2012 California Construction Law Update

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Contractors and others involved in the construction industry should be aware of several new laws enacted this past year, and one enacted the year before, that take effect in 2012 and later. The new laws, which are intended to provide relief to the state’s hard hit construction industry, provide for speedier progress payments, place caps on public works retention, establish new requirements for the filing of payment bond claims and limit the types of indemnity that can be required of downstream contractors and subcontractors:

Progress Payments

Beginning January 1, 2012, prime contractors on both public and private projects must pay progress payments to subcontractors no later than 7 days after receipt from the owner. Previously, progress payments were required to be made no later than 10 days after receipt. Prime contractors who fail to make progress payments within 7 days are subject to penalties of 2% per month, disciplinary action and attorneys’ fees.

Public Works Retention

Beginning January 1, 2012, for public works contracts entered on or after January 1, 2012 and through January 1, 2016, public owners, original contractors and subcontractors may not withhold more than 5% retention with two exceptions: (1) where an original contractor requires performance and payment bonds in their request for bids and a subcontractor is unable or refuses to furnish performance and payment bonds, the original contractor may withhold retention from that subcontractor in excess of 5% or (2) where the director of the department contracting for the public works makes a finding, prior to bidding the project, that the project is substantially complex and requires the withholding of more than 5% retention. The new law does not change existing law, which permits public owners to withhold up to 150% of any disputed work....

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