BP BHEAD INT S [atlas:bill]

AN ACT Relating to licensing of residential contractors; amending RCW 18.27.040 and 18.27.114; adding new sections to chapter 18.27 RCW; adding a new section to chapter 19.27 RCW; and prescribing penalties.

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

NEW SECTION. Sec. 1. The definitions in this section apply throughout sections 2 through 8 of this act unless the context clearly requires otherwise.

(1) "Board" means the state residential construction contractors board.

(2) "Residential contractor" means a general contractor who performs work in connection with residential structures and the appurtenances thereto. "Residential contractor" includes, but is not limited to, a person who purchases or owns property and constructs or for compensation arranges for the construction of one or more residential structures with the intent of selling the residential structure or structures.

(3) "Residential structure" means a residence, including a site-built home, a modular home constructed off-site, a condominium, a duplex, or multifamily residential building.

NEW SECTION. Sec. 2. (1) The state residential construction contractors board is established, consisting of nine members appointed by the governor with the advice of the director of the department. The members of the board shall be selected and appointed as follows: Three members shall be contractors who primarily work on residential structures; one member shall be a contractor engaged primarily in the business of residential remodeling; two members shall represent the public; two members shall be elected representatives of governing bodies of local government, one shall represent the governing body of a county; and one member shall be a general contractor who primarily works on nonresidential structures.

(2) The members shall serve four-year terms. Of the initial members, two must be appointed for a one-year term, three must be appointed for a two-year term, three must be appointed for a three-year term, and the remainder must be appointed for four-year terms. Thereafter, members must be appointed for four-year terms. A member is eligible for reappointment. If there is a vacancy for any cause, the governor shall make an appointment immediately effective for the unexpired term.

(3) In order to be eligible for board membership, the contractor members of the board shall be registered under this chapter and shall maintain their registration in good standing during their terms on the board.

(4) The board at its first meeting shall select from its membership a chairperson and a vice-chairperson with such duties and powers necessary for the performance of their duties as the board determines.

(5) Meetings of the board shall be held at least quarterly in accordance with a schedule established by the board. A majority of the members of the board constitutes a quorum for the transaction of business. Each member of the board shall receive compensation in accordance with RCW 43.03.240 and shall be reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060 which shall be paid out of the contractor license fund, upon forms approved by the director of the department.

(6) The department shall provide administrative and clerical assistance to the board.

NEW SECTION. Sec. 3. (1) It is unlawful for any person, firm, partnership, corporation, or other entity to engage in, conduct, or carry on the business of a residential contractor, without having an unrevoked, unsuspended, and unexpired residential contractor license, issued by the department in accordance with sections 1 through 8 of this act.

(2) The department may issue a residential contractor license for a period of twenty-four months after the date of issuance unless the license is revoked or suspended as set forth in this chapter. It may be renewed by the same procedure and period provided for an original registration upon application and furnishing of any supplemental information as the department may require by rule.

(3) An application for a residential contractor license shall be made in writing to the department, accompanied by the required fee. The application shall contain the information pertaining to the applicant required in RCW 18.27.030.

(4) In addition to the requirements of subsection (3) of this section, the application for a residential contractor license shall be accompanied by a surety bond issued by a surety insurer who meets the requirements of chapter 48.28 RCW in the amounts required in section 4 of this act. If a valid bond is not already on file with the department at the time the application is filed, a bond must accompany the application for a license.

(5) Except for the amount of the surety bond as required in section 4 of this act, the surety bond must meet the requirements of RCW 18.27.040.

NEW SECTION. Sec. 4. (1) The surety bond required for residential contractors shall be determined based on the volume of work as follows:

(a) If the estimated annual volume of residential construction work of the applicant is ten million dollars or more, the applicant shall furnish a surety bond of one hundred thousand dollars;

(b) If the estimated annual volume of residential construction work of the applicant is more than five million dollars and less than ten million dollars, the applicant shall furnish a surety bond of seventy-five thousand dollars;

(c) If the estimated annual volume of residential construction work of the applicant is more than one million dollars and less than five million dollars, the applicant shall furnish a surety bond of fifty thousand dollars;

(d) If the estimated annual volume of residential construction work of the applicant is more than five hundred thousand dollars and less than one million dollars, the applicant shall furnish a surety bond of twenty-five thousand dollars; and

(e) If the estimated annual volume of residential construction work of the applicant is less than five hundred thousand dollars, the applicant shall furnish a surety bond of fifteen thousand dollars.

(2) Applicants for a residential contractor license shall also provide proof of meeting the insurance or financial responsibility requirements of RCW 18.27.050.

NEW SECTION. Sec. 5. (1) It is the purpose and function of the board to establish a residential contractor license. In addition, it is the purpose and function of the board to establish and administer a written examination for residential contractors.

(2) Examinations for an initial license shall be designed to reasonably insure that residential contractors are competent to engage in and supervise the work covered by sections 1 through 8 of this act. The examination shall include questions from the following categories to assure proper safety and protection for the general public: (a) Safety; (b) state building code; and (c) business practices that affect residential contractors.

(3) Examinations for renewing a license shall be designed to reasonably insure that residential contractors have kept updated on residential construction techniques and business practices. As part of the requirement for renewing a residential contractor license, the board shall require by rule that residential contractors provide evidence of completion of up to twelve hours of education in subjects relating to business practices and laws that affect residential contractors.

(4) The department with consent of the board may enter into a contract with a professional testing agency to develop, administer, and score the examinations. The fee for the examination may be set by the department in its contract with the professional testing agency. The department may direct that the applicant pay the fee to the professional testing agency. The fee shall cover but not exceed the costs of preparing and administering the examination.

NEW SECTION. Sec. 6. The residential contractor's license account is created in the state treasury. All receipts from application fees, the issuance or renewal of residential contractor licenses, or other sources must be deposited into the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used only for the purposes of sections 1 through 8 of this act.

NEW SECTION. Sec. 7. (1) There is established the residential contractors' recovery fund, to be administered by the department, from which any person injured by an act, representation, transaction, or conduct of a licensed residential contractor, that is in violation of this chapter or rules adopted by the department, may be awarded in the county where the violation occurred an amount of not more than twenty thousand dollars for damages sustained by the act, representation, transaction, or conduct. An award from the fund is limited to the actual damages suffered by the claimant as a direct result of the residential contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure or appurtenances within residential property lines, except that an award from the fund shall not be available to persons injured by an act, representation, transaction, or conduct of a residential contractor whose license was revoked, expired, canceled, or suspended under this chapter at the time of the contract. No more than the maximum individual award from the fund shall be made on any individual residence or to any injured person. Moneys in the fund shall not be used to pay attorneys' fees or costs except in contested cases appealed to the superior court.

(2) A person making application for a residential contractor's license or for renewal of a residential contractor's license shall pay an assessment of not more than six hundred dollars for deposit into the fund. If the department does not issue the license, the assessment shall be returned to the applicant.

(3) The department shall, by rule, establish guidelines for awarding claims from the fund to persons injured by an act, representation, transaction, or conduct of a residential contractor.

(4) As used in this section:

(a) "Assessment" means the contribution by a contractor to the residential contractors' recovery fund;

(b) "Fund" means the residential contractors' recovery fund; and

(c) "Person injured" means any owner of a residential structure and which is actually occupied or intended to be occupied by the owner as a residence including, but not limited to, community property, tenants in common or joint tenants who are damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance on that real property. "Person injured" includes lessees of residential real property who contract directly with a residential contractor or a subcontractor of that contractor and homeowners' or unit owners' association after transfer of control from the contractor or developer for damages to the common elements within the complex.

NEW SECTION. Sec. 8. (1) A contractor agreeing to perform any contracting project for the repair, alteration, or construction of a residential structure when the bid or contract price totals one thousand dollars or more, shall provide the customer with the following disclosure statement prior to starting work on the project:

"NOTICE TO CUSTOMER

This contractor is registered and licensed with the state of Washington, registration/license no. . . . . ., as a residential contractor and has posted with the state a bond of $. . . . . . for the purpose of satisfying claims against the residential contractor for negligent or improper work or breach of contract in the conduct of the contractor's business. The expiration date of this contractor's registration/license is . . . . . .. This bond may not be sufficient to cover a claim which might arise from the work done under your contract. If any supplier of materials used in your construction project or any employee of the contractor is not paid by the contractor on your job, your property may be liened to force payment. If you wish additional protection, you may request the contractor to provide you with original "lien release" documents from each supplier or subcontractor on your project. The contractor is required to provide you with further information about lien release documents if you request it. General information is also available from the department of labor and industries."

(2) A residential contractor shall notify any consumer to whom notice is required under subsection (1) of this section if the contractor's license has expired or is revoked or suspended by the department before completion or other termination of the contract with the consumer.

(3) A residential contractor may not bring or maintain any lien claim under chapter 60.04 RCW based on any contract to which this section applies without alleging and proving that the residential contractor has provided the customer with a copy of the disclosure statement as required in subsection (1) of this section.

(4) Failure to comply with this section constitutes an infraction under this chapter.

(5) The department shall produce model disclosure statements, and public service announcements detailing the information needed to assist residential contractors and residential contractors' customers to comply under this section. As necessary, the department shall periodically update these education materials.

NEW SECTION. Sec. 9. A new section is added to chapter 19.27 RCW to read as follows:

(1) The state building code council shall, by January 1, 1999, prepare a written training course and examination to be administered, at no cost to the local government, to all local government building inspectors that inspect single or multifamily residential buildings.

(2) The state building code council may use an existing certification program designed to test local government building inspectors on their knowledge of the state building code.

(3) After January 1, 2000, a local government building inspector shall not inspect a single or multifamily residential building unless certified by the state building code council.

(4) The state building code council shall adopt necessary rules to implement this section.

Sec. 10. RCW 18.27.040 and 1997 c 314 s 5 are each amended to read as follows:

(1) Except as provided in section 3 of this act, each applicant shall file with the department a surety bond issued by a surety insurer who meets the requirements of chapter 48.28 RCW in the sum of six thousand dollars if the applicant is a general contractor and four thousand dollars if the applicant is a specialty contractor. If no valid bond is already on file with the department at the time the application is filed, a bond must accompany the registration application. The bond shall have the state of Washington named as obligee with good and sufficient surety in a form to be approved by the department. The bond shall be continuous and may be canceled by the surety upon the surety giving written notice to the director of its intent to cancel the bond. A cancellation or revocation of the bond or withdrawal of the surety from the bond suspends the registration issued to the registrant until a new bond or reinstatement notice has been filed and approved as provided in this section. The bond shall be conditioned that the applicant will pay all persons performing labor, including employee benefits, for the contractor, will pay all taxes and contributions due to the state of Washington, and will pay all persons furnishing labor or material or renting or supplying equipment to the contractor and will pay all amounts that may be adjudged against the contractor by reason of breach of contract including negligent or improper work in the conduct of the contracting business. A change in the name of a business or a change in the type of business entity shall not impair a bond for the purposes of this section so long as one of the original applicants for such bond maintains partial ownership in the business covered by the bond.

(2) Any contractor registered as of July 1, 1997, who maintains such registration in accordance with this chapter shall be in compliance with this chapter until the next annual renewal of the contractor's certificate of registration. At that time, the contractor shall provide a bond, cash deposit, or other security deposit as required by this chapter and comply with all of the other provisions of this chapter before the department shall renew the contractor's certificate of registration.

(3) Any person, firm, or corporation having a claim against the contractor for any of the items referred to in this section may bring suit upon the bond or deposit in the superior court of the county in which the work was done or of any county in which jurisdiction of the contractor may be had. The surety issuing the bond shall be named as a party to any suit upon the bond. Action upon the bond or deposit shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within one year from the date of expiration of the certificate of registration in force at the time the claimed labor was performed and benefits accrued, taxes and contributions owing the state of Washington became due, materials and equipment were furnished, or the claimed contract work was completed or abandoned. Service of process in an action against the contractor, the contractor's bond, or the deposit shall be exclusively by service upon the department. Three copies of the summons and complaint and a fee of ten dollars to cover the handling costs shall be served by registered or certified mail upon the department at the time suit is started and the department shall maintain a record, available for public inspection, of all suits so commenced. Service is not complete until the department receives the ten-dollar fee and three copies of the summons and complaint. The service shall constitute service on the registrant and the surety for suit upon the bond or deposit and the department shall transmit the summons and complaint or a copy thereof to the registrant at the address listed in the registrant's application and to the surety within forty-eight hours after it shall have been received.

(4) The surety upon the bond shall not be liable in an aggregate amount in excess of the amount named in the bond nor for any monetary penalty assessed pursuant to this chapter for an infraction. The liability of the surety shall not cumulate where the bond has been renewed, continued, reinstated, reissued or otherwise extended. The surety upon the bond may, upon notice to the department and the parties, tender to the clerk of the court having jurisdiction of the action an amount equal to the claims thereunder or the amount of the bond less the amount of judgments, if any, previously satisfied therefrom and to the extent of such tender the surety upon the bond shall be exonerated but if the actions commenced and pending at any one time exceed the amount of the bond then unimpaired, claims shall be satisfied from the bond in the following order:

(a) Employee labor and claims of laborers, including employee benefits;

(b) Claims for breach of contract by a party to the construction contract;

(d) Taxes and contributions due the state of Washington;

(e) Any court costs, interest, and attorney's fees plaintiff may be entitled to recover. The surety is not liable for any amount in excess of the penal limit of its bond.

A payment made by the surety in good faith exonerates the bond to the extent of any payment made by the surety.

(5) If a final judgment impairs the liability of the surety upon the bond so furnished that there shall not be in effect a bond undertaking in the full amount prescribed in this section, the department shall suspend the registration of the contractor until the bond liability in the required amount unimpaired by unsatisfied judgment claims is furnished. If the bond becomes fully impaired, a new bond must be furnished at the rates prescribed by this section.

(6) In lieu of the surety bond required by this section the contractor may file with the department a deposit consisting of cash or other security acceptable to the department.

(7) Any person having filed and served a summons and complaint as required by this section having an unsatisfied final judgment against the registrant for any items referred to in this section may execute upon the security held by the department by serving a certified copy of the unsatisfied final judgment by registered or certified mail upon the department within one year of the date of entry of such judgment. Upon the receipt of service of such certified copy the department shall pay or order paid from the deposit, through the registry of the superior court which rendered judgment, towards the amount of the unsatisfied judgment. The priority of payment by the department shall be the order of receipt by the department, but the department shall have no liability for payment in excess of the amount of the deposit.

(8) The director may adopt rules necessary for the proper administration of the security.

Sec. 11. RCW 18.27.114 and 1997 c 314 s 12 are each amended to read as follows:

(1) Any specialty contractor agreeing to perform any contracting project: (a) For the repair, alteration, or construction of four or fewer residential units or accessory structures on such residential property when the bid or contract price totals one thousand dollars or more; or (b) for the repair, alteration, or construction of a commercial building when the bid or contract price totals one thousand dollars or more but less than sixty thousand dollars, must provide the customer with the following disclosure statement prior to starting work on the project:

"NOTICE TO CUSTOMER

This contractor is registered with the state of Washington, registration no. . . . ., as a general/specialty contractor and has posted with the state a bond or cash deposit of $6,000/$4,000 for the purpose of satisfying claims against the contractor for negligent or improper work or breach of contract in the conduct of the contractor's business. The expiration date of this contractor's registration is . . . . . . This bond or cash deposit may not be sufficient to cover a claim which might arise from the work done under your contract. If any supplier of materials used in your construction project or any employee of the contractor or subcontractor is not paid by the contractor or subcontractor on your job, your property may be liened to force payment. If you wish additional protection, you may request the contractor to provide you with original "lien release" documents from each supplier or subcontractor on your project. The contractor is required to provide you with further information about lien release documents if you request it. General information is also available from the department of labor and industries."

(2) A contractor subject to this section shall notify any consumer to whom notice is required under subsection (1) of this section if the contractor's registration has expired or is revoked or suspended by the department prior to completion or other termination of the contract with the consumer.

(3) No contractor subject to this section may bring or maintain any lien claim under chapter 60.04 RCW based on any contract to which this section applies without alleging and proving that the contractor has provided the customer with a copy of the disclosure statement as required in subsection (1) of this section.

(4) This section does not apply to contracts authorized under chapter 39.04 RCW or to contractors contracting with other contractors.

(5) Failure to comply with this section shall constitute an infraction under the provisions of this chapter.

(6) The department shall produce model disclosure statements, and public service announcements detailing the information needed to assist contractors and contractors' customers to comply under this section. As necessary, the department shall periodically update these education materials.

NEW SECTION. Sec. 12. Sections 1 through 8 of this act are each added to chapter 18.27 RCW and codified with the subchapter heading of "residential contractors."