A new bill in the Louisiana legislature might bring big changes to the local construction industry. House Bill 334 (“HB 334”) could negatively impact suppliers as well as contractors. Here at Smiley Law Group, we want you to be prepared for any changes in the law that will affect your business. This post will give you an overview of the current law compared to the proposed changes.
Contractor Payments (R.S. 9:2784(A))
The current law obligates contractors and sub-contractors to make prompt payments to sub-contractors, sub-sub-contractors or suppliers in proportion to the percentage of work completed. This obligation triggers when they receive payment from the owner for improvements to an immovable.
Proposed changes to the law create a duty to pay when there is a valid contract. It also would prevent enforcement of contract terms from being a cause for reduction of damages under C.C. Article 2003, unless there is a showing of bad faith.
In effect this change weakens suppliers by removing their right to require timely payment and eliminating the 15% penalty they currently can attach to accounts that do not pay them in a timely manner.
Attorney’s Fees and Bond Surety (R.S. 9:3902)
The current law encourages timely payment by bond sureties and awards a ten percent attorney’s fee in creditor lawsuits where the surety failed to honor their obligation.
Proposed changes to the law will make it much harder for suppliers on construction projects to require timely payment by sureties. Suppliers will no longer have the right to collect ten percent attorney’s fees from sureties unless there is a valid contract between the principle on the bond and the creditor. The effect of this change provides more power to the bond surety to avoid paying the supplier.
It can be tough to adapt your business practices to changes in the law. Make no mistake: if you are a supplier, contractor or sub-contractor in Louisiana then you should be ready in case HB 334 becomes law. The elements of sending the required non-payment notices and filing valid liens or bond claims become even more important if the new proposal becomes law.
Having a knowledgeable, Louisiana construction lawyer in your corner can make all the difference. The Smiley Law Group advises many construction businesses, both locally and nationwide. Contact us today for a free consultation.