Business and Labor

Measure to speed subcontractor payments advanced

A bill to hasten payments to builders and their subcontractors advanced from general file March 25.

Introduced by Omaha Sen. Heath Mello, LB373 originally would have amended the Nebraska Construction Prompt Pay Act to:
• provide a definition for the term “substantially complete;”
• require that contractors place any proceeds intended for the payment of subcontractors into a separate trust account;
• establish a maximum cap of 5 percent on the amount of retainage that can be withheld;
• provide that a contractor, owner or subcontractor can bring an action under the act, with attorney’s fees and costs awarded to the prevailing party; and
• remove the exemption of residential property from the act.

A Business and Labor Committee amendment, adopted 25-0, changed the major provisions of the bill by:
• reinstating the residential unit exemption;
• removing the trust account and penalty provisions;
• defining “substantially complete” to reflect the definition used by the American Institute of Architects;
• capping the retainage amount at 10 percent and, once the project is 50 percent complete, retainage would be capped at 5 percent;
• requiring the owner or owner’s representative to pay the retainage to the contractor within 45 days of substantial completion, after which the contractor must pay subcontractors within 10 days; and
• allowing builders and subcontractors to receive attorney fees and costs if awarded damages.

Mello said that despite current laws addressing the timeliness of payments to contractors and subcontractors, funding delays continue to cause problems for small businesses in Nebraska.

“Unscrupulous owners and contractors, often from out of state, have been avoiding the Prompt Pay law either by abusing retainage provisions or just chancing that the contractor or subcontractor won’t file suit to enforce their rights under the act to recoup their costs,” Mello said.

Senators advanced the bill on a 27-0 vote.

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