Proposed Legislation Would Profoundly Impact Colorado Construction Contracts
A last minute bill has been introduced in the Colorado Senate. Colorado Senate Bill 12-181, introduced last week by State Senator Lois Tochtrop, proposes new requirements related to construction projects in Colorado. These proposed changes are not favorable to property owners in Colorado and will limit the ability of property owners to negotiate business terms in their construction contracts. SB 12-181 is set for a hearing before the Senate Business, Labor and Technology Committee on Wednesday, May 2, 2012.
SB 12-181 applies to “Building and Construction Contracts” which is defined as any contract subject to Title 38, Article 22 of the Colorado Revised Statutes, Colorado’s mechanics’ lien law. SB 12-181 contains the following points:
- Colorado Law Must Apply. Any provision in a Building or Construction Contract for work to be performed in Colorado that makes the contract subject to the laws of another state or contains a dispute resolution provision governed by the laws of another state, is void and unenforceable.
- Parties Cannot Contract Around Colorado Mechanics’ Lien Law. Any provision in a Building and Construction Contract that requires a contractor or subcontractor to waive its right to file a mechanics’ lien or claim against a payment bond prior to being paid is void and unenforceable.
- Payment to Subcontractors and Suppliers Required Within 7 Days. All principals, general contractors and subcontractors must pay their subcontractors and material suppliers within seven days of receipt of services.
- Mandatory Interest Penalty; Costs and Attorney Fees Award. A 1.5% monthly interest penalty applies to all unpaid amounts, and subcontractors and suppliers who successfully sue to collect this interest penalty will also be entitled to collect their costs of suit, including attorney fees.
- Monthly Progress Payments Required; Retainage Amounts Capped. Property owners or parties responsible for payment must make monthly progress payments to the general contractor unless the Building and Construction Contract specifies otherwise, and owners or payment parties may only reserve as retainage a maximum of 5% of each payment.
- Change Orders. General contractors must submit the costs of any change orders to owners for payment within 30 days of the change order. Owners or payment parties will be required to pay at least 50% of any disputed change order amounts.