significant issue. Liens must now be filed electronically in the registry, housed on the Iowa Secretary of State's website, as part of the shift ushered in by the passage of Iowa House File 565. Among other changes, it provides that any civil action by a subcontractor against a general contractor or owner-builder will be approved by the Secretary of State's office (the administrator) rather than a District Court.

Still, the larger purpose of the registry continues to be to protect residential homeowners more so than contractors or materials providers. Prospects of a change in the upcoming Iowa legislative session appear unlikely. A spokesperson for the Secretary of State' office said there have been 2,668 lien filings through September 10, 2013 and 82,439 total visitors. The spokesperson admitted the law is much more geared to assist residential homeowners than any other stakeholders. Other mechanic's lien-related bills previously introduced before the 2013-2014 recess, including House Study Bill 215, have either been withdrawn, "died" in committee or had parts folded into HF 565. The spokesperson said there were no known legislative efforts related to this or mechanic's lien changes in general for the remainder of the 2013-2014 Session, which is set to pick up business again later this fall.

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News Makers - ILLINOIS

Mechanic's Lien Substitution

A bill proposed in the 98th Illinois General Assembly that would allow changes for when an applicant can substitute a bond for the existing mechanic's lien does not appear to be on a fast track in the Illinois House.

As noted in a previous News Maker entry, HB 2804, proposed by Rep. Arthur Turner, sought to amend the state's existing Mechanic's Lien act to allow an applicant to petition at any time before judgment a substitution of a bond for a mechanic's lien. At this time, there does not seem to be a strong push for this or any other new mechanic's lien-related proposals in Illinois. A spokesperson for Turner told NACM that it "could take a few years to get it moving." The proposal failed to gain traction, and like many bills at the end of the Illinois session, was moved to the Rules Committee (on March 22, 2013). Still, it bears watching to see if a renewed push is established when the Assembly returns to session on October 22.

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News Maker - CALIFORNIA

CALIFORNIA:  On Aug. 13, California Governor Jerry Brown signed AB 164 "An act to amend Section 5956.6 of the Government Code, relating to infrastructure financing".  The new law, originally sponsored by Bob Wieckowski and Jeff Gorell, will help assure that subcontractors and suppliers will be paid for work they perform and services they provide on construction projects financed through public-private partnerships also known as P3's.

Payment bonds to secure the payment of claims of laborers, mechanics, and materials suppliers employed on the work under the contract. Payment bonds required under this subdivision shall conform to the requirements of Sections 9550 to 9566, inclusive, of the Civil Code.

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News Maker - NORTH CAROLINA

NORTH CAROLINA:  On July 25th H857 "Public Contracts/Construction Methods" was forwarded to the governor for his signature.  Applying to construction of public buildings, the bill spells out the terms under which design-build may be used by local governments, including criteria under which a governmental unit would evaluate its capability to manage the project, public notice requirements, firm interview and selection procedures, and performance and payment bond requirements.

Under the bill The  design-builder  shall  provide  a  performance  and  payment  bond  to  the governmental  entity  in  accordance  with  the  provisions  of  Article  3  of  Chapter  44A  of  the General Statutes, which is the public payment bond policy in NC.   When  the  total  amount  of  construction  contracts  awarded  for  any  one  project exceeds  three  hundred  thousand  dollars  ($300,000),  a  performance  and  payment  bond  as  set forth  in  (1)  and  (2) {1 and 2 require the payment and performance bonds to be equal to 100% of the contract amount}  is  required  by  the  contracting  body  from  any  contractor  or  construction manager at risk with a contract more than fifty thousand dollars ($50,000); provided that, for State departments, State agencies,  and  The  University  of  North  Carolina  and  its  constituent institutions, a performance and payment bond is required in accordance with this subsection if the total amount of construction contracts awarded for any one project  exceeds five hundred thousand dollars ($500,000). 

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News Maker - WASHIINGTON DC

WASHINGTON DC - On August 2nd, Mayor Vincent Gray signed into law the "Private Contractor and Subcontractor Prompt Payment Act of 2013."  The new law establishes private contractor and subcontractor prompt payment laws, time requirements for owners and contractors to pay contractors and subcontractors when the contract does not provide for specific dates and times of payment, and other requirements.  The bill also provides civil penalties for failure to meet the prompt payment requirements.  Further, it requires the Mayor to select an agency director to monitor and enforce the provisions of the Act and who will be responsible for developing a plan for payment terms based on established industry standards.

Specifically The new law requires an owner to pay undisputed balances within 15 days of granting an occupancy permit, 15 days after the owner takes possession of the property, or 15 days after the owner receives a payment request, whichever is earlier.

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News Maker - CALIFORNIA

CALIFORNIA: CA SB 616 continues to make its way through the legislative process.   Sponsored by Roderick Wright SB 616 the bill is titled "Public works: payment bonds".

Existing law requires a direct contractor that is awarded a public works contract involving expenditure greater than $25,000 to give a payment bond to, and approved by, the officer or public entity by when whom the contract was awarded. This bill would until January 1, 2017, exempt the Los Angeles Unified School District from this provision when the district enters into a public works contract in an amount less than $1,000,000 with a contractor that is a small business or micro business, as defined, that participates in the district's self-insurance program.

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