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H0615...........................................................by BUSINESS
RESIDENTIAL REAL ESTATE - Amends existing law to provide for a withholding
of moneys in a residential real estate closing when the property is newly
constructed; to provide a minimum retainage withheld; to authorize the
sale of lien release insurance; to require the submission of a list to
allow the closing entity to talk to all subcontractors, laborers,
materialmen and professional services; and to provide penalties if a lien
is filed against the residential property.
02/18 House intro - 1st rdg - to printing
02/21 Rpt prt - to Bus
H0615
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature Second Regular Session - 2000
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 615
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO NEWLY CONSTRUCTED RESIDENTIAL REAL PROPERTY; AMENDING CHAPTER 6,
3 TITLE 48, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 48-609, IDAHO CODE,
4 TO PROVIDE FOR A WITHHOLDING OF MONEYS IN A RESIDENTIAL REAL ESTATE CLOS-
5 ING WHEN THE PROPERTY IS NEWLY CONSTRUCTED, TO PROVIDE A MINIMUM RETAINAGE
6 WITHHELD, TO AUTHORIZE THE SALE AND PURCHASE OF LIEN RELEASE INSURANCE, TO
7 REQUIRE THE SUBMISSION OF A LIST TO ALLOW THE CLOSING ENTITY TO INTERVIEW
8 ALL SUBCONTRACTORS, LABORERS, MATERIALMEN AND PROFESSIONAL SERVICES
9 PROVIDERS AND TO PROVIDE PENALTIES IF A LIEN IS FILED AGAINST THE RESIDEN-
10 TIAL PROPERTY.
11 Be It Enacted by the Legislature of the State of Idaho:
12 SECTION 1. That Chapter 6, Title 48, Idaho Code, be, and the same is
13 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
14 ignated as Section 48-609, Idaho Code, and to read as follows:
15 48-609. WITHHOLDING OF FUNDS ON RESIDENTIAL REAL ESTATE CLOSING. Every
16 title insurance company, real estate agent, real estate broker, licensed
17 attorney, bank, savings and loan association, mortgage company or credit union
18 authorized to transact business in this state shall comply with the provisions
19 of this section. Whenever a title insurance company, real estate agent, real
20 estate broker, licensed attorney, bank, savings and loan association, mortgage
21 company or credit union is performing a closing on residential real estate
22 which is newly constructed, the title insurance company, real estate agent,
23 real estate broker, licensed attorney, bank, savings and loan association,
24 mortgage company or credit union shall withhold a minimum of fifteen percent
25 (15%) of the sales price to be paid to the seller or contractor until the
26 title insurance company, real estate agent, real estate broker, licensed
27 attorney, bank savings and loan association, mortgage company or credit union
28 can verify that there are no liens filed by subcontractors, laborers,
29 materialmen, or other persons providing professional services, against the
30 property and that there should be no liens filed against the property. The
31 title insurance company, real estate agent, real estate broker, licensed
32 attorney, bank, savings and loan association, mortgage company or credit union
33 shall have the right to request a list of all contractors, subcontractors,
34 laborers, materialmen, and professionals who provided assistance on the prop-
35 erty, all insurance required to be in force and copies of the policies and any
36 legal or administrative actions that have been filed against the developer or
37 contractor that could impact the residential real estate subject to the clos-
38 ing. The developer or the contractor shall provide how much money is still
39 owed to these individuals or entities, shall provide all lien release forms,
40 and shall attest under penalty of perjury that the foregoing information is
41 correct.
42 The title insurance company, real estate agent, real estate broker,
43 licensed attorney, bank, savings and loan association, mortgage company or
2
1 credit union shall provide the developer or the contractor with the option of
2 purchasing lien release insurance from a title insurance company or other
3 entity authorized to sell such insurance, in which the money being retained
4 will be released earlier and the buyer of the real property shall be indemni-
5 fied against any and all liens that may be filed against the property as a
6 result of the developer or contractor not making proper payments. Moneys
7 retained pursuant to this section shall be placed in an escrow account in a
8 bank or other financial institution insured by an agency of the federal gov-
9 ernment and any and all interest earned on the moneys in the escrow while the
10 title insurance company, real estate agent, real estate broker, licensed
11 attorney, bank, savings and loan association, mortgage company or credit union
12 is ascertaining the lien status of the property, shall revert to the purchaser
13 of the property.
14 The title insurance company, real estate agent, real estate broker,
15 licensed attorney, bank, savings and loan association, mortgage company or
16 credit union or any agent or employee of those entities has the right to
17 interview and question all subcontractors, laborers, materialmen, and other
18 providers of professional services in order to ascertain whether a lien has
19 been filed or is likely to be filed. They may also include in their report any
20 comments by the subcontractors, laborers, materialmen and other providers of
21 professional services about the developer's or contractor's ability to pay on
22 time, how the developer's or contractor's business practices could cause a
23 lien to be filed and any other information the title insurance company deems
24 relevant. The title insurance company, real estate agent, real estate broker,
25 licensed attorney, bank, savings and loan association, mortgage company or
26 credit union may keep this information in a database and may utilize it when
27 future closings occur with the same developer or contractor or another busi-
28 ness name being utilized but the practical effect being that it is the same
29 developer or contractor.
30 If, after the release of the retainage, a lien is subsequently filed by a
31 subcontractor, laborer, materialman, or other provider of a professional ser-
32 vice whose name does not appear on the list submitted to the title insurance
33 company, real estate agent, real estate broker, licensed attorney, bank, sav-
34 ings and loan association, mortgage company or credit union by the developer
35 or general contractor, the developer or general contractor who failed to pro-
36 vide the name of the subcontractor, materialman or other provider of profes-
37 sional services shall be guilty of a felony if the developer or contractor had
38 knowledge of the subcontractor, materialman or other provider of professional
39 services and that money was owing these individuals or entities for work,
40 materials or services provided to the property subject to the closing. If
41 found guilty, the developer or contractor shall be fined an amount not in
42 excess of one hundred thousand dollars ($100,000), shall be sentenced to the
43 state penitentiary for a term not in excess of fifteen (15) years, or both
44 such fine and imprisonment. Additionally, the sentencing court shall enter an
45 order that the developer or contractor can no longer engage in the real estate
46 development or contracting business in this state or face a contempt of court
47 charge.
48 The attorney general may prosecute any violations of this section or may
49 refer a criminal violation to the prosecuting attorney of the county where the
50 real property is located. If a criminal violation of this section did not
51 occur, the violator is subject to penalties and sanctions provided in this
52 chapter.
STATEMENT OF PURPOSE
RS 09982C1
This bill will require title insurance companies at time of closing on a residential
real estate transaction to withhold a minimum of 15% of sales price until the title
company can verify that there are no liens filed by subcontractors, materialmen, or
other persons providing professional services. Clearing any outstanding liens will
serve to protect the financial interests of the consumer, subcontractors, and other
professional people involved in the construction.
FISCAL IMPACT
None.
Contact: Rep. W.O. "Bill" Taylor
(208) 332-1000
STATEMENT OF PURPOSE/FISCAL NOTE H 615