Tennessee State Legislature Passes New Payment Protection Laws for GCs, Subs

After a year and a half of a concerted effort with construction associations across the state, last week the House and State passed HB0271 adding new payment protections that mitigate risks for GCs and subs. The highlights include:

• Requires the owner to pay all retainage for work completed to the GC within 30 days (instead of 90 days) from the last day of the month of receipt of use or occupancy permit, or work is completed or substantial completion of the project for work is completed;
• Extends the timeframe of the notice of nonpayment served to the owner or prime contractor from 90 days to 12 months;
• Removes the receipt of a certificate of substantial completion from an architect and beginning use as specific triggering events for payment of retainage;
• Does not change the 10-day period time limit for paying retainages to subcontractors, sub-subcontractors, and material suppliers;
• Deletes provision that authorizes a prime contractor to include a condition precedent for payment in a contract with a remote contractor stating the prime contractor is not obligated to pay the remote contractor until the prime contractor is paid by the construction owner client.
• Establishes a prime contractor, or remote contractor in respect to a prime contractor, may suspend performance of work, without penalty, and receive payment of late fees, if payment is not received from a construction owner client in accordance with a written contract.

Click here for a link to the full bill
Click here for a link to the summary