Senate Bill No. 373-Committee on Commerce and Labor
May 7, 1997
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Referred to Committee on Commerce and Labor
SUMMARY--Requires prompt payment to contractors and suppliers. (BDR 52-270)
FISCAL NOTE: Effect on Local Government: No.
Effect on the State or on Industrial Insurance: No.
EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.
AN ACT relating to the building trades; requiring prompt payment for work performed and materials furnished for certain persons; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
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Section 1 Chapter 597 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 17, inclusive, of this act.
Sec. 2 As used in sections 2 to 17, inclusive, of this act, unless the context otherwise requires, the words and terms defined in sections 3 to 8, inclusive, of this act have the meanings ascribed to them in those sections.
Sec. 3 "Contractor" has the meaning ascribed to it in NRS 624.020.
Sec. 4 "Improvement" has the meaning ascribed to it in NRS 108.221.
Sec. 5 "Owner" includes the owner of property in fee simple, the owner of a life estate, a lessee or a sublessee.
Sec. 6 "Prescribed rate" means the rate of interest established pursuant to NRS 99.040.
Sec. 7 "Progress billing" means a billing for a portion of the work performed by a contractor or subcontractor on an improvement.
Sec. 8 "Subcontractor" means a contractor who has entered into a contract with a contractor or another subcontractor.
Sec. 9 The duties imposed by sections 2 to 17, inclusive, of this act do not apply to an improvement for residential occupancy or to a public work governed by chapter 338 of NRS.
Sec. 10 1. Except as otherwise provided in sections 2 to 17, inclusive, of this act:
(a) An owner shall pay a contractor at least 90 percent of the amount of a progress billing within 15 days after the billing is received by the owner.
(b) A contractor shall pay:
(1) Each subcontractor at least 90 percent of the amount of a subcontractor's progress billing within 10 days after payment is received from an owner for the contractor's progress billing.
(2) A supplier within 15 days after payment is received from an owner for a contractor's progress billing or billing for final payment that includes the cost of the materials supplied.
(c) A subcontractor shall pay a supplier within 15 days after payment is received from a contractor for a subcontractor's progress billing or billing for final payment that includes the cost of the materials supplied.
2. Any amount withheld from a contractor or subcontractor pursuant to section 11 of this act not to exceed 10 percent of the amount of a progress billing earns interest at the prescribed rate.
3. Payment by an owner or contractor must be made by personal delivery, electronic transfer or first-class mail.
Sec. 11 1. An owner or contractor may withhold not more than 150 percent of the amount of a progress billing or a billing for final payment for any portion of an improvement if he shows by affidavit or other documentary evidence that:
(a) The work performed by the contractor or subcontractor is not progressing according to the schedule set forth in the written contract;
(b) A defect in the work performed by the contractor or subcontractor, certified by the owner, the contractor, the architect, the engineer or an inspector as not conforming to the plans or specifications of the contract, has not been corrected;
(c) A claim related to the work performed by the contractor or subcontractor has been filed by a third party;
(d) The contractor is liable for damages to the owner;
(e) The work to be performed by the contractor or subcontractor cannot be completed for the unpaid balance of a contract;
(f) A defect in the work performed by the contractor or subcontractor, certified by the owner, the contractor, the architect, the engineer or an inspector as not conforming to the applicable building code, has not been corrected;
(g) A subcontractor or supplier is liable for damages to the owner or contractor; or
(h) The contractor, subcontractors, suppliers or the employees of the contractor or subcontractors have failed to furnish waivers or releases of lien. For the purpose of progress payments, the waivers or releases of lien must be conditional for the progress payments to be received and unconditional for the payments received.
2. A contractor may withhold from a subcontractor such an amount as he is liable to pay or contribute for the subcontractor pursuant to chapter 608 or 612 or chapters 616A to 617, inclusive, of NRS upon receipt of notification of that liability.
3. The owner shall give to the contractor, within 7 days after receiving a progress billing or billing for final payment, written notice of a withholding, the amount withheld and the reason for the withholding, supported by the evidence required by subsection 1 or 2.
4. A contractor shall give each subcontractor, within 5 days after the receipt of a written notice of withholding from the owner or receipt of payment from the owner for less than the amount due, whichever occurs first, written notice of a withholding, the amount withheld and the reason for the withholding, supported by the evidence required by subsection 1 or 2.
5. A contractor shall give to the owner written notice of any amount withheld by the contractor from a subcontractor pursuant to subsection 1 or 2, and the reason for the withholding, at or before the time the contractor submits a billing to the owner which would otherwise include that amount, and shall not include the amount so withheld in the billing.
6. A notice required by this section must be given by personal delivery or sent by facsimile machine or registered or certified mail.
Sec. 12 1. An amount withheld by an owner pursuant to section 11 of this act must be deposited in an interest-bearing escrow account in a financial institution located in this state. The amount so deposited must be kept separate and apart from any other funds and assets of the owner. The owner shall release any amount withheld to the contractor, with the interest earned thereon, within 15 days after the correction of the reason for the withholding.
2. Any amount withheld by a contractor pursuant to section 11 of this act must be deposited in an interest-bearing escrow account in a financial institution located in this state. The amount so deposited must be kept separate and apart from any other funds and assets of the contractor. The contractor shall release any amount withheld by the contractor, or any amount paid by the owner which was withheld from the subcontractor, to the subcontractor, with interest earned thereon, within 15 days after the correction of the reason for the withholding and payment is received from the owner.
Sec. 13 1. If a payment by an owner to a contractor, or by a contractor to a subcontractor, is made more than 15 days after the occurrence of any of the following acts or omissions, the owner shall pay to the contractor, or the contractor to the subcontractor, in addition to the full amount of the progress billing or billing for final payment, interest at the prescribed rate from the 15th day until the date of payment, prorated daily, upon the amount so delayed:
(a) The owner or contractor receives a progress billing or a billing for final payment and fails to provide a written notice of withholding in the time and manner required by section 11 of this act.
(b) The contractor receives a payment from the owner after the reason for a withholding has been corrected.
(c) The owner or contractor receives a written notice of correction of the reason for a withholding.
(d) Any amount withheld is not deposited in a interest-bearing escrow account in accordance with section 12 of this act.
2. A contractor or subcontractor who is the prevailing party in an action to recover any amount owed pursuant to subsection 1 is entitled to an award of costs and reasonable attorney's fees.
3. If a contractor receives interest upon a delayed payment, he shall pay a proportionate share of the interest to each subcontractor to whom payment has been delayed, prorated daily. The contractor may deduct from the interest payable to each subcontractor only a proportionate share of any reasonable expense he incurs in collecting the delayed payment, including court costs, costs related to arbitration and reasonable attorney's fees.
Sec. 14 The requirement of payment for materials stored may be limited by contract to materials in short supply or materials specifically fabricated for the improvement, or both. If the requirement is so limited, the contractor may bill for the unpaid balance of all materials when the improvement, or an agreed portion of the improvement, is substantially completed, and the owner shall pay that billing within the time allowed for payment of other billings, less any withholding.
Sec. 15 1. If an owner fails to pay a contractor, or a contractor fails to pay a subcontractor, within the time required by section 10 of this act, without justification as provided in sections 2 to 17, inclusive, of this act, and the money withheld is not deposited in an interest-bearing escrow account pursuant to section 12 of this act:
(a) The contractor may stop work, until the progress billing is paid, after giving 5 working days' written notice to the owner.
(b) The subcontractor may stop work, until the progress billing is paid, after giving 5 working days' written notice to the owner and the contractor.
2. A notice required by this section must be given by personal delivery or sent by facsimile machine or registered or certified mail.
Sec. 16 1. A final payment, including, without limitation, any amount withheld, must be paid by an owner to a contractor not later than 30 days after the owner or a person acting with the authority of the owner occupies the improvement or the improvement becomes available for its intended use, whichever is earlier, but:
(a) The contractor must have given written notice to the owner on or before the date on which he claims the improvement became available; and
(b) The owner may continue to withhold payment only pursuant to section 11 of this act.
2. Payment pursuant to this section must be made on account of partial occupancy or availability of a building, or occupancy or availability of one or more of several buildings, in proportion to the relative value of the building or part occupied or available as compared to the value of the whole.
3. A final payment, including, without limitation, any amount withheld, must be paid by a contractor to a subcontractor not later than 15 days after the contractor receives the final payment from the owner.
4. Payment by an owner or contractor must be made by personal delivery, electronic transfer or first-class mail.
Sec. 17 The requirements of sections 2 to 17, inclusive, of this act may not be waived by an owner, contractor, subcontractor or supplier.
Sec. 18 NRS 99.040 is hereby amended to read as follows:
99.040 [1.] When there is no express contract in writing fixing a different rate of interest, interest must be allowed at a rate equal to the prime rate at the largest bank in Nevada, as ascertained by the commissioner of financial institutions, on January 1 or July 1, as the case may be, immediately preceding the date of the transaction, plus 2 percent, upon all money from the time it becomes due, in the following cases:
[(a)] 1. Upon contracts, express or implied, other than book accounts.
[(b)] 2. Upon the settlement of book or store accounts from the day on which the balance is ascertained.
[(c)] 3. Upon money received to the use and benefit of another and detained without his consent.
[(d)] 4. Upon wages or salary, if it is unpaid when due, after demand therefor has been made.
The rate must be adjusted accordingly on each January 1 and July 1 thereafter until the judgment is satisfied.
[2. The provisions of this section do not apply to money owed:
(a) For the construction or remodeling of a building pursuant to NRS 624.325; or
(b) By a contractor to his subcontractor pursuant to NRS 624.326.]
Sec. 19 NRS 624.322, 624.325 and 624.326 are hereby repealed.
TEXT OF REPEALED SECTIONS
624.322 Rights of contractor and subcontractor when amounts due are unpaid or work is stopped; limitations.
1. If, through no fault or act of a prime contractor or anyone employed by him, the owner fails to pay that contractor:
(a) Pursuant to their schedule for payments under the contract, or within a reasonable time after maturity and presentation of charges if no schedule is established;
(b) Any sum certified by the architect, engineer or other supervisory agent of the owner; or
(c) Such sum as is otherwise properly due,
or if the owner through his own act or neglect, excluding acts of God, floods, fires or strikes, causes the work to be stopped for a period of 5 working days or more, the contractor may, after 5 working days' written notice to the owner, stop work or terminate the contract and recover from the owner payment for all work executed.
2. If, through no fault of a subcontractor or anyone employed by him, the contractor fails to pay that subcontractor:
(a) Pursuant to the schedule for payments under the subcontract, or within a reasonable time after maturity and presentation of charges if no schedule is established;
(b) Any sum certified by the architect, engineer or other supervisory agent of the owner or contractor; or
(c) Such sum as is otherwise properly due,
or if the contractor through his own acts or neglect, excluding acts of God, floods, fires or strikes, causes the work to be stopped for a period of 5 working days or more, the subcontractor may, after 5 working days' written notice to the owner and the contractor, stop work or terminate the subcontract and recover from the contractor payment for all work executed. The subcontractor may not be held liable for nonperformance of that subcontract and for the cost incurred by the contractor to complete the work.
3. The provisions of subsection 2 do not apply if the contractor's failure to pay is caused by his need to withhold money pursuant to an official notice from a state agency that he is liable to make payments or contributions for the subcontractor pursuant to chapter 608 or 612 or chapters 616A to 616D, inclusive, of NRS.
624.325 Payment of contractor after completion of construction or remodeling; limitations.
1. Except as otherwise provided in subsections 2, 3 and 5, any money remaining unpaid for the construction or remodeling of a building is payable to the contractor within 30 days after:
(a) Occupancy by the owner or by a person acting with the authority of the owner; or
(b) The availability of a constructed or remodeled building for its intended use. The contractor must have given a written notice of availability to the owner on or before the day on which he claims that the building became available.
2. The owner may:
(a) Withhold payment for the amount of any disputed or uncompleted items if he notifies the contractor in writing at the time of withholding as to any disputed items.
(b) Require, as a condition precedent to the payment of any money under the construction contract, that waivers of lien be furnished by the contractor's subcontractors, suppliers or employees.
3. The partial occupancy or availability of a building requires payment in direct proportion to the value of the part of the building which is partially occupied or partially available. For projects which involve more than one building, each building must be considered separately in determining the amount of money which is payable to the contractor.
4. Unless otherwise provided in the construction contract, any money which is payable to a contractor pursuant to this section accrues interest at a rate equal to the lowest daily prime rate at the three largest United States banking institutions on the date the contract is executed plus 2 percent, from 30 days after the date on which the money became payable until the date of payment.
5. This section does not apply to:
(a) Any residential building; or
(b) Public works.
624.326 Disbursement of money by contractor to subcontractors and suppliers; time for payment; interest.
1. Each contractor shall disburse money paid to him pursuant to NRS 624.325, including any interest which he receives, to his subcontractors and suppliers within 15 days after he receives the money, in direct proportion to the subcontractors' and suppliers' basis in the total contract between the contractor and the owner.
2. Any money which is payable to a subcontractor pursuant to this section accrues interest at a rate equal to the lowest daily prime rate at the three largest United States banking institutions on the date the contract is executed plus 2 percent, from 15 days after the date on which the money was received by the contractor until the date of payment.