2005 Nevada Revised Statutes - Chapter 627 — Disbursement of Money by Construction Controls

CHAPTER 627 - DISBURSEMENT OF MONEY BYCONSTRUCTION CONTROLS

GENERAL PROVISIONS

NRS 627.010 Shorttitle.

NRS 627.020 Definitions.

NRS 627.030 Categoriesof disbursements defined.

NRS 627.040 Completeplans and specifications defined.

NRS 627.050 Constructioncontrol defined.

NRS 627.060 Constructionloan deed of trust defined.

NRS 627.070 Crossingcategories of disbursement defined.

NRS 627.080 Generalcontract of construction defined.

NRS 627.090 Improvementdefined.

NRS 627.100 Lenderdefined.

NRS 627.110 Owner-contractorcontract defined.

NRS 627.130 Premisesdefined.

NRS 627.140 Relatedconstruction control defined.

NRS 627.150 Restoredcategory of disbursement defined.

NRS 627.160 Subcontractdefined.

NRS 627.170 Totalcost of construction defined.

NRS 627.175 Applicability.

SURETY BONDS

NRS 627.180 Dutyof construction control to deposit surety bond with State Contractors Board;form and amount of bond; exceptions.

NRS 627.183 Constructioncontrol may deposit substitute form of security in lieu of surety bond; amountdeposited must equal amount of bond; interest or dividends accrue to depositor.

DUTIES AND LIABILITIES

NRS 627.190 Dutiesof construction control.

NRS 627.200 Designationand appointment of construction control as agent; liability for violation ofchapter; action by claimant of mechanics lien.

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GENERAL PROVISIONS

NRS 627.010 Shorttitle. This chapter may be cited as theConstruction Control Law.

(Added to NRS by 1965, 1179)

NRS 627.020 Definitions. As used in this chapter the words and terms defined in NRS 627.030 to 627.170, inclusive, shall, unless thecontext otherwise requires, have the meaning ascribed to them in NRS 627.030 to 627.170, inclusive.

(Added to NRS by 1965, 1179)

NRS 627.030 Categoriesof disbursements defined. Categories of disbursementsmeans categories of construction funds to be disbursed in payment of work,labor and material bills due for construction, repair, alteration orimprovement of premises. Such categories shall be in writing and include butnot be limited to structural masonry, masonry veneer, plumbing, electricalwork, carpentry, reinforcing steel, structural steel, earthwork, heating andventilating and air-conditioning, glass and glazing, lath and plaster orsheetrock, insulation and soundproofing, finish flooring, painting anddecorating, concrete or asphalt paving, and shall provide for the complete,full and final disbursement of all of the construction funds.

(Added to NRS by 1965, 1179)

NRS 627.040 Completeplans and specifications defined. Completeplans and specifications means all written instruments, diagrams, drawings,notations, provisions, statements and lists of materials used by artisans,workmen, contractors or subcontractors in the construction, repair, alterationor improvement of premises and approved by the appropriate city or countyboard, agency, commission, building department or council and upon which thebuilding permit has been issued.

(Added to NRS by 1965, 1179)

NRS 627.050 Constructioncontrol defined. A construction control isany person that engages in the control or disbursement of any funds payable orpaid to laborers, materialmen, material suppliers, contractors, subcontractors,architects, engineers or others, for the purpose of satisfying bills incurredin construction, repair, alteration or improvement of any premises or thatengages in the processing or approval of any mechanics lien release, voucheror authorization for payment of a labor bill, or material bill where such billis incurred in the construction, repair, alteration or improvement of anypremises.

(Added to NRS by 1965, 1179)

NRS 627.060 Constructionloan deed of trust defined. Constructionloan deed of trust means any deed of trust recorded or to be recorded assecurity for a loan for the construction, repair, alteration or improvement ofany premises, and includes a construction loan mortgage.

(Added to NRS by 1965, 1179)

NRS 627.070 Crossingcategories of disbursement defined. Crossingcategories of disbursement means the exhausting by disbursement of funds heldwithin a category of disbursement and thereafter the disbursement of funds outof another category to pay for bills applicable to the exhausted category. Aconstruction control does not cross categories of construction if it removesfrom one category of disbursement funds found to be in excess of the costs ofconstruction to be performed under that category after giving at least 10 dayswritten notice in person or by mail to each person entitled to be paid fromthat category. Notice by mail is deemed to be given when deposited in the mail,postage prepaid, directed to the most recent address of the recipient known tothe construction control.

(Added to NRS by 1965, 1180)

NRS 627.080 Generalcontract of construction defined. General contractof construction means a written contract signed by the owner of premises andby a contractor who contracts with other contractors, subcontractors ormaterial suppliers to perform work or labor, or supply materials to suchpremises.

(Added to NRS by 1965, 1180)

NRS 627.090 Improvementdefined. Improvement means any existing orproposed structure, building, edifice or addition to real property added to orplaced on or under the surface of real property.

(Added to NRS by 1965, 1180)

NRS 627.100 Lenderdefined. Lender means any bank or savingsand loan association authorized to do business under the laws of the State ofNevada or laws of the United States of America making a loan or providingmoneys for construction, repair, alteration or improvement of any premises orany person doing business in the State of Nevada, providing moneys to be usedin the payment of bills incurred in the construction, repair, alteration orimprovement of any premises.

(Added to NRS by 1965, 1180)

NRS 627.110 Owner-contractorcontract defined. Owner-contractor contractmeans any written contract entered into between an owner of premises who is acontractor having the work done and another person for the performance of workor labor, or the supplying of materials, or both, to such owner-contractorhaving the work done.

(Added to NRS by 1965, 1180)

NRS 627.130 Premisesdefined. Premises means real property or anyinterests therein.

(Added to NRS by 1965, 1180)

NRS 627.140 Relatedconstruction control defined. Relatedconstruction control means a construction control owned, in whole or in part,by the lender, by one or more of the stockholders of the lender, by one or moreof the associates or partners of the lender, or designated by the lender or thelender and the borrower of funds or by the borrower alone or by a person at therequest of the lender.

(Added to NRS by 1965, 1180)

NRS 627.150 Restoredcategory of disbursement defined. Restoredcategory of disbursement means a category of disbursement that has beenexhausted below a level sufficient to pay bills to which have been added otherfunds sufficient to cover such bills.

(Added to NRS by 1965, 1180)

NRS 627.160 Subcontractdefined. A subcontract is a written contractsigned by a contractor who is not the owner of premises and another person forthe performance of work or labor or the supplying of materials to bring aboutthe construction, repair, alteration or improvement of any premises.

(Added to NRS by 1965, 1180)

NRS 627.170 Totalcost of construction defined. Total cost ofconstruction means the total sum payable to a general contractor to completethe construction, repair, alteration or improvement of the premises, or theaggregate total sum payable to others under owner-contractor contracts tocomplete construction, repair, alteration or improvement of the premises.

(Added to NRS by 1965, 1180)

NRS 627.175 Applicability.

1. Except as otherwise provided in subsection 2, thefollowing shall not be a construction control or subject to the provisions ofthis chapter:

(a) A contractor licensed under the laws of the Stateof Nevada, paying a subcontractor, supplier of material, laborer or otherperson for bills incurred in the construction, repair, alteration orimprovement of any premises.

(b) A subcontractor licensed to do business under thelaws of the State of Nevada, paying a subcontractor, supplier of material,laborer or other person for bills incurred in the construction, repair,alteration or improvement of any premises.

(c) An owner-contractor paying a contractor,subcontractor, supplier of material, laborer or other person for bills incurredin the construction, repair, alteration or improvement of any premises.

(d) A lender of construction loan money, provided thathe disburses the money directly to a contractor authorized by the borrower todo the work, or disburses the money directly to the owner of the premises.

(e) A lender of construction loan money, to an owner ofa residential property or to an owner of not more than four units if the loanis made to repair or improve such property and the construction costs are$10,000 or less, or 35 percent of the appraised value of the improvements andrepairs, whichever is greater.

2. The provisions of this chapter apply to acontractor who is required to obtain the services of a construction controlpursuant to the provisions of NRS 624.264,624.323 or 624.960.

(Added to NRS by 1965, 1183; A 2001, 2983; 2003, 1903)

SURETY BONDS

NRS 627.180 Dutyof construction control to deposit surety bond with State Contractors Board;form and amount of bond; exceptions.

1. The provisions of this section do not apply to:

(a) Savings and loan associations, state banks andnational banking associations licensed to do business in the State of Nevada,under the laws of the State of Nevada or under the laws of the United States.

(b) Title insurers or underwritten title insurancecompanies authorized to do business in the State of Nevada.

(c) Lenders of construction loan money for dwellingunits who are approved by the Federal Housing Administration or Department ofVeterans Affairs and who have been licensed and authorized to do business inthe State of Nevada.

2. Except as otherwise provided in subsection 1 and NRS 627.183, as a condition to doingbusiness in this state, each construction control shall deposit with the StateContractors Board and keep in full force and effect a surety bond, in theamount set forth in subsection 4, which is executed by some corporationauthorized to issue surety bonds in this state.

3. The surety bond must be in substantially thefollowing form:

Bond No.

CONSTRUCTION CONTROLBOND

Know All Men by ThesePresents:

That I, ................................, having aprincipal place of business in...................................................., Nevada, as principal, and................................, a corporation licensed to execute suretybonds under the provisions of the Nevada Insurance Code, as surety, are heldand firmly bound to the State of Nevada, for the use of any person by whomfunds are entrusted to the principal or to whom funds are payable by theprincipal, in the sum of ................ Dollars, lawful money of the UnitedStates of America, to be paid to the State of Nevada, for which payment welland truly to be made we bind ourselves, our heirs, executors and successors,jointly and severally, firmly by these presents:

The Condition ofthe Above Obligation Is Such That:

Whereas, Underthe Construction Control Law, certain duties, obligations and requirements areimposed upon all persons, copartnerships, associations or corporations actingas construction controls;

Now, Therefore,If the principal and its agents and employees shall faithfully and in allrespects conduct business as a construction control in accordance with theprovisions of the Construction Control Law, this obligation shall be void,otherwise to remain in full force and effect;

Provided,However, That the surety or sureties may cancel this bond and berelieved of further liability hereunder by delivering 30 days written noticeof cancellation to the principal; however, such cancellation shall not affectany liability incurred or accrued hereunder prior to the termination of such30-day period;

Provided Further,That the total aggregate liability of the surety or sureties herein for allclaims which may arise under this bond shall be limited to the payment of................ Dollars.

In WitnessWhereof, The principal and surety have hereunto set their hands this..................... day of the month ................ of the year............

.......................................................

By.......................................................

Principal

(Surety)

By.......................................................

Attorney

4. Each construction control shall initially deposit asurety bond that complies with the provisions of this section or a substituteform of security that complies with the provisions of NRS 627.183 in the amount of $20,000. Notlater than 3 months after the initial deposit and annually thereafter, theconstruction control shall:

(a) Submit to the State Contractors Board a signed andnotarized affidavit attesting to the average monthly balance in the trustaccount maintained by the construction control; and

(b) Deposit a surety bond that complies with the provisionsof this section or a substitute form of security that complies with theprovisions of NRS 627.183 in thefollowing amount based upon the average monthly balance in the trust accountmaintained by the construction control:

AVERAGE MONTHLY BALANCE AMOUNTOF BOND OR

SECURITYREQUIRED

Less than $2,000,000......................................................................................... $20,000

$2,000,000 or more but less than$4,000,000.................................................... 40,000

$4,000,000 or more but less than$6,000,000.................................................... 60,000

$6,000,000 or more but less than$8,000,000.................................................... 80,000

$8,000,000 or more but less than$12,000,000................................................ 120,000

$12,000,000 or more but less than$20,000,000.............................................. 200,000

$20,000,000 or more........................................................................................... 250,000

(Added to NRS by 1965, 1181; A 1971, 842, 1924, 1958;1995, 1096; 1999,3760; 2001, 282)

NRS 627.183 Constructioncontrol may deposit substitute form of security in lieu of surety bond; amountdeposited must equal amount of bond; interest or dividends accrue to depositor.

1. As a substitute for the surety bond required by NRS 627.180, a construction control may, inaccordance with the provisions of this section, deposit with any bank or trustcompany authorized to do business in this state, in a form approved by theState Contractors Board:

(a) An obligation of a bank, savings and loanassociation, thrift company or credit union licensed to do business in thisstate;

(b) Bills, bonds, notes, debentures or otherobligations of the United States or any agency or instrumentality thereof, orguaranteed by the United States; or

(c) Any obligation of this state or any city, county,town, township, school district or other instrumentality of this state, orguaranteed by this state.

2. The obligations of a bank, savings and loanassociation, thrift company or credit union must be held to secure the sameobligation as would the surety bond. With the approval of the StateContractors Board, the depositor may substitute other suitable obligations forthose deposited which must be assigned to the State of Nevada and arenegotiable only upon approval by the State Contractors Board.

3. Any interest or dividends earned on the depositaccrue to the account of the depositor.

4. The deposit must be in an amount at least equal tothe required surety bond and must state that the amount may not be withdrawnexcept by direct and sole order of the State Contractors Board. The value ofany item deposited pursuant to this section must be based upon principal amountor market value, whichever is lower.

(Added to NRS by 1999, 3760)

DUTIES AND LIABILITIES

NRS 627.190 Dutiesof construction control. Every constructioncontrol shall:

1. Obtain a true copy, certified as true by aregistered architect or licensed professional engineer and signed by the personor persons who executed the general contract of construction or theowner-contractor contracts, respectively, as owner, of the complete plans andspecifications to be used in the construction subject to the constructioncontrol.

2. Obtain from the lender a written statement of thetotal net amount of money, credits or loan proceeds that will be available fordisbursement or, as a lender engaging in construction control functions, reviewand ascertain its total net amount.

3. Obtain a true copy, signed by all the partiesthereto, of the general contract of construction or all owner-contractorcontracts, pursuant to which the construction will be performed.

4. Obtain a true copy, signed by the parties thereto,of all of the subcontracts entered into with a contractor if the constructionis to be performed pursuant to a general contract of construction.

5. Compare the total amounts to be paid pursuant toall of the subcontracts with the total amount payable to the generalcontractor, and compare the amount payable with the total net loans proceedsavailable for disbursement as construction loan funds.

6. Compare the total amounts to be paid pursuant toall owner-contractor contracts entered into with the total net loan proceedsavailable for disbursement as construction loan funds.

7. Establish, in writing, the categories ofdisbursement and the amounts of money apportioned to each category fordisbursement.

8. Disburse or authorize the disbursement of moneyfrom a particular category only for bills incurred within that category.

9. Disburse or authorize the disbursement of funds ifthe total net loan proceeds exceeds in amount or equals the total payable bythe terms of:

(a) The general contract of construction, or thesubcontracts entered into with the general contractor, whichever is greater; or

(b) The total payable by the terms of allowner-contractor contracts.

10. Receive funds before authorizing disbursement, ifother funds are needed to create an excess of funds as required pursuant to subsection9.

11. Restore categories of disbursement in the order inwhich they become exhausted and to the amount exhausted from any availablefunds in its hands and from other funds supplied by the borrower or borrowers.

12. Obtain from the obligee a mechanics lien releasecovering all work, labor and materials performed or supplied to the timespecified in the lien release and for the amount payable pursuant to the termsof the release, before the disbursement of any money for payment of such bills.

13. Upon receipt of written notice of a change orderentered into after the beginning of construction which requires expenditure ofextra money and the amount thereof, require that any category of disbursementaffected thereby be increased and restored to the extent of the amount of suchextras from any available funds in its hands and from other funds supplied bythe borrower before the disbursement of additional funds from that category.

14. Before disbursing money to a subcontractor orsupplier, obtain from that subcontractor or supplier a true copy of the bill,in those instances in which the category was established based upon a proposalor bid of that subcontractor or supplier and not upon a firm contract.

(Added to NRS by 1965, 1182; 1997, 1057)

NRS 627.200 Designationand appointment of construction control as agent; liability for violation ofchapter; action by claimant of mechanics lien. Anylender desiring to use the services of a construction control shall firstobtain the written assent of the borrower specifying by name the constructioncontrol to be used. The lender and borrower shall be deemed to have appointedthat construction control as their agent for the particular construction loanfor which its services are requested and the acts of the construction controlare binding upon the lender and borrower severally. If a related constructioncontrol or the employee or agent of a related construction control, or a lenderacting as a construction control or any employee or agent of a lender acting asa construction control, violates any of the provisions of this chapter,otherwise than as the result of a good faith error in mathematical computation,then:

1. With respect to a particular loan subject toconstruction control, the construction control and the lender shall each,jointly and severally, be liable for payment of any mechanics lien filedagainst the premises subject to construction to the extent that such a lien isthe result of a violation of any provision of this chapter.

2. Any mechanics lien claimant damaged by theviolation of any provision of this chapter may jointly or severally proceedwith an action on the bond referred to in NRS627.180, and the rights and remedies under the bond or lien claims and anydirect right of action against the lender or construction control arecumulative, and the lien claimant prevailing in any such action is entitled toreasonable attorneys fees.

(Added to NRS by 1965, 1183; A 1995, 1527)