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TCA Issues

Legislative Issues for 2013 – 83rd Legislative Session

 

Protect Gains Made in the 2011 Legislative Session.  The construction industry must be vigilant in the 2013 Session to ensure that no legislation is passed that would erode the gains made in the 2011 Session.

 

Lender Notice of Default.  A lender should be required to give subcontractors and prime contractors notice of an owner's default on a construction loan.  This notice will allow for work to be suspended until the default is cured. This will reduce the construction team’s exposure to enriching a lender without hope of getting paid.  Read TCA's issue brief here.

Read HB 2180 text.  Referred to House Business & Industry Committee on 3/11/13.  Also filed as SB 295, which was referred to the Senate Business & Commerce Committee on 2/5/13.

 

Lien Law Reform.  Texas has the most complicated lien laws of any of the 50 states.  During the current legislative interim, the House Business & Industry Committee will review specific problematic provisions in the lien laws and will make recommendations to the Texas Legislature regarding needed changes to the lien laws for consideration in the 2013 Session.  Read TCA's issue brief here.

Read SB 1281 text.  Referred to the Senate Business & Commerce Committee on 3/13/13.  Also filed as HB 3553, which was referred to House Business & Industry Committee on 3/25/13.


Misclassification of Workers.  Contractors should be required to properly classify an individual performing construction services, whether as an employee or independent contractor, and there should be strong penalties for non-compliance.  Certain requirements could be specified that would automatically make the person an employee or, conversely, make the person an independent contractor.  Read TCA's issue brief here.

Read HB 1925 text.  Referred to the House Economic & Small Business Development Committee on 3/5/13.  Also filed as SB 676, which was referred to the Senate Business & Economic Development Committee on 2/25/13.

 

Retainage Trust Fund.  An owner should be required to set aside in a separate escrow or trust account the retainage amount not paid each month for construction costs during the life of a project to ensure that contractors and subcontractors would be paid the retainage to which they are entitled.  Read TCA's issue brief here.

Read HB 3316 text.  Referred to House Business & Industry Committee on 3/19/13.

 

Consolidated Insurance Program Standards (CIPs).  Known typically as Owner Controlled or Contractor Controlled Insurance Programs, the use of these “Wrap-Up” programs is widely used by the industry in Texas. While possibly a money saver for the Owner, the CIPs are plagued by poor administration, gaps in coverage or lack of coverage, insufficient limits, questionable safety and back to work programs, and auditing practices that cause subcontractor's retainage to be withheld even longer than usual.  In many cases, the exposure a subcontractor faces working on a CIP is unknown.  In 2009, the indemnity bill that passed included language that requires a three-year minimum coverage in a CIP for completed operations. The Legislature should establish minimum standards for CIPS. 

Note that legislation dealing with the Consolidated Insurance Programs issue will not be filed this session.  TCA is working with the Texas Department of Insurance to resolve our industry’s concerns with these programs through rulemaking at the agency.

 

Issues from the 82nd Legislative Session

The 82nd Texas Legislature adjourned its Regular Session on May 30, 2011. During the 140-day Session, legislators addressed a number of TCA high priority issues set by the Board of Diretors for the Texas Construction Association.  Those issues are listed below, along with a link to the bills dealing with each of them. 

 

Broad Form Indemnification. A clause found in construction contracts provides that the subcontractor indemnifies the general contractor or owner for the general contractor's or owner's wrongdoing even though the subcontractor may have done nothing improper. These clauses, known as broad form indemnity clauses, and certain additional insured endorsements should be made void and against the public policy of Texas. These indemnification clauses are in direct conflict with the concept that a company should be responsible for its negligent acts.  SB 361 & HB 2010 were the original bils filed to address these issues, but the language from SB 361 was later amended into HB 2093, which was passed by both the House and Senate and signed by Governor Perry.  Read HB 2093 text  HB 2093 is effective on January 1, 2012.

 

Consolidated Insurance Program (CIPs). Known typically as Owner Controlled or Contractor Controlled Insurance Programs, the use of these “Wrap-Up” programs is increasing in Texas.  While possibly a money saver for the Owner, CIPs are plagued by poor administration, gaps in coverage or lack of coverage, insufficient limits, questionable safety and back to work programs, and auditing practices that cause subcontractor's retainage to be withheld even longer than usual. In many cases, the exposure a subcontractor faces working on a CIP is unknown. The Legislature should establish minimum standards for CIPS.  HB 2093 & 1337 were the original bills filed dealing with CIPs, but late in the session, HB 2093 became the "vehicle" for the indemnification bill (SB 361).  Read HB 2093 text  HB 2093 is effective on January 1, 2012.

 

Lien Law Reform. Texas has the most complicated lien laws of any of the 50 States. Our lien laws should be reformed to make them much less complicated and much more user friendly. The lien law issues which should be addressed include the following:

 

Lien Waivers. Prohibit the waiver of a person’s lien rights prior to getting paid for work performed or materials supplied. HB 1456 is the lien waiver bill passed by the legislature and signed by the governor.  Read HB 1456 text  HB 1456 is effective on January 1, 2012.

 

Retainage Lien. The process to establish a lien for retained funds should be revised to provide a less onerous system for subcontractors, general contractors, and owners.  HB 1390 is the retainage lien bill passed by the Legislature and signed into law by Governor Perry.  Read HB 1390 text   HB 1390 is effective on September 1, 2011.

 

Retainage Trust Fund. Require retainage to be held in trust for the benefit of construction firms that provide labor and materials to a project.  SB 1425 was the bill that dealt with this issue, but it did not pass.  Read SB 1425 text  HB 1425 died in the House Calendar Committee.

 

Loan Default. A lender should be required to give subcontractors and prime contractors notice of an owner's default on a construction loan. This notice will allow for work to be suspended until the default is cured. This will reduce the construction team’s exposure to enriching a lender without hope of getting paid.  Read HB 3040 text  HB 3040 died in the House Calendar Committee.

 

 

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