H.B. 869: PRIVATE PROJECT PAYMENT BOND LEGISLATION
H.B. 869: PRIVATE PROJECT PAYMENT BOND LEGISLATION
- The 2014 Revised Construction Lien Law repealed the old private project construction bond statute (§85-7-185) because it failed to protect first and second-tier subs and materialmen of subs. Further, it was felt that because of the standardization of surety forms, there would be no need for a private bond statute. That has not proven to be the case.
- The void has resulted in inconsistent notice and timeline requirements, leaving uncertainty for general contractors, subs and suppliers alike. Thus, there is a need for a new private project payment bond statute to fill the current legal void left by the repeal of the old private bond statute.
- The purpose of the proposed new statute is to apply the same Little Miller Act (LMA) baseline standards that apply now to public project payment and performance bonds to private project bonds if there happens to be a bond on the project, to provide uniformity for claims, including:
- Copy of the Bond: The requirement that a payment bond claimant receive a copy of the payment bond upon a written request to the owner or general contractor (GC);
- Notice of Claims: The same requirements for claimants to give notice of their bond claims to the GC on private jobs as on public jobs (no notice for 1st tiers having direct contracts with the GC; notice to the GC of the claims of 2nd tiers having no direct contract with the GC within 90 days of their last addition of labor & materials); and
- Limitations: The same 1-year Statute of Limitations to file suit that applies on a public project payment bond claim would also now apply on a private project bond claim.
- Currently there is no statute a claimant on a bonded private project can cite to require that the owner, GC or their attorney provide a copy of the bond–even after a written request. In the absence of such a statute the owner or his GC can stonewall the claimant on the request for the bond and even on the name of the bond surety. The proposed law requires that the owner or his GC provide the claimant with a copy of the bond within thirty (30) days of a written request or become liable for attorney’s fees in any subsequent action on the bond.
- Further, the 2014 lien law prohibits the filing of a lien on a bonded project. The prohibition can apply, preventing filing of a lien, even if the claimant only knows there is a bond on the project, but can’t get a copy of the bond, does not know its terms, and doesn’t know the name of the surety (§ 85-7-431).
- The proposed statute would not require a bond on a private project, but if there is one, would prevent the creation of an illusory or fake payment bond with unreasonable notice requirements. For example, an unreasonable requirement that the claimant give notice to the surety (whose name he may not know) instead of to the GC (whose name he would know), or that the notice be provided within an unreasonably short period of time (such as within 90 days even though the claimant is a direct sub of the GC instead of the one year allowed for subs to make their claims under the LMA.
- To avoid confusion, the statute of limitations for suit on a private project bond should be the same as the statute of limitations on a public project bond. Further, for consistency, the statute should control the period of limitations, not the terms of a private project bond, in keeping with Mississippi law (§15-1-5: a statutory period of limitations cannot be changed by a contract such as a bond).
Sharpe & Wise Summaries of Mississippi’s New Construction Lien Law:
Five Sharpe & Wise Construction Bills Pass the MS Legislature – Helping Construction Parties Get Paid
• Passed in 2015 Legislative Session: SB 2364 drafted by S&W to amend 2014 lien law to clarify Notice of Contest lien form.
• Passed in 2014 Legislative Session: SB 2622 co-drafted by S&W to create a new set of lien laws expanding lien protections for the first time to Mississippi subcontractors, materialmen, engineers and surveyors.
• Passed in 2012 Legislative Session: HB 1301 drafted by S&W to amend the private payment bond statute to provide an enforceable right of contractors to a copy of the bond (now superseded by our 2014 new lien law).
• Passed in 2011 Legislative Session: SB 2363 drafted by S&W to add County Courts for enforcement of lien actions and clarify the statute of limitations (now superseded our 2014 new lien law).
• Passed in 2010 Legislative Session: SB 2800 drafted by S&W to add equipment rental suppliers to the protection of the Mississippi lien, stop notice and private payment bond statutes (now superseded by our 2014 new lien law).
 Amending Miss. Code Ann. § 85-7-433(4) (lien law form).
 Miss. Code Ann. §§ 85-7-401 to 433 2014 (new lien laws).
 Amending (former) Miss. Code Ann. § 85-7-185 (private project bonds).
 Amending (former) Miss. Code Ann. § 857-141 (liens).
 Amending (former) Miss. Code Ann. §§ 85-7-131 (liens); 85-7-181 (stop notices); 85-7-185 -189 (private project bonds)