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2004 SESSION
046632320Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia is amended by adding a section numbered 11-4.1:1 as follows:
§ 11-4.1:1. Payment and performance bonds required in certain private construction projects.
A. As used in this section, unless the context requires a different meaning:
"Claimant" means any person performing labor or furnishing material to a site in furtherance of a construction contract or any subcontract thereof, whether or not such person is a party to either of such contracts.
"Construction contract" means a contract for the alteration, improvement, renovation, or building of any commercial structure or residential structure containing four or more residential units. Construction contract shall not include construction contracts entered into by public bodies.
"Labor or materials" shall include public utility services and reasonable rentals of equipment, but only for periods when the equipment rented is actually used at the site.
"Payment" means the amount a claimant is seeking under a payment bond for unpaid labor performed or unpaid materials furnished in furtherance of a construction contract or subcontract. Payment includes amounts previously paid to a claimant but returned by the claimant as a result of any federal or state insolvency or bankruptcy laws.
"Site" means the real estate on which the structure is located.
B. Within 10 calendar days of execution of any contract exceeding $250,000, the prime contractor shall furnish to the owner the following bonds:
1. A performance bond in the sum of the contract amount conditioned upon the faithful performance of the construction contract by the prime contractor in strict conformity with the plans, specifications and conditions of the contract.
2. A payment bond in the sum of the contract amount. The bond shall be for the protection of claimants who have and fulfill contracts to supply labor or materials to the prime contractor to whom the contract was awarded, or to any subcontractors, in furtherance of the work provided for in the contract, and shall be conditioned upon the prompt payment for all materials furnished or labor supplied or performed in the furtherance of the work.
C. Each of the bonds shall be executed by one or more surety companies that are authorized to do business in Virginia, selected by the prime contractor in the case of the construction contract and the subcontractor in the case of a subcontract.
D. Nothing in this section shall preclude an owner from requiring payment or performance bonds for construction contracts below $250,000.
E. The originals of each bond required by subsection B shall be filed with the owner that awarded the construction contract or his agent, and with a copy provided by the surety company to the prime contractor. The surety or prime contractor shall, upon written request of a claimant who identifies himself as such, provide a copy of the bond to the claimant with five business days of receipt of such request. The failure to provide a copy shall result in a $250 damage award to the claimant collectable by court action. The court may award court costs and reasonable attorney's fees under this subsection.
F. Nothing in this section shall preclude the prime contractor from requiring a subcontractor of the prime contractor to furnish a payment bond with surety thereon in the sum of the full amount of the subcontract with such subcontractor conditioned upon the payment to each claimant who has and fulfills contracts that are directly with the subcontractor in the prosecution of the work provided for in the subcontract. The original of the bond required by this subsection shall be filed with the prime contractor that awarded the subcontract or his agent, and with a copy provided by the surety company to the subcontractor. The surety or subcontractor shall, upon written request of a claimant who identifies himself as such, provide a copy of the bond to such claimant within five business days of receipt of such request. The failure to provide such copy shall result in a $250 damage award to the claimant collectable by court action. The court may award court costs and reasonable attorney's fees under this subsection.
G. Subject to the provisions of subsection H, any claimant who has not been paid in full before the expiration of 90 days after the day on which the claimant performed the last of the labor or furnished the last of the materials for which he claims payment may bring an action on the payment bond to recover any amount due him for the labor or material. The obligee named in the bond need not be named a party to the action.
H. Any claimant may bring an action on the prime contractor's payment bond only if he has given written notice to the prime contractor within 180 days from the day on which the claimant performed the last of the labor or furnished the last of the materials for which he claims payment.
Any claimant may bring an action on the subcontractor's payment bond only if he has given written notice to the subcontractor within 180 days from the day on which the claimant performed the last of the labor or furnished the last of the materials for which he claims payment.
The notice shall state with substantial accuracy (i) the amount claimed, (ii) the name of the person for whom the work was performed or to whom the material was furnished, and (iii) a general description of the structure and the location of the site. The notice shall be accompanied with a copy of each unpaid invoice and an affidavit signed by the claimant stating the information provided is true, correct, and free and clear of any known offset. The notice shall be served by registered or certified mail, postage prepaid, in an envelope addressed to the prime contractor, subcontractor, and surety, as the case may be, at any place where his office is regularly maintained for the transaction of business.
Claims for sums withheld as retainages with respect to labor performed or materials furnished shall not be subject to the time limitations stated in this subsection; nor shall any payments made to a claimant that are returned by the claimant as a result of any federal or state insolvency or bankruptcy laws, including a preference, be subject to the time limitations stated in this subsection.
I. The surety to whom notice has been sent under subsection H shall, within 21 calendar days of receipt of such notice, respond in writing to the claimant by either paying in whole or in part each invoice sent by the claimant with his notice or stating with specificity each reason why the surety will not pay the claimant for a particular invoice provided in such notice. In any action by the claimant to collect on an invoice of his not paid but contained in his notice, if the court determines and imposes liability on the surety, the court shall award interest on such invoice from the date notice was received by the surety plus court costs and reasonable attorney's fees.
J. Any action on a payment bond shall be brought within one year after the day on which the person bringing such action last performed labor or last furnished or supplied materials.
K. Any waiver of the right to sue on the payment bond required by this section shall be void unless it is in writing, signed by the person whose right is waived, and executed after such person has performed labor or furnished material in accordance with the contract documents.
L. Any payment and performance bond conforming to the requirements of this section shall satisfy the bonding requirements under the Condominium Act (§ 55-79.39 et seq.) and the Virginia Real Estate Time-Share Act (§ 55-360 et seq.). Any inconsistency between this section and such Acts shall be resolved in favor of this section.