HB0193 Green, Timothy P

C O M M I T T E E

HB 193 -- CONSTRUCTION CONTRACTS

SPONSOR: Green

COMMITTEE ACTION: Voted "do pass" by the Committee on Labor by a vote of 24 to 0.

This bill allows a court to award attorney's fees and monthly interest of up to 1.5% on late payments on a construction contract. Owner occupied residential property of 4 units or less is exempt.

The bill also removes as a defense to a mechanic's lien any contract provision which makes a payment obligation contingent upon receipt of a payment from any other party.

FISCAL NOTE: General Revenue Fund - Exact cost is unknown but should not exceed $100,000 per fiscal year.

PROPONENTS: Supporters say that subcontractors now have to spend an exorbitant amount of their time just trying to collect overdue accounts. Retention of payments by general contractors is being abused. Years go buy and accounts are not fully paid, and then the debtors offer pennies on the dollar. Thus, subcontractors end up "financing" the developments on which they work. It's become an industry-wide problem. Developers -- like in Branson -- slowly pay the contractors, who then have trouble paying the subcontractors, who then can't pay employees. It has caused many small subcontractors to file Chapter 7 or Chapter 11 bankruptcy. The effect of the bill will be to reduce litigation, because it will prevent much of the holding back of a small percentage of the accounts due.

Testifying for the bill were: Representative Green; Hoette Concrete Co.; St. Louis Area Contractors; Missouri Builders Association; American Subcontractors Association; Associated General Contractors of Missouri; St. Louis Homebuilders Association; Sheet Metal Workers Local 36; National Electric Contractors Association; Sheetmetal Contractors of St. Louis; Painting & Decorating Foundation; Mechanical Contractor Association of St. Louis; and Missouri Merchants & Manufacturers Association.

OPPONENTS: There was no opposition voiced to the committee.

Richard Smreker, Research Analyst