a:\newslw.96 [4]Alan Lee MitchellStephen De'ak202003-09-29T20:11:00Z2006-07-01T22:31:00Z2006-07-01T22:31:00Z1399022748 189532668511.8026 Scott Hookland LLPConsider . . .VOL. 12, ISSUE 4 October, 2003Law OfficesSCOTT HOOKLAND LLP9185 SW BURNHAM ST. POST OFFICE BOX 23414TIGARD, OR 97223 TIGARD, OR 97281(503) 620-4540 -- (800) 334-8986 -- FAX: (503) 620-4315www.furrer-scott.comNEW LEGISLATION:Please take a moment to review the following legislative summary. Unless stated otherwise, the following new laws go into effect on January 1, 2004.CONTRACTORS & CONSTRUCTION CONTRACTSClaims Against Contractors(SB 909; 2003 Or Laws Ch. 660)A residential owner may not commence arbitration or litigation for claims of construction defects on “residences” unless the owner first follows a new “right to cure” procedure. The owner must send a written notice to each party the owner intends to name as a defendant and must include a description of each alleged defect and the remediation the owner believes is necessary. These parties can include contractors, subcontractors or suppliers. An owner who fails to follow these new procedures cannot maintain an arbitration or litigation.The notice must include any reports or other documents evidencing the defects. Parties that receive these notices can send similar secondary notices to other parties that the recipient believes may share responsibility for the alleged defects. These secondary notices must be sent within 14 days of the date the first notice was received.A party receiving one of these notices has the right: (1) to make a request for a visual examination of the residence (this must be sent to the owner within 14 days after receiving the initial notice); and (2) to inspect the residence (this request must be made within 14 days after the visual examination). Within 90 days of first receiving its notice, the party must send the owner a written response that addresses the allegations of defective work.Prompt Payment(SB 906 (§§54-60); 2003 Or Laws Ch. 675)SB 906 creates new rules concerning prompt payment of amounts owing on private projects in Oregon. These new rules do not apply to public improvement projects or projects that are defined as residential under ORS 87.021.For projects lasting more than 60 days, an owner must make progress payments on a 30-day cycle. The only exception is if the contract and each page of the plans and specifications include a written “alternative billing cycle” notice. Owners and contractors can require lien waivers and require that those waivers be notarized.The owner must pay progress payments within 14 days after the contractor submits its billing. Billings are deemed certified 10 days after their receipt unless the owner gives a written notice of the specific reasons why any portion of a billing will not be paid. The statute lists nine reasons why the owner can decline to pay a portion of a billing. Upon final completion, the owner must pay the entire balance within 7 days of the owner’s approval of construction. Similar rules apply to the relations between original contractors and sub-contractors/suppliers.The failure to make payments as required under this new law results in the claimant being entitled to interest at 1.5% per month (18% per annum) together with attorney fees and costs in any action, claim or arbitration. The failure to reasonably account for construction contract payments can result in disciplinary action by the Construction Contractors Board.If an owner fails to meet the payment deadlines, the contractor can, upon 7 days’ written notice, suspend its performance. If the suspension lasts over 30 days, the contractor can terminate the contract. Subcontractors have similar rights.Notices under this new law must be either personal delivery, certified mail return receipt requested or any other method that allows independent third-party verification. The rights under this bill may not be contractually waived. The bill provides that these rights apply to contracts for which the plans were published after January 1, 2004.“Unlicensed” Contractor Claims(SB 906 (§71); 2003 Or Laws Ch. 675)SB 906 makes a substantial revision to ORS 701.065. As of October 1, 2003, contractors with CCB license defects can seek administrative or civil remedies against construction contractors, construction suppliers, architects or engineers if the claim arises out of defects, deficiencies or inadequate performance of the work or products provided. The prior version of ORS 701.065 provided that contractors who were not properly licensed were essentially barred from any administrative or civil remedies.Contractor Licensing(HB 2564 2003; Or Laws Ch. 136)The Department of Consumer and Business Services (the location of the Building Codes Division) is now mandated to establish a system whereby a contractor who has two or more licenses issued by the Division can hold a single combined license. This bill applies only to licenses issued through the Electrical and Elevator Board, the Board of Boiler Rules and the State Plumbing Board (all of which are part of the Building Codes Division). It does not apply to licenses issued through the Construction Contractors Board.Building Code Changes(SB 906 (§§1-53); 2003 Or Laws Ch. 675)The One and Two Family Dwelling Code is now known as the Low-Rise Residential Dwelling Code. There are two new boards with the state Building Codes Division: the Residential Structures Board and the Mechanical Board. The existing Building Codes Structures Board is changed from 15 to 9 members and the types of required parties on this board have been changed. This bill was declared an “emergency” and became effective as of August 8, 2003.Building Plan Review(SB 711; 2003 Or Laws Ch. 367)This bill creates a new ability for licensed engineers and architects who prepare construction plans for one and two family dwellings to avoid plan review by the local building official. The engineer or architect must be certified by the Building Codes Division as a one and two family dwelling plans examiner and the building must be of conventional light frame construction.The bill also creates new authority for the Building Codes Division to allow local jurisdictions to make electrical and plumbing code plan review mandatory only for complex structures (a term that is not defined by the statutes).Also, the bill allows the Building Codes Division to adopt rules “necessary to interpret, harmonize, streamline, adjust, administer or enforce the state building code” in order to avoid language that is “unclear, duplicative or in conflict with another or when the code does not adequately address a project of a unique type or scope.” The Department Director must report to the Legislature no later than January 30, 2005 as to any rules adopted in this regard.Electronic Permits(SB 713; 2003 Or Laws Ch. 336)This bill allows the Building Codes Division to study the feasibility of a database that would allow electronic submission of permit applications, issuance of minor labor and other appropriate permits, and scheduling for inspections (and tracking of corrections and approvals). The Department Director must report to the Legislature no later than January 30, 2005 as to the implementation of this program. The bill also creates a “sunset” date of January 2, 2006, when the bill will automatically be repealed.Minor & Alternative Permits(SB 714; 2003 Or Laws Ch. 368)This bill takes a Portland area program and applies it statewide. Under this program, the Building Codes Division (and local municipalities) may allow special programs for permitting and inspecting minor construction work. Also, the program allows alternative permit and inspection services for commercial, manufacturing, industrial and institutional facilities (unless the construction work involves life-safety work).Essential Projects(SB 715; 2003 Or Laws Ch. 369)This bill is intended to allow “fast track” approval for construction of “essential projects.” These projects are defined as: (1) State owned and operated developments; (2) Developments essential to the state’s economic well-being as designated by the Economic and Community Development Department; (3) Projects over 100,000 square feet and in industrial areas listed as ready for development by the Economic and Community Development Department; and (4) Projects over 100,000 square feet and in the “traded sector” (a term defined by ORS 285A.010).Permit applicants can request that the Building Codes Division administer and enforce the building codes for the project, including plan review and permit issuance. If the Building Codes Division feels that the local building jurisdiction has inadequate resources, the State can undertake all necessary actions on its own.Construction Contracts(SB 906 (§58); 2003 Or Laws Ch. 675)The 2001 Legislature adopted HB 2414 (ORS 81.100 et al) that limited the effectiveness of non-Oregon choice of law provisions in construction agreements. Now, SB 906 re-addresses and expands on that issue.Now, construction contracts in Oregon may not include an out-of-state choice of law provision and also may not include an out-of-state forum selection clause. Any such provisions are deemed void and unenforceable. The bill provides that these changes apply to contracts for which the plans were published after January 1, 2004.Electrical Products(HB 2717; 2003 Or Laws Ch. 299)This bill makes revisions to the Oregon Electric Safety Law concerning industrial electrical equipment that reduces the process of insuring that equipment. “Industrial electrical equipment” means electrical devices that are used in industry or government. This bill was declared an “emergency” and became effective as of June 11, 2003.Wells(HB 2210; 2003 Or Laws Ch. 144)This increases the bond or letter of credit from $4,000 to $10,000 that must be posted by anyone who offers services to construct, alter, abandon or convert wells. Also, in order to obtain a permit to work on wells, the applicant must post a bond or letter of credit in the amount of $5,000, an increase from the prior limit of $2,000.Landscape Contractors(SB 919; 2003 Or Laws Ch. 659)This bill clarifies the existing prohibition on using the word “landscape” in a business name without being licensed through the Landscape Contractors Board (“LCB”). Now, an unlicensed person or entity may not use the words “landscape contractor,” “landscape gardener” or “landscaper” or any other use of the word “landscape” unless the person or entity is licensed through the LCB. The prohibition includes the use of business cards, signs or other advertising methods. The only exception continues to be for “landscape maintenance” businesses whose name does not include any other connotation.CONSTRUCTION CONTRACTORS BOARD (“CCB”)CCB Notices & Fees(HB 2233; 2003 Or Laws Ch. 294)As a new requirement, parties wishing to file claims through the CCB must first send a notice to the contractor. The notice must be sent certified mail and must be sent at least 30 days prior to filing the claim. If the time period for filing a CCB claim is within 45 days of expiring, the claim filing deadline is extended until 60 days after the notice is mailed.The CCB now has an increased ability to impose a fee for filing a CCB claim. The amount of the fee may not exceed the filing fee for a circuit court lawsuit. The CCB may charge a different fee for residential versus commercial claims. Upon application and showing of need, the CCB may waive this filing fee.On a procedural note, there is a small change in the deadline for filing a claim concerning a large commercial structure. Previously, ORS 701.046 provided that the claimant could deliver a copy of the complaint to the CCB and the contractor’s surety no later than the earlier of 90 days after filing the lawsuit or 14 days before the first day of trial. Now, the deadline is the earlier of those two deadlines or 30 days prior to the court issuing a judgment. This addresses the issue of when the plaintiff seeks a default judgment less than 90 days after filing the lawsuit.Contractor Insurance(SB 943; 2003 Or Laws Ch _____)This bill gives the CCB authority to adopt rules allowing an alternative to the insurance requirement for licensed construction contractors. Instead of providing proof of the traditional insurance coverage (liability, personal injury and property damage), contractors can provide an “alternative form of security” in a form yet to be determined. Because the legislature did not specify what would constitute an “alternative form of security,” the CCB will form a work group to address the relevant issues. While this bill was declared an “emergency” and became effective upon its passage (August 25, 2003), it will likely take some time for the CCB to evaluate whether there is any acceptable “alternative form of security.”CCB Licensing #1(SB 575; 2003 Or Laws Ch 329)The list of parties exempt from CCB licensing (found in ORS 701.010) is expanded to include businesses that supply personnel to licensed contractors. In order to meet this exemption, the personnel must be performing construction work under the direction and supervision of the licensed contractor.CCB Licensing #2(HB 3218; 2003 Or Laws Ch 285)The list of parties exempt from CCB licensing (found in ORS 701.010) is expanded to include qualified intermediaries in a Section 1031 tax-free property exchange. The qualified intermediary must not perform any construction activities in order to meet this exemption.Developer CCB Licensing(SB 906 (§§68-76); 2003 Or Laws Ch. 675)The CCB must institute a new license class for contractors who are licensed developers. “Licensed developers” are defined as contractors who own real property and arrange for construction work by licensed contractors who have sole responsibility for all phases of construction. The licensed developer itself may not perform any on-site construction work. Licensed developers are exempt from the regular contractor examination.This bill then revises ORS 701.065 to carve out a new exception for licensed developers. ORS 701.065 now provides that contractors who are not properly licensed are essentially barred from any administrative or civil remedies. Under these new changes, a licensed developer can “cure” defects in its licensing within certain limitations. Also, there is a special “safe harbor” for licensed developers where, if they obtain their CCB license prior to April 1, 2004, then they can seek remedies for work performed prior to April 1, 2004 (so long as, during performance of that work, the party met the basic licensed developer requirements). These provisions of this bill will become operative on October 1, 2003.