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SPONSOR: |
King |
DATE TYPED: |
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HB |
904 |
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SHORT TITLE: |
Contractor Proof of Financial Responsibility |
SB |
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ANALYST: |
Maloy |
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APPROPRIATION
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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NFI |
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NFI |
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(Parenthesis
( ) Indicate Expenditure Decreases)
Responses
Received From
Construction
Industries Division of Regulation and Licensing Department
SUMMARY
Synopsis of Bill
House Bill 907 changes
the manner in which licensed contractors may demonstrate proof of financial
responsibility, as required under the Construction Industries Licensing Act,
for issuance and maintenance / renewal of a construction license.
Currently, the law
provides that a contractor may demonstrate compliance with this licensing requirement
one of three ways: (1) a license bond, (2) cash collateral, or
(3) provision of a current financial statement as issued by a financial
institute. HB 907 eliminates this
third option (provision of a current financial statement).
The bill also provides
that the failure to maintain proof of financial responsibility shall result in
a cause of action (brought by the Construction Industries Division) for
revocation of the contractor’s license, or the assessment of an administrative
penalty of not less than $500 or more than $5,000. Currently, the only cause of action available
to the Division is the revocation of the license.
Finally, HB 904 also
strikes the 12-month “statute of limitations” for bringing action against a
licensee on the proof of responsibility.
Significant Issues
However, with an
internal financial statement, if the contractor’s assets / business value
changes, the Division has no way of knowing.
Troubles
relating to statutes of limitations are raised by homeowners who allow a known
code violation to linger, unaddressed, until the time frame allowed for seeking
a remedy through the Construction Industries Division has expired. A homeowner has two years from the date of
discovery of a code violation to seek the assistance of the Division. A contractor should not be liable
indefinitely, and the two year period is fair to the homeowner and the
contractor.
FISCAL IMPLICATIONS
HB 904 has no direct
financial implications for the state.
However, a secondary benefit may exist for the state if the Construction
Industries Division is able to more easily identify non-compliance with the
proof of responsibility requirements, and/or is able to take action against
bonds or collateral assignments in order to satisfy unpaid fees or fines. This is revenue to the general fund. However, the Division rarely pursues the payment
of fees or fines through the proof of responsibility on file.
RELATIONSHIP
Senate Bill 141 and
House Bill 609 increase penalties related to a contractor’s failure to disclose
to a consumer that the bond does not benefit the consumer. Senate Bill 141 also contains a provision
that requires contractors to obtain a consumer protection bond as a part of
licensure.
SJM/prr/njw:yr