Substitute Senate Bill No. 197
Substitute Senate Bill No. 197
PUBLIC ACT NO. 98-82
AN ACT CONCERNING EQUITY IN CONSTRUCTION
CONTRACTS.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. (NEW) As used in sections 1 to 4,
inclusive, of this act, unless the context
otherwise requires:
(1) "Owner" means any individual, corporation,
partnership, limited partnership, limited
liability company or other business entity that is
the owner, or lessee under a lease having a term
of ten years or more, of real property upon which
a commercial or industrial building is to be or is
being constructed pursuant to a construction
contract, and includes any project or construction
manager that has entered into a construction
contract on behalf of or as agent for such owner
or lessee.
(2) "Completion" means the point in time
during the construction of a commercial or
industrial building pursuant to a construction
contract when a certificate of occupancy may
lawfully be issued by a local building official.
(3) "Retainage" means any amount owed by an
owner to a general contractor and held back by the
owner pursuant to the terms of a construction
contract.
(4) "Construction contract" or "contract"
means any contract for the construction of a
commercial or industrial building, or for the
renovation or rehabilitation of a commercial or
industrial building for which a certificate of
occupancy is required, including any improvements
to real property that are associated with such
construction, renovation or rehabilitation, or any
subcontract for a project associated with the
construction, renovation or rehabilitation of a
commercial or industrial building, having a total
cost or estimated cost of two hundred fifty
thousand dollars or more, entered into in this
state on or after the effective date of this act
between an owner and a general contractor, or
between a general contractor and a subcontractor
or subcontractors, or between a subcontractor and
any other subcontractor, but does not include any
public works or other building contract entered
into with the state, the United States, any other
state, and any municipality or other political
subdivision of the state or any other state.
Sec. 2. (NEW) (a) Each construction contract
shall contain the following provisions:
(1) A requirement that any dispute concerning
any payment owed under the contract shall be
submitted to arbitration not later than thirty
days after the date such payment was due under the
contract, unless, before the expiration of such
thirty-day period, such dispute is resolved by the
mutual agreement of the parties or the parties
mutually agree to bring such dispute before a
court of competent jurisdiction. In the absence of
any such mutual agreement, such dispute shall be
submitted to arbitration in accordance with
applicable law and the rules of any dispute
resolution entity agreed upon by the parties,
except that if the parties cannot agree upon a
dispute resolution entity, the applicable rules of
the American Arbitration Association shall apply.
Prior to submitting a dispute to arbitration, the
parties may, by mutual agreement, submit the
dispute to mediation. In the event of mediation,
the rules of the American Arbitration Association
shall apply to such mediation.
(2) A requirement that any arbitration fees
and reasonable attorneys' fees incurred in
connection with any arbitration required by
subdivision (1) of this subsection shall be paid
as directed by the arbitrator or arbitrators.
(3) A requirement or requirements, as
applicable, that (A) the owner shall pay interest
in the amount of ten per cent per year on any
amount awarded by the arbitrator or arbitrators to
the general contractor; (B) the general contractor
shall pay interest in the amount of ten per cent
per year on any amount awarded by the arbitrator
or arbitrators to the subcontractor; or (C) the
subcontractor shall pay interest in the amount of
ten per cent per year on any amount awarded by the
arbitrator or arbitrators to any other
subcontractor. Such interest shall accrue from the
date the amount that is the subject of the
arbitration award was due to be paid under the
contract.
(4) A requirement or requirements, as
applicable, that (A) the general contractor shall
make final payment to the subcontractor, for work
satisfactorily performed under the contract, by a
specific time mutually agreed to by the general
contractor and the subcontractor, but not later
than sixty days after the date on which the
general contractor receives final payment from the
owner; or (B) the subcontractor shall make final
payment to any other subcontractor, for work
satisfactorily performed under the contract, by a
specific time mutually agreed to by the
subcontractor and such other subcontractor, but
not later than sixty days after the date on which
the former subcontractor receives final payment
from the general contractor.
(b) Each construction contract may contain the
following provisions:
(1) A requirement or requirements, as
applicable, that (A) the owner shall allow the
general contractor to furnish the owner's business
or residential address to the subcontractor for
notice purposes and allow the subcontractor to
furnish the owner's business or residential
address to any other subcontractor for notice
purposes; (B) the general contractor shall furnish
the business or residential address of the owner
to the subcontractor for notice purposes at the
time the contract is executed; (C) the
subcontractor shall furnish the business or
residential address of the owner to any other
subcontractor for notice purposes at the time the
contract is executed; and (D) the subcontractor
and any such other subcontractor shall give
written notice by registered or certified mail to
the owner, at the address of the owner furnished
to the subcontractor under the contract, stating
(i) the subcontractor's name and business address,
(ii) that the subcontractor has commenced to
furnish materials or render services in connection
with the commercial or industrial building being
constructed, renovated or rehabilitated on the
owner's real property, and (iii) the type and
contract price of materials or services being or
to be provided. The notice required by
subparagraph (D) of this subdivision shall be
given not later than five business days after the
subcontractor commences to furnish such materials
or render such services. A post office box address
shall not be deemed to satisfy the requirements of
this subdivision.
(2) A provision authorizing the owner to
tender payment to the general contractor, in full
satisfaction of the owner's obligation to pay
under the contract, by a check or checks made
payable to the general contractor and the
subcontractor not alternatively, as provided in
subsection (d) of section 42a-3-110 of the general
statutes.
(c) Any owner who (1) is a party to a
construction contract containing the provisions
set forth in subparagraphs (A) and (B) of
subdivision (1) and subdivision (2) of subsection
(b) of this section, (2) has received written
notice from the subcontractor as provided in
subparagraph (D) of subdivision (1) of subsection
(b) of this section, and (3) has made final
payment to the general contractor under the
contract in accordance with subdivision (2) of
subsection (b) of this section shall not be denied
the issuance of a final certificate of occupancy
under section 5 of this act.
(d) No construction contract may provide for
any retainage (1) in an amount that exceeds five
per cent of the amount owed to the general
contractor by the owner under the contract, and
(2) which is held for a period exceeding sixty
days following completion of all work to be
performed under the contract.
(e) No surety shall be obligated to pay any
fees or interest pursuant to subdivisions (2) and
(3) of subsection (a) of this section.
(f) Either party to a construction contract
arbitration pursuant to subdivision (1) of
subsection (a) of this section may make
application to the superior court for the judicial
district in which one of the parties resides or
has his principal place of business for:
(1) A trial before a jury or the court. A
demand for a trial under this subdivision shall be
filed with the court not later than twenty days
after the date on which the arbitration award is
rendered. The factual findings of the arbitrator
or arbitrators shall be admissible in any such
trial unless (A) the court determines that any
such findings are not supported by substantial
evidence in the record or that the arbitrator or
arbitrators acted arbitrarily or capriciously in
the course of the hearings before them, or (B) the
court finds any of the defects set forth in
subsection (a) of section 52-418, as amended, or
subsection (a) of section 52-419 of the general
statutes. If the court determines that any or all
of the factual findings of the arbitrator or
arbitrators are admissible, such findings shall be
presumed correct, provided, such presumption may
be rebutted by a preponderance of the evidence; or
(2) If a demand for a trial is not filed under
subdivision (1) of this subsection, an order
confirming, vacating, modifying or correcting any
award rendered in such arbitration, in accordance
with the provisions of this subdivision and
sections 52-417 to 52-424, inclusive, of the
general statutes, as amended.
(g) If the court determines that the party
making an application under subsection (f) of this
section has acted without good cause in bringing
an appeal of the arbitration award, the court, in
its discretion, may grant costs and reasonable
attorney's fees to the prevailing party.
Sec. 3. (NEW) For purposes of sections 1, 2
and 5 of this act, any payment made by an owner
directly to a subcontractor of any amount owed to
such subcontractor by a general contractor under a
construction contract between the subcontractor
and the general contractor shall be deemed to have
been paid by the owner to such general contractor
under any construction contract between the
general contractor and the owner, provided: (1)
Such amount shall not exceed the amount required
to be paid to the subcontractor by the general
contractor under the construction contract between
the subcontractor and the general contractor; (2)
such amount was not paid by the general contractor
to the subcontractor within the time required by
the construction contract between the
subcontractor and the general contractor; and (3)
the owner shall provide written notice to the
general contractor that the owner is making such
payment to the subcontractor.
Sec. 4. (NEW) (a) No act or agreement of the
parties to a construction contract nor any
agreement or statement contained in such contract
shall constitute a valid waiver of the provisions
of sections 1 to 3, inclusive, of this act.
(b) If any provision or clause of sections 1
to 4, inclusive, of this act or the application of
such provision or clause to any person or
circumstance is declared to be invalid or
unenforceable by a court of competent
jurisdiction, the remainder of sections 1 to 4,
inclusive, of this act and the application of such
provision or clause to persons or circumstances
other than those to which it is held invalid or
unenforceable shall not be affected, and to this
end the provisions of sections 1 to 4, inclusive,
of this act are severable.
Sec. 5. (NEW) Notwithstanding any special act
or local ordinance, no final certificate of
occupancy shall be issued by a local building
official for any commercial or industrial
building, for which a building permit is issued on
or after the effective date of this act, if the
building official has received a written notice of
dispute stating that money is owed by an owner or
by a general contractor for work performed in
connection with a construction contract, as
defined in section 1 of this act, and that all or
part of such money owed remains unpaid. The
building official shall issue such final
certificate, if otherwise eligible for issuance,
upon receipt of: (1) Written notice signed by the
parties to the dispute stating that an amount
equal to the amount claimed by the party owed has
been placed in an interest-bearing escrow account
in a bank in this state by the party obligated to
pay; (2) a copy of a court order or decision
concerning the dispute; (3) written notice signed
by the parties to the dispute stating that the
dispute has been submitted to arbitration in
accordance with subdivision (1) of subsection (a)
of section 2 of this act; (4) an affidavit signed
by one of the parties to the dispute certifying
under penalties of perjury that the dispute has
been submitted to arbitration in accordance with
subdivision (1) of subsection (a) of section 2 of
this act; (5) written notice signed by the parties
to the dispute agreeing that the certificate
should issue notwithstanding the dispute; (6) if
the owner is a public service company, as defined
in section 16-1 of the general statutes, or a
subsidiary or affiliate of a public service
company, certification from the Secretary of the
State pursuant to section 16-230 of the general
statutes that the paid-in capital and surplus of
such public service company is not less than five
hundred thousand dollars; or (7) an affidavit
signed by the owner certifying under penalties of
perjury that the owner is entitled to the issuance
of a final certificate of occupancy pursuant to
subsection (c) of section 2 of this act. Nothing
in this section shall be construed to impose any
liability on any municipality or any building
official as a result of any action taken or not
taken under this section or to prohibit the
issuance of a temporary certificate of occupancy
as allowed by law.
Vetoed May 28, 1998