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