5657-S

AN ACT Relating to prompt pay for works of improvement; adding a new chapter to Title 60 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout sections 1 through 5 of this act.

(1) "Retainage" means a portion of any payment which is due a retainee but is being withheld or retained by an owner, contractor, or subcontractor as security for, until, or conditioned upon completion of the work of improvement and to serve as a source of funds to meet lien claims under chapter 60.04 RCW which may arise. The retainage is considered conditionally earned by and owed to the retainee.

(2) "Retainee" means a contractor, subcontractor, material supplier, equipment, or professional services provider who has performed all or part of a work of improvement and who has had some portion of sums due under a contract withheld.

(3) "Prime retainor" means any person or entity, excluding those persons loaning or advancing funds pursuant to interim or construction financing, that withholds retainage from the prime contractor.

(4) "Completion" means the date upon which the work of improvement has been completed in accordance with the terms and conditions of the contract, the date upon which the work becomes usable or fit for the purposes for which it was intended, the date of issuance of a certificate of occupancy, or the date of occupation or use by the owner or an agent of the owner, whichever occurs first.

(5) "Work of improvement" means work performed or provided, including labor, materials, equipment, and professional services, which has led to the improvement of real property for a private owner. Work of improvement includes incremental improvements which are in themselves complete in accordance with the terms and conditions of the contract but do not necessarily bring a property improvement to a state of completion. "Work of improvement" does not include single family residential construction, or multifamily residential construction consisting of common wall residential buildings of four or fewer units that do not exceed two stories in height.

NEW SECTION. Sec. 2. PROMPT PAY. (1) Except under subsection (2) of this section, the owner shall pay amounts due the prime contractor for a private work of improvement in accordance with the terms and conditions of the contract but shall pay amounts due to the prime contractor no later than ten days after receipt of draws or loan disbursements. The prime contractor shall pay amounts due subcontractors and suppliers for a work of improvement, and the subcontractor shall pay amounts due their suppliers and lower tier subcontractors for a work of improvement, no later than ten days after receipt of draws, progress payments, final payment, or retainage for that work of improvement.

(2) In the event there is a good faith dispute over all or any portion of the amount due from the owner to the prime contractor, prime contractor to a subcontractor, subcontractor to a subcontractor, or contractor to a supplier, then the owner, prime contractor, or subcontractor may withhold no more than one hundred fifty percent of the disputed amount. Those not party to the dispute and who are otherwise due payment are entitled to full and prompt payment of their portion of a draw, progress payment, final payment, or released retainage including interest.

NEW SECTION. Sec. 3. PORTION OF CONTRACT PRICE RETAINED. (1) Except for improvements made on an existing owner-occupied single family residential property, retainage for private works of improvement shall be regarded and treated as the property of the retainee. Retainage shall accrue interest for the benefit of the prime retainee and subsequent retainees at the lower of either the rate given for certificates of deposit at the bank or lending institution of the prime retainor or at the rate established in RCW 19.52.025. Interest shall accrue from the date retainage is withheld until the date the retainage is released to the prime retainee.

(2) Except as permitted in subsections (3) and (4) of this section, retainage and interest earned on the retainage shall be released no later than ninety days from the date of completion of the work of improvement and the prime contractor and each contractor or subcontractor shall pay each of its contractors, subcontractors, or suppliers their proportionate share of the retention and interest within ten days from the time that all or any portion of the retainage and interest is received. If retainage is not disbursed within ten days, then interest under subsection (1) of this section will resume until retainage is paid to the retainee.

(3) In the event there is a good faith dispute over the release of all or any portion of the retainage, the prime retainor may not withhold an amount in excess of one hundred fifty percent of the estimated value of the issue in dispute. Those not party to a dispute, and who are otherwise due payment are entitled to full and prompt payment of their portion of the retained amount.

(4) In addition to amounts withheld as permitted under section 2 of this act, the prime retainor may withhold from the retained percentage amounts required to meet the claims of those who have given notice under chapter 60.04 RCW, together with sums sufficient to defray the cost of foreclosing the liens of such claims, and to pay attorneys' fees. The retainor may retain an amount equal to such unpaid claims together with a sum sufficient to defray the costs and attorneys' fees incurred in foreclosing the lien of such claims, and shall pay the remainder to the retainee.

NEW SECTION. Sec. 4. REMEDIES. In addition to all other remedies either civil, administrative, or criminal, any person from whom funds have been withheld in violation of this chapter is entitled to receive from the person wrongfully withholding the funds, for every month and portion thereof that payment including retainage is not made, interest as established under RCW 19.52.025, plus an additional charge of one and one-half percent per month. In any action for the collection of funds withheld, the prevailing party is entitled to costs of suit and his or her reasonable attorneys' fees.

NEW SECTION. Sec. 5. APPLICATION‑-DATES. Sections 1 through 4 of this act are applicable to all contracts entered into on or after September 1, 1993, relating to the construction of any work of improvement.

NEW SECTION. Sec. 6. CAPTIONS. Captions used in this act do not constitute any part of the law.

NEW SECTION. Sec. 7. This act shall take effect September 1, 1993.

NEW SECTION. Sec. 8. Sections 1 through 7 of this act shall constitute a new chapter in Title 60 RCW.