RECENT LEGISLATION AFFECTING THE TEXAS CONSTRUCTION INDUSTRY

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1 RECENT LEGISLATION AFFECTING THE TEXAS CONSTRUCTION INDUSTRY Presented for the Houston Contractors Association (HCA) Allison J. Snyder & Curtis W. Martin Porter Hedges LLP Ford Nassen & Baldwin PC 1000 Main Street, 36 th Floor One Riverway, Suite 2070 Houston, Texas Houston, Texas (713) (713) (713) fax (713) fax August 18, v1 1 1 Summary of the 82 nd Legislature 5796 bills introduced 1378 passed 13 are significant to the construction industry 2 [ porterhedges.com 2 1

2 HB 2093 Anti-Indemnity Bill Prohibits a person (the Indemnitor ) from indemnifying another person (the Indemnitee ) from claims or damages which are caused by the Indemnitee s negligence Indemnity clauses which violate this prohibition are unenforceable and void 3 [ porterhedges.com 3 Applies to: HB 2093 Anti-Indemnity Bill construction contracts (which includes subcontracts and performance bonds); and agreements collateral to or affecting a construction contract Design Contracts Joint Venture Agreements Numerous other agreements 4 [ porterhedges.com 4 2

3 HB 2093 Anti-Indemnity Bill Applies to claims arising from the Indemnitee s sole negligence Applies to claims arising from the Indemnitee s partial negligence Extends to the obligation to defend another from claims Major Exception - claims for bodily injury or death of an employee of the Indemnitor, its agents or its subcontractors of any tier 5 [ porterhedges.com 5 HB 2093 Anti-Indemnity Bill Extends to Additional Insured endorsements Current forms that provide for coverage for an indemnitee s partial negligence will not be enforceable to the extent that it provides coverage prohibited by statute Does not apply to OCIP s or CCIP s 6 [ porterhedges.com 6 3

4 Exclusions: HB 2093 Anti-Indemnity Bill 1) municipal public works projects; 2) residential construction (single-family house, townhouse, duplex or land development directly related thereto ); 3) OCIP s and CCIP s; 4) breach of contract or warranty that exists independent of indemnity obligation; 7 [ porterhedges.com 7 HB 2093 Anti-Indemnity Bill Exclusions continued: 5) general agreements of indemnity required by sureties; 6) copyright infringement claims; 7) joint defense agreements entered after claims are made; and 8) claims for bodily injury or death of an employee of the Indemnitor, its agents or its subcontractors of any tier. 8 [ porterhedges.com 8 4

5 HB 2093 Anti-Indemnity Bill Requires all OCIP s and CCIP s that provide CGL coverage to provide completed operations coverage for no less than three years This statute cannot be waived by contract 9 [ porterhedges.com 9 Applies to: HB 2093 Anti-Indemnity Bill original contracts entered into on or after January 1, 2012 (and all of the subcontracts that follow); and consolidated insurance programs for projects beginning on or after Jan. 1, [ porterhedges.com 10 5

6 HB 2093 Anti-Indemnity Bill Unanswered Question: What about Master Service Agreements executed before January 1, 2012 with Work Orders issued after that date? Unanswered Question: What happens if an Indemnitee is found not negligent but was alleged to have been negligent? 11 [ porterhedges.com 11 HB 2093 Anti-Indemnity Bill What you need to do to prepare for this change: Revise your contract forms to comply with the statute; and Discuss this change and its effects on insurance coverage with your insurance broker. 12 [ porterhedges.com 12 6

7 HB 1390 Retainage Notices Currently, to perfect a lien claim for retainage, a derivative claimant must: give the early notice of contractual retainage by the 15th day of the second month after the first delivery of materials or performance of work after the claimant agreed to the contractual retainage 13 [ porterhedges.com 13 HB 1390 Retainage Notices Many derivative claimants do not send the early notice not aware of the requirement pressure not to hurt relationship with the general contractor retainage is not yet due 14 [ porterhedges.com 14 7

8 HB 1390 Retainage Notices Must record a lien affidavit on or before the 15 th day of the 4 th month after indebtedness accrues But, Owners are only required to withhold retainage for 30 days after the prime contract is completed, terminated or abandoned 15 [ porterhedges.com 15 HB 1390 Retainage Notices New Legislation moves the early notice to the end of the claimant s work 30th day after the earlier of: the date the claimant s work is completed, terminated or abandoned; or the date the original contract is terminated or abandoned. 16 [ porterhedges.com 16 8

9 HB 1390 Retainage Notices It also extends the deadline to file a lien affidavit (provided the claimant sent its notice timely) to the 15 th day of the 4 th calendar month after indebtedness accrues, unless: 1) The Owner files and sends an Affidavit of Completion to claimant as required by ; Then the deadline is 40 days after the date of completion stated in the Affidavit 17 [ porterhedges.com 17 HB 1390 Retainage Notices 2) The Owner files and sends Notice of Termination or Abandonment to claimant as required by ; or Then the deadline is 40 days after the date of termination or abandonment 3) The Owner sends written demand for the claimant to file its lien affidavit within 30 days pursuant to (g). Then the deadline is 30 days after the date the Owner sent notice to the claimant 18 [ porterhedges.com 18 9

10 HB 1390 Retainage Notices Statute goes into effect for liens that fall under original contracts entered into on or after September 1, [ porterhedges.com 19 HB 1456 Waivers and Releases of Lien and Bond Claims Creates lien rights for certain landscapers Previously a landscaper could only record a valid lien if it had a written contract with the owner (original contractor) New law revised the statutory language to allow landscapers that have written contracts with owners, general contractors, subcontractors, trustees or receivers to have lien rights Applies to contracts entered into after January 1, [ porterhedges.com 20 10

11 HB 1456 Waivers and Releases of Lien and Bond Claims Establises 4 statutory lien waiver forms that are required to be used: Conditional Waiver and Release on Progress Payment Unconditional Waiver and Release on Progress Payment Conditional Waiver and Release on Final Payment Unconditional Waiver and Release on Final Payment Any waiver/release of a lien or payment bond claim is unenforceable unless it is executed and delivered in accordance with the new statute 21 [ porterhedges.com 21 HB 1456 Waivers and Releases of Lien and Bond Claims Use the conditional waivers when payment is not made simultaneous to providing the executed waiver The recipient of one of the statutory conditional waivers should verify payment has been made before relying upon the conditional release 22 [ porterhedges.com 22 11

12 HB 1456 Waivers and Releases of Lien and Bond Claims Does not include unconditional waiver of prior progress payments. What does other items furnished mean? 23 [ porterhedges.com 23 HB 1456 Waivers and Releases of Lien and Bond Claims Substantial compliance is required Any provision that expands or restricts the rights or liabilities provided by this act shall be disregarded and the provisions of this statute substituted Any contract or agreement that attempts to waive the right to file or enforce a lien or bond claim is void 24 [ porterhedges.com 24 12

13 HB 1456 Waivers and Releases of Lien and Bond Claims Takes effect January 1, [ porterhedges.com 25 HB 1456 Waivers and Releases of Lien and Bond Claims Exclusions: contracts or subcontracts for labor only or for labor and materials for construction or land development of residential projects Residential contracts for material only must still use the statutory waivers 26 [ porterhedges.com 26 13

14 HB 1456 Waivers and Releases of Lien and Bond Claims Exclusions continued: Accord and satisfaction of an identified dispute (settlement agreement prior to litigation or arbitration); Agreements concerning pending actions in court or arbitration proceedings; and Agreements executed after a lien affidavit is filed or a bond claim has been made. 27 [ porterhedges.com 27 HB 1456 Waivers and Releases of Lien and Bond Claims What this means to you: 1) You will have to start using the statutory waivers; 2) You may want to use separate waivers to obtain releases for work performed prior to and outside of the work covered by the progress payment; and 3) You may want to obtain a all bills paid affidavit. 28 [ porterhedges.com 28 14

15 SB 1048 Sunshine for Public Private Partnerships (P3) Summary Public Private Partnerships authorized Subject to public processes 29 [ porterhedges.com 29 The Process Gov t. Entities can request proposals or receive unsolicited proposals BUT before considering, Gov t Entity must Adopt & publish guidelines for consideration of proposals Allow submission of other proposals Conduct public hearing before entering agreement 30 [ porterhedges.com 30 15

16 Not Exclusive The legislation doesn t prevent governmental entities from to procuring public and private facilities and infrastructure under other statutory authority (c) 31 [ porterhedges.com 31 Proposals: Accepting v. Approving Accepting a proposal for consideration Approving a proposal 32 [ porterhedges.com 32 16

17 Guidelines for Considering Proposals Two sets of guidelines State Agencies Board, commission, department, or other agency of this state, including an institution of higher education (5) (A) Local Gov t Entities: A political subdivision of this state (5) (B) 33 [ porterhedges.com 33 Comprehensive Agreement Review of plans by the entity; Inspection of the project by the entity; Maintenance of insurance; Monitoring of contracting practices; User fees and/or lease payments; and Policies and procedure concerning default. 34 [ porterhedges.com 34 17

18 Partnership Advisory Comm n. For State proposals > $5,000,000 PAC to review proposals Make Recommendations PAC to review proposed Agreements 35 [ porterhedges.com 35 Procurement Protections Entity to develop procurement guidelines That don t materially conflict with existing statutory design/build procedures Performance and Payment bond requirements follow Gov t Code [ porterhedges.com 36 18

19 Substitutions Limited Can t substitute identified team members after Interim or Comprehensive Agreement Without written approval of Responsible Gov t. Entity 37 [ porterhedges.com 37 Process Public Entity must: Provide notice of proposals; Make copy of proposal available; Hold public hearing. But Financial information, cost estimates, and other financial information need not be disclosed 38 [ porterhedges.com 38 19

20 SB 1048 Public/Private Partnerships (P3 s) P3 = Project where the governmental entity owns real estate and private developers provide funding to develop the real estate Historically done with no rules or guidelines Examples: convention centers, sports facilities, airports, hospitals, etc. 39 [ porterhedges.com 39 SB 1048 Public/Private Partnerships (P3 s) Establishes a process for private entities and governmental entities to contract with each other Takes effect September 1, 2011 Provides for solicited and unsolicited proposals 40 [ porterhedges.com 40 20

21 SB 1048 Public/Private Partnerships (P3 s) Governmental entity has to adopt guidelines that, among other things: makes a representative available to meet with prospective proposers; provides reasonable criteria for selection; sets timelines to select and negotiate a comprehensive agreement; and includes a financial review and analysis. 41 [ porterhedges.com 41 SB 1048 Public/Private Partnerships (P3 s) Allows contractors to develop a project, collect payments and assess user fees approved by the governmental entity Contractors must comply with state designbuild procedures and requirements regarding bonding Public postings and hearings are required Creates the Partnership Advisory Commission to review proposals 42 [ porterhedges.com 42 21

22 SB 1048 Public/Private Partnerships (P3 s) Exceptions: State highways; Transportation authorities; and Telecommunications, cable television, video service, or broadband infrastructure. 43 [ porterhedges.com 43 HB 628 Alternative Delivery Systems in Public Procurement Consolidates all of the provisions regarding public procurement into a new chapter 2267 in the Government Code Applies to state and local governmental entities and public junior colleges Does not apply to institutions of higher education, TxDOT, and regional toll road and mobility authorities 44 [ porterhedges.com 44 22

23 HB 628 Alternative Delivery Systems in Public Procurement Criteria to be considered: price; experience and reputation; quality of goods and/or services offered; impact on the ability to use HUB s; safety record; proposed personnel; financial capability; and any other relevant factor. 45 [ porterhedges.com 45 HB 628 Alternative Delivery Systems in Public Procurement Revises the Selection Process Governmental entities shall publish the criteria to be used and the applicable weighted value; and Governmental entities shall document the basis of its selection and make evaluations public not later than the 7 th day after the date the contract is awarded 46 [ porterhedges.com 46 23

24 HB 628 Alternative Delivery Systems in Public Procurement Reforms handling of school construction litigation involving defective design or construction Requires notice of suits be sent to the Commissioner of Education Provides the Commission with an opportunity to join the suit Requires payments relating to state funded work to be used for repairs or returned to the state 47 [ porterhedges.com 47 HB 345 Prompt Pay Act Interest Amends the statute waiving a local governmental entity s sovereign immunity for breach of contract claims to allow recovery of Prompt Pay interest 48 [ porterhedges.com 48 24

25 HB 679 Change Order Approval for Certain Political Subdivisions Changes the threshold for when approval of change orders is required from $25,000 to $50,000 for local governmental entities Gives the board authority to grant one official or employee authority to approve Takes effect immediately 49 [ porterhedges.com 49 HB 1711 Disaster Remediation Contracts Regulates contracts for the removal, cleaning, sanitizing, demolition, and reconstruction or other treatment of improvements to real property caused by a natural disaster Contracts must be in writing Contracts cannot require any full or partial payment before work starts Contract must have warning language in at least 10 pt. type 50 [ porterhedges.com 50 25

26 HB 1711 Disaster Remediation Contracts May not require payment in excess of an amount reasonably proportionate to the work performed. Requires that statutory disclosures be included in the contracts Failure to comply is a DTPA violation Potential Treble Damages 51 [ porterhedges.com 51 HB 1711 Disaster Remediation Contracts Exception to the New Law Contractors licensed by the TCEQ with regard to solid waste treatment or disposal Contractors who have maintained a physical business address in the county (or an adjacent county) in which the property is located for at least one year This statute cannot be waived by contract Effective September 1, [ porterhedges.com 52 26

27 SB 539 Attorneys Fees Pertaining to Liens and Bonds Changes the may to shall in the statutes allowing recovery of attorney s fees in lien and bond claim cases Exception Courts are not required to order owners in residential cases to pay costs and attorney s fees Court still gets to decide what fees and costs are equitable and just Takes effect September 1, [ porterhedges.com 53 HB 2284 Professional Design Services Clarifies the roles of engineers and architects Prohibits engineers from providing a complete, comprehensive set of building plans for a building designed for human use or occupancy without: 1) Architectural plans from an architect; or 2) Approval from the Texas Board of Architectural Examiners. 54 [ porterhedges.com 54 27

28 HB 2284 Professional Design Services Grandfathers engineers who have prepared architectural plans for 3 or more safely built projects before January 1, [ porterhedges.com 55 HB 398 Criminal History Background Checks 2007 Bill passed requiring background checks for teachers, administrators, employees of schools and employees of those with whom the school contracts Result Subcontractors were not required to perform background checks on their employees but GC s were required to perform the checks on their own employees as well as the subcontractor s employees 56 [ porterhedges.com 56 28

29 HB 398 Criminal History Background Checks 2009 Amendment meant to correct this was passed but it contained a drafting error referencing the teacher criteria instead of the non-teacher criteria for the checks This new legislation seeks to correct the drafting error and requires contractors and subcontractors to submit to the non-teacher background check 57 [ porterhedges.com 57 HB 1951 Relating to Surety Bonds Changes the threshold for sureties to be Treasury Listed from $100,000 to $1,000,000 Thus, a surety can issue a $950,000 bond without being Treasury Listed or having reinsurance for the bond Reinsurers for surety bonds must be either Treasury Listed or authorized, but not both as previously required 58 [ porterhedges.com 58 29

30 SB 425 Property and Casualty Certificates of Insurance Enacts Chapter 1811 of the Texas Insurance Code Requires Certificates of Insurance to be approved by the Tex. Dept. Ins. States that Certificates of Insurance are not policies of insurance and do not alter, amend or extend coverage 59 [ porterhedges.com 59 SB 425 Property and Casualty Certificates of Insurance Prohibits insurers and agents from issuing certificates that purport to alter, amend or extend coverage or terms of the policy States that certificates may not purport to give someone a right to notice of cancellation unless the person is named and notice is required in the policy Statutory violation = $1,000 penalty 60 [ porterhedges.com 60 30

31 Questions? Allison J. Snyder Cynthia A. Holub Timothy C. Ross {713} Tel {713} Fax v