SENATE CORPORATIONS AND TRANSPORTATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 604

48th legislature - STATE OF NEW MEXICO - first session, 2007

AN ACT

RELATING TO TRADE PRACTICES; CHANGING THE NAME OF THE RETAINAGE ACT TO THE PROMPT PAYMENT ACT; ELIMINATING PROVISIONS OF CHAPTER 57, ARTICLE 28 NMSA 1978 CONCERNING RETAINAGE; PROHIBITING THE WITHHOLDING OF AMOUNTS DUE FOR WORK PERFORMED; AMENDING AND REPEALING SECTIONS OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     Section 1. Section 57-28-1 NMSA 1978 (being Laws 2001, Chapter 68, Section 1) is amended to read:

     "57-28-1. SHORT TITLE.--[This act] Chapter 57, Article 28 NMSA 1978 may be cited as the ["Retainage] "Prompt Payment Act"."

     Section 2. Section 57-28-2 NMSA 1978 (being Laws 2001, Chapter 68, Section 2) is amended to read:

     "57-28-2. DEFINITIONS.--As used in the [Retainage] Prompt Payment Act:

          A. "construction" means building, altering, repairing, installing or demolishing in the ordinary course of business any:

                (1) road, highway, bridge, parking area or related project;

                (2) building, stadium or other structure;

                (3) airport, subway or similar facility;

                (4) park, trail, athletic field, golf course or similar facility;

                (5) dam, reservoir, canal, ditch or similar facility;

                (6) sewage or water treatment facility, power generating plant, pump station, natural gas compression station or similar facility;

                (7) sewage, water, gas or other pipeline;

                (8) transmission line;

                (9) radio, television or other tower;

                (10) water, oil or other storage tank;

                (11) shaft, tunnel or other mining appurtenance;

                (12) electrical wiring, plumbing or plumbing fixture, gas piping, gas appliances or water conditions;

                (13) air conditioning conduit, heating or other similar mechanical work;

                (14) leveling or clearing land;

                (15) excavating earth;

                (16) drilling wells of any type, including seismographic shot holes or core drilling; and

                (17) similar work, structures or installations;

          B. "contractor" means a person performing construction through a contract with an owner;

          C. "owner" means a person, local public body or state agency other than the [state highway and] department of transportation [department];

          D. "person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture or similar legal entity; and

          [E. "retainage" means money payable to the contractor or subcontractor that has been withheld by the owner conditioned on substantial completion of all work in connection with a construction contract; and

          F.] E. "subcontractor" means a person performing construction for the owner not through a contract with the owner."

     Section 3. Section 57-28-3 NMSA 1978 (being Laws 2001, Chapter 68, Section 3) is amended to read:

     "57-28-3. APPLICABILITY OF ACT.--The provisions of the [Retainage] Prompt Payment Act do not apply to construction contracts for residential property containing four or fewer dwelling units."

     Section 4. Section 57-28-5 NMSA 1978 (being Laws 2001, Chapter 68, Section 5) is amended to read:

     "57-28-5. PAYMENTS--PROMPT PAY REQUIRED [RETAINAGE]--WITHHOLDING PROHIBITED.--

          A. Except as provided in Subsection B of this section, all construction contracts shall provide that payment for amounts due [except for retainage] shall be paid within twenty-one days after the owner receives an undisputed request for payment. Payment by the owner to the contractor may be made by first-class mailing, electronic funds transfer or by hand delivery of the undisputed amount of a pay request based on work completed or service provided under the contact. If the owner fails to pay the contractor within twenty-one days after receipt of an undisputed request for payment, the owner shall pay interest to the contractor beginning on the twenty-second day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until the payment is issued. If an owner receives an improperly completed invoice, [he] the owner shall notify the sender of the invoice within seven days of receipt in what way the invoice is improperly completed, and [he] the owner has no further duty to pay on the improperly completed invoice until it is resubmitted as complete.

          B. A local public body may make payment within forty-five days after submission of an undisputed request for payment when grant money is a source of funding, if:

                (1) the construction contract specifically provides in a clear and conspicuous manner for a payment later than twenty-one days after submission of an undisputed request for payment; and

                (2) the following legend or substantially similar language setting forth the specified number of days appears in clear and conspicuous type on each page of the plans, including bid plans and construction plans:

"Notice of Extended Payment Provision

     This contract allows the owner to make payment within ____________ days after submission of an undisputed request for payment.".

          C. All construction contracts shall provide that contractors and subcontractors make prompt payment to their subcontractors and suppliers for amounts owed for work performed on the construction project within seven days after receipt of payment from the owner, contractor or subcontractor. If the contractor or subcontractor fails to pay [his] the contractor's or subcontractor's subcontractor and suppliers by first-class mail or hand delivery within seven days of receipt of payment, the contractor or subcontractor shall pay interest to [his] the subcontractors and suppliers beginning on the eighth day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until payment is issued. These payment provisions apply to all tiers of contractors, subcontractors and suppliers.

          D. A creditor shall not collect, enforce a security interest against, garnish or levy execution on those [retainage] progress payments or other payments that are owed by an owner, contractor or subcontractor to a person, or [his] the owner's contractor's or subcontractor's surety, who has furnished labor or material pursuant to a construction contract.

          E. When making payments, [the owner shall retain no more than five percent of the cost of estimated work done and the value of materials stored on the site or suitably stored and insured off-site. When the project is substantially complete, no further retainage shall be withheld. A contractor shall retain no more than five percent retainage, regardless of whether retainage is withheld by the owner.

          F. The retainage may be held until substantial completion of each separate building, public work or other division of the contract on which a price is stated separately in the contract or that can be separately ascertained from the contractor's schedule of values if the escrow arrangement described in Section 6 of the Retainage Act is used] an owner, contractor or subcontractor shall not retain, withhold, hold back or in any other manner not pay amounts owed for work performed."

     Section 5. Section 57-28-11 NMSA 1978 (being Laws 2001, Chapter 68, Section 11) is amended to read:

     "57-28-11. ATTORNEY FEES.--In an action to enforce the provisions of the [Retainage] Prompt Payment Act, the court may award court costs and reasonable attorney fees."

     Section 6. REPEAL.--Sections 57-28-4, 57-28-6, 57-28-9 and 57-28-10 NMSA 1978 (being Laws 2001, Chapter 68, Sections 4, 6, 9 and 10) are repealed.

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