What's happening
The bill requires a surety bond or irrevocable letter of credit for public improvement projects over $250,000 where no public fund exists.
Why it matters
Expands financial protection for workers and suppliers. on large public improvement projects by requiring a surety bond or irrevocable letter of credit equal to the project’s construction cost, ensuring payment even if no dedicated public fund exists.
Shifts responsibility for securing payment protections. from the government to private entities involved in public improvement projects, closing a loophole that previously left some contractors, subcontractors, and suppliers exposed to nonpayment risk.
Could increase project costs or administrative complexity. for private entities working on public improvements over $250,000, as they must obtain and maintain bonds or letters of credit before work can begin.
Strengthens overall payment security and trust. in public improvement contracting, potentially reducing disputes and liens by guaranteeing that funds will be available to cover labor and materials, promoting fairer business practices.
Albany, before your first meeting.
Every bill that moved yesterday, summarized in a sentence and ranked by impact. The Albany Scorecard follows on Sundays.
Free. Unsubscribe in one click. Want alerts on specific bills? Create an account.
Who cares
Headline styles
Require Contractors' Payment Bonds
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to judiciary
- Print number 5229a
- Amend (t) and recommit to judiciary
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Require Contractor Surety Bonds
In Assembly Committee · Judiciary · Sponsor Michael Cusick
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
5229--A
2019-2020 Regular Sessions
IN SENATE
April 17, 2019
Introduced by Sen. BRESLIN -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the lien law, in relation to requiring a surety bond for contractors and subcontractors where no public fund has been established for the financing of a public improvement
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 5 of the lien law, as amended by chapter 155 of the laws of 2004, is amended to read as follows:
§ 5. Liens under contracts for public improvements. A person performing labor for or furnishing materials to a contractor, his or her subcontractor or legal representative, for the construction or demolition of a public improvement pursuant to a contract by such contractor with the state or a public corporation, and any trust fund to which benefits and wage supplements are due or payable for the benefit of such person performing labor, shall have a lien for the principal and interest of the value or agreed price of such labor, including benefits and wage supplements due or payable for the benefit of any person performing labor, or materials upon the moneys of the state or of such corporation applicable to the construction or demolition of such improvement, to the extent of the amount due or to become due on such contract, and under a judgment of the court of claims awarded to the contractor for damages arising from the breach of such contract by the state, or awarded for furnishing labor or materials not contemplated by the provisions of said contract, upon filing a notice of lien as prescribed in this article, except as hereinafter in this article provided. Where no public fund has been established for the financing of a public improvement with estimated cost in excess of two hundred fifty thousand dollars, the chief financial officer of the public owner shall require the private entity
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09505-03-9
S. 5229--A 2
for whom the public improvement is being made to post, or cause to be posted, a surety bond issued by a surety duly licensed in the state of New York or [other form of undertaking] an irrevocable letter of credit, in an amount equal to the cost of the construction work guaranteeing prompt payment of moneys due to the contractor, his or her subcontractors and to all persons furnishing labor or materials to the contractor or his or her subcontractors in the prosecution of the work on the public improvement.
§ 2. This act shall take effect immediately and shall apply to contracts entered into on or after such effective date.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the lien law, in relation to requiring a surety bond for contractors and subcontractors where no public fund has been established for the financing of a public improvement
Purpose or general idea of bill
This legislation would provide contractors and subcontractors with payment protection on certain "hybrid" construction projects built in New York State.
Summary of provisions
Amends Section 5 of the lien law, as amended by chapter 155 of the laws of 2004, to provide that where no public fund has been established for the financing of a public improvement with an estimated cost in excess of two hundred fifty thousand dollars, the chief financial officer of the public owner shall require the private entity for whom the public improvement is being made to post, or cause to be posted, a bond or a letter of credit other form of collateral financial security approved by a federal or state financial regulator guaranteeing prompt payment of moneys due to the contractor, his or her subcontractors and to all persons furnishing labor or materials to the contractor or his or her subcontractors in the prosecution of the work on the public improvement.
Read the full memo (665 words)
This legislation replaces the term "other form of undertaking" in current law with the more specific requirement of "a letter of credit or other form of collateral financial security approved by a federal or state financial regulator."
Justification
Prior to 2004, subcontractors performing work on private projects could file mechanic's liens if they were not paid for the work performed on the project. On public projects, unpaid subcontractors could file a public improvement lien, which attached to the public fund set up to pay for the project. However, the Lien Law had a "gap" in payment protection, in that subcontractors performing work on "hybrid" projects being built by private developers with private funds, but on public land, could not file liens against the public land or the private enti- ty's leasehold interest.
In 2003, legislation amending Section 5 of the Lien Law was introduced to provide payment security to contractors and subcontractors on such hybrid projects. However, in 2018 the NYS Court of Appeals affirmed an Appellate Division, First Department decision which effectively made the 2004 amendment to the Lien Law meaningless because a "completion guaran- tee" provided to the public entity provides no payment security whatso- ever to the contractors and subcontractors performing work on the project. It merely provides a guarantee to the public entity that the project will be completed. Judge Judith Gische, who partially dissented in the First Department decision, wrote that a completion guarantee is not a form of undertaking that satisfies the Lien Law. In her dissent she states in part:
"In order to achieve the objective of the Lien Law, and consistent with the legislative history of the amendment, any alternative undertaking must provide substantially equivalent protection to that provided by a bond. The alternative undertaking should be a financial arrangement that would afford an unpaid contractor, subcontractor, laborer or provider of materials, a fund of money, or an asset, available for predictable and prompt payment...The completion guarantee is not the functional equiv- alent of a bond or other form of undertaking..."
The Legislature never intended for contractors, subcontractors, materi- almen and workers to be left without payment protection simply because a private developer enters into a ground lease agreement with a public entity. This legislation would require that a payment bond, letter of credit or other equivalent form of payment security be posted by the private developer on projects costing more than $250,000, which would provide all parties supplying labor and/or materials to the project some measure of protection against non-payment for work performed and/or material delivered.
Prior legislative history
New bill.
Fiscal implications for state and local governments
None to the State.
Effective date
This act shall take effect immediately and shall apply to contracts entered into on or after such effective date.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.