Chapter 197 Oregon Laws 2001

AN ACT

HB 2189

Relating to construction claims; creating new provisions; amending ORS 87.058, 701.005, 701.010, 701.055, 701.085, 701.140, 701.145, 701.150, 701.180, 701.205 and 701.235; and repealing sections 4 and 5, chapter 160, Oregon Laws 2001 (Enrolled House Bill 2188), and section 280, chapter 104, Oregon Laws 2001 (Enrolled House Bill 2609).

Be It Enacted by the People of the State of Oregon:

SECTION 1. Sections 2 to 5 of this 2001 Act are added to and made a part of ORS chapter 701.

SECTION 2. The Construction Contractors Board may not process a claim against a licensed contractor, including a claim based upon a court judgment or arbitration award, unless the claim is filed in a timely manner as follows:

(1) Except as otherwise provided in this section, if the owner of a new structure files the claim, the board must receive the claim no later than the earlier of:

(a) One year after the date the structure was first occupied; or

(b) Two years after substantial completion of the structure by the contractor filed against.

(2) Except as otherwise provided in this section, if the owner of an existing structure files the claim, the board must receive the claim no later than one year after the date the work was substantially completed by the contractor filed against.

(3) Regardless of whether the claim involves a new or existing structure, if the owner of the structure files the claim and the licensed contractor failed to begin the work, the board must receive the claim no later than one year after the date the parties entered into the contract.

(4) Regardless of whether the claim involves a new or existing structure, if the owner of the structure files the claim and the licensed contractor failed to substantially complete the work, the board must receive the claim no later than one year after the date the contractor ceased to work on the structure.

(5) Except as otherwise provided in this section, if a licensed contractor files the claim against the licensed contractor performing work as a subcontractor on a new structure, the board must receive the claim no later than the earlier of:

(a) Fourteen months after the date the structure was first occupied; or

(b) Two years after substantial completion of the structure.

(6) Except as otherwise provided in this section, if a licensed contractor files the claim against the licensed contractor performing work as a subcontractor on an existing structure, the board must receive the claim no later than 14 months after the date the work on the structure was substantially completed.

(7) If a licensed contractor files the claim against the licensed contractor performing work as a subcontractor on a structure and the subcontractor failed to substantially complete the work, the board must receive the claim no later than 14 months after the date the subcontractor ceased to work on the structure.

(8) If the licensed contractor’s employee, subcontractor or material or equipment supplier files the claim, the board must receive the claim no later than one year after the date the contractor incurred the indebtedness.

SECTION 3. Except as provided in section 5 (2) of this 2001 Act, the Construction Contractors Board may resolve a dispute against a licensed contractor only if a claim is made against the contractor’s surety bond required by ORS 701.085. In order to have access to the bond, a person must file a claim of a type described in ORS 701.140 within the applicable time limitation described in section 2 of this 2001 Act. The claim must be filed and resolved as follows:

(1) A claim that involves work on a residential structure or an appurtenance to the structure must be resolved as provided under ORS 701.145.

(2) A claim that involves work on a small commercial structure or an appurtenance thereto may be resolved as provided in ORS 701.145 or section 4 of this 2001 Act.

(3) Except as provided in subsections (4) and (5) of this section, a claim that involves work on a large commercial structure or an appurtenance thereto must be resolved as provided in section 4 of this 2001 Act.

(4) A claim by an owner that involves work on a large commercial structure or an appurtenance thereto when the total contract involved in the claim is $25,000 or less may be resolved as provided in ORS 701.145 or section 4 of this 2001 Act.

(5) Notwithstanding subsections (1) to (4) of this section, a claim may be resolved by the board through binding arbitration under section 5 of this 2001 Act.

SECTION 4. For a claim described in section 3 (3) of this 2001 Act involving work on a large commercial structure or an appurtenance thereto, a claim described in section 3 (2) of this 2001 Act involving work on a small commercial structure or an appurtenance thereto that is not resolved under ORS 701.145 or an owner’s claim described in section 3 (4) of this 2001 Act involving work on a large commercial structure or an appurtenance thereto that is not resolved under ORS 701.145:

(1) The person seeking to file the claim must:

(a) Bring an action on the claim against the licensed contractor in a court of competent jurisdiction; or

(b) Initiate a proceeding to resolve the claim through binding arbitration substantially in conformance with ORS 36.300 to 36.365.

(2) The claimant must file the claim with the Construction Contractors Board by delivering to the board a copy of the complaint or the demand for arbitration or other document necessary to initiate arbitration. The claimant must also give notice to the surety on the bond by delivering to the surety a copy of the complaint or the demand for arbitration or other document necessary to initiate arbitration. Delivery to the board and the surety must be accomplished by certified mail, return receipt requested, no later than the earlier of:

(a) The 90th day after the complaint, demand or other document was filed or made; or

(b) The 14th day before the first day of trial or arbitration.

(3) Filing the claim with the board under subsection (2) of this section constitutes filing the claim for purposes of establishing timeliness of the claim under section 2 of this 2001 Act and priority of the claim under ORS 701.150.

(4) Except as provided in this subsection and subsection (7) of this section, if the claimant properly gives notice of the claim to the surety under subsection (2) of this section, a judgment or award against the contractor entered in the action or arbitration is binding on the surety. If the claimant delivers notice of the claim to the wrong surety, the surety receiving the notice may avoid being bound by a judgment or award by delivering notice of the mistake to the claimant or the claimant’s attorney of record, and to the board, on or before the 30th day after the surety receives notice under subsection (2) of this section. Delivery of the notice of mistake must be by certified mail, return receipt requested, or by facsimile machine or other form of transmission with an acknowledgment of receipt.

(5) A surety under subsection (2) of this section has an absolute right to intervene in an action or arbitration brought or initiated under subsection (1) of this section. A claimant may not join a surety as a party to an action or arbitration unless the claimant disputes the validity or timeliness of the surety’s notice of mistake or the surety disputes the validity or timeliness of the delivery to the surety of the complaint or the demand or other document necessary to initiate arbitration. If the surety elects to intervene or is joined as a party, the surety is bound by all issues of fact and law determined by the court or arbitrator and may not seek board review of those determinations.

(6) If a court issues a judgment on an action, or reduces an arbitration award to judgment, against a contractor on a claim described in subsection (1) of this section, the claimant must deliver a certified copy of the judgment to the board and to the surety no later than the 30th day after entry of the judgment in order to retain a claim against the bond. The entry of a final judgment against the contractor concludes the contractor’s involvement in any proceedings to determine whether the bond is subject to payment of the claim. The claimant and the surety are the only parties to the administrative process set forth in subsection (7) of this section.

(7) Upon receipt of a timely delivered certified copy of the judgment as described in subsection (6) of this section, the board shall issue a proposed order in the amount of the judgment together with any costs, interest and attorney fees awarded under the judgment, to the extent that the judgment, costs, interest and fees are within the jurisdiction of the board. The board’s determination of the claim is limited to whether the claim comes within the jurisdiction of the board and is subject to payment by the surety. The board shall issue the proposed order in a form that indicates the surety’s maximum liability to the claimant. If a hearing is not requested within the time set forth in the proposed order, the proposed order becomes final without any further action by the board. If a hearing is requested, unless review of an issue is precluded under subsection (5) of this section, the board may determine:

(a) Whether the claim was timely filed with the board as provided in section 2 of this 2001 Act.

(b) Whether the surety received timely notice as provided in subsections (2) and (6) of this section.

(c) Whether the claim is for work subject to this chapter.

(d) The extent of the surety’s liability to the claimant.

SECTION 5. (1) With the prior agreement of a claimant and a licensed contractor, the Construction Contractors Board may resolve a claim against the contractor’s bond required by ORS 701.085 through binding arbitration under rules adopted by the board substantially in conformance with ORS 36.300 to 36.365.

(2) The board may resolve through mediation or arbitration a construction dispute between any persons who agree to follow the rules of the board.

(3) The board may refuse to accept a dispute for mediation or arbitration under subsection (1) or (2) of this section if the board determines that the nature or complexity of the dispute is such that a court or other forum is more appropriate for resolution of the dispute.

(4) The board may require claims against the contractor’s bond of less than $1,000 to be subject to mediation or resolved through binding arbitration.

(5) Contested case hearings before the board must be conducted by a hearing officer assigned from the Hearing Officer Panel established by section 3, chapter 849, Oregon Laws 1999. The board may delegate authority to the hearing officer to issue a final order in any matter.

(6) Sections 2 to 21, chapter 849, Oregon Laws 1999, do not limit in any way the ability of the board to make full use of alternative dispute resolution, including mediation or arbitration, to resolve claims against contractors filed under the provisions of section 2 of this 2001 Act.

(7) In assigning hearing officers for hearings conducted under the provisions of this section, the chief hearing officer of the Hearing Officer Panel established under section 3, chapter 849, Oregon Laws 1999, shall defer to board requests.

(8) The board, by rule, may require a deposit not to exceed $100 for the filing of a claim, a request for hearing or exceptions. The party may recover the deposit upon prevailing on the claim or exceptions.

SECTION 5a. If House Bill 2188 becomes law, sections 4 and 5, chapter 160, Oregon Laws 2001 (Enrolled House Bill 2188) (amending ORS 701.145), are repealed and section 5 of this 2001 Act is amended to read:

Sec. 5. (1) With the prior agreement of a claimant and a licensed contractor, the Construction Contractors Board may resolve a claim against the contractor’s bond required by ORS 701.085 through binding arbitration under rules adopted by the board substantially in conformance with ORS 36.300 to 36.365.

(2) The board may resolve through mediation or arbitration a construction dispute between any persons who agree to follow the rules of the board.

(4) The board may require claims against the contractor’s bond of less than $1,000 to be subject to mediation or resolved through binding arbitration.

(5) Contested case hearings before the board must be conducted by a hearing officer assigned from the Hearing Officer Panel established by section 3, chapter 849, Oregon Laws 1999. Notwithstanding ORS 670.325, the board may delegate authority to the hearing officer to issue a final order in any matter.

SECTION 6. Section 5 of this 2001 Act is amended to read:

(2) The board may resolve through mediation or arbitration a construction dispute between any persons who agree to follow the rules of the board.

(4) The board may require claims against the contractor’s bond of less than $1,000 to be subject to mediation or resolved through binding arbitration.

(5) Contested case hearings before the board must be conducted by [a hearing officer assigned from the Hearing Officer Panel established by section 3, chapter 849, Oregon Laws 1999] the board or by a hearing officer designated by the board. The board may delegate authority to the hearing officer to issue a final order in any matter.

[(6) Sections 2 to 21, chapter 849, Oregon Laws 1999, do not limit in any way the ability of the board to make full use of alternative dispute resolution, including mediation or arbitration, to resolve claims against contractors filed under the provisions of section 2 of this 2001 Act.]

[(7) In assigning hearing officers for hearings conducted under the provisions of this section, the chief hearing officer of the Hearing Officer Panel established under section 3, chapter 849, Oregon Laws 1999, shall defer to board requests.]

[(8)] (6) The board, by rule, may require a deposit not to exceed $100 for the filing of a claim, a request for hearing or exceptions. The party may recover the deposit upon prevailing on the claim or exceptions.

SECTION 7. The amendments to section 5 of this 2001 Act by section 6 of this 2001 Act become operative January 1, 2004.

SECTION 7a. If House Bill 2188 becomes law, sections 6 and 7 of this 2001 Act are repealed and section 5 of this 2001 Act, as amended by section 5a of this 2001 Act, is amended to read:

(2) The board may resolve through mediation or arbitration a construction dispute between any persons who agree to follow the rules of the board.

(4) The board may require claims against the contractor’s bond of less than $1,000 to be subject to mediation or resolved through binding arbitration.

(5) Contested case hearings before the board must be conducted by [a hearing officer assigned from the Hearing Officer Panel established by section 3, chapter 849, Oregon Laws 1999] the board or by a hearing officer designated by the board. Notwithstanding ORS 670.325, the board may delegate authority to the hearing officer to issue a final order in any matter.

SECTION 7b. The amendments to section 5 of this 2001 Act by section 7a of this 2001 Act become operative January 1, 2004.

SECTION 8. ORS 87.058 is amended to read:

87.058. (1) As used in this section:

(a) “Contractor” has the meaning given that term in ORS 701.005.

(b) “Board” means the Construction Contractors Board established in ORS 701.205.

[(c) “Structure” means a residence, duplex or multiunit residential building.]

(2) When a suit to enforce a lien perfected under ORS 87.035 is filed and the owner of the structure subject to that lien files a claim [with] that is being processed by the board under ORS 701.145 against a contractor who performed work [that is subject to ORS chapter 701] on the structure, the owner may obtain a stay of proceedings on the suit to enforce the lien if:

(a) The owner already has paid [a] the contractor for that contractor’s work that is subject to this chapter on the structure;

(b) The person suing to enforce the lien perfected under ORS 87.035:

(A) Performed work that is subject to ORS chapter 701 on the structure for the contractor who has been paid by the owner;

(B) Furnished labor, services or materials or rented or supplied equipment used on the structure to the contractor who has been paid by the owner; or

(C) Otherwise acquired the lien as a result of a contribution toward completion of the structure for which the contractor has been paid by the owner; and

(c) The continued existence of the lien on which the suit is pending is attributable to the failure of the contractor who has been paid by the owner to pay the person suing for that person’s contribution toward completion of the structure.

(3) The owner may petition for the stay of proceedings described in subsection (2) of this section by filing the following papers in the circuit court in which the suit on the lien is pending:

(a) A certified copy of the claim filed [with] for processing by the board under ORS 701.145; and

(b) An affidavit signed by the owner that contains:

(A) A description of the structure;

(B) The street address of the structure;

(D) A statement that the petitioner is the owner of the structure.

(4) Upon receipt of a complete petition described in subsection (3) of this section, the circuit court shall stay proceedings on the suit to enforce the lien.

(5) After the board [has adjudicated or otherwise completely processed] order on the claim becomes final and the board issues any required notice for payment against the contractor’s bond or deposit, the circuit court shall dissolve the stay ordered under subsection (4) of this section.

SECTION 9. ORS 701.005 is amended to read:

701.005. As used in this chapter:

(1) “Board” means the Construction Contractors Board.

[(2) “Consultant” means a person registered as a contractor with the board who inspects or otherwise provides services to a property owner or other contractor but who does not substantively add to or subtract from a structure. “Consultant” includes but is not limited to home inspectors certified under ORS 701.350, lead-based paint inspectors licensed under ORS 701.515, and cross connection and backflow prevention device inspectors certified under ORS 448.279.]

[(3)] (2) “Contractor” means a person who, for compensation or with the intent to sell, arranges or undertakes or offers to undertake or submits a bid to construct, alter, repair, add to, subtract from, improve, inspect, move, wreck or demolish, for another, any building, highway, road, railroad, excavation or other structure, project, development or improvement attached to real estate or to do any part thereof. “Contractor” includes general contractors, residential-only contractors and specialty contractors as defined in this section.

[(4)] (3) “General contractor” means a contractor whose business operations require the use of more than two unrelated building trades or crafts that the contractor supervises or performs in whole or part, whenever the sum of all contracts on any single property, including materials and labor, exceeds an amount established by rule by the board. “General contractor” does not include specialty contractors[, as defined in subsection (8) of this section,] or limited contractors, as described in ORS 701.085.

[(5)] (4) “Home inspector” means a person who, for a fee, inspects and provides written reports on the overall physical condition of a residential structure and the appurtenances thereto. “Home inspector” does not include persons certified under ORS chapter 455 to inspect new, repaired or altered structures for compliance with the state building code.

(5) “Large commercial structure” means a structure that is not a residential structure or small commercial structure.

(6) “Residential-only contractor” means a general contractor or specialty contractor who performs work exclusively in connection with residential structures and small commercial structures, and the appurtenances thereto. “Residential-only contractor” includes, but is not limited to:

(a) A person who purchases or owns property and constructs or for compensation arranges for the construction of one or more residential structures or small commercial structures with the intent of selling the [residential structure or] structures;

(b) A school district, as defined in ORS 332.002, that permits students to construct a residential structure or small commercial structure as an educational experience to learn building techniques and[, upon completion of the residential structure, the district] sells the completed [residential] structure;

(c) A community college district, as defined in ORS 341.005, that permits students to construct a residential structure or small commercial structure as an educational experience to learn building techniques and [upon completion of the residential structure, the district] sells the completed structure; or

(d) Any person except a landscape contractor, nurseryman, gardener or person engaged in the commercial harvest of forest products who is engaged as an independent contractor to remove trees, prune trees, remove tree limbs or stumps or to engage in tree or limb guying.

(7) “Residential structure” means a residence, including a site-built home, [a] modular home constructed off-site, [a] floating home as defined in ORS 830.700, [a] condominium unit,[and a] manufactured dwelling[, a] or duplex or a multiunit residential building consisting of four units or less that is not part of a multistructure complex of buildings.

(8) [“Residential structure” includes any] “Small commercial structure” means a nonresidential structure with a ground area of 4,000 square feet or less, including exterior walls, and [is] not more than 20 feet in height from the top surface of the lowest flooring to the highest interior overhead finish of the [building] structure.

[(8)] (9) “Specialty contractor” means a contractor who performs work on a structure, project, development or improvement and whose operations as such do not fall within the definition of “general contractor.” “Specialty contractor” includes a person who performs work regulated under ORS chapter 446.

SECTION 9a. Section 280, chapter 104, Oregon Laws 2001 (Enrolled House Bill 2609) (amending ORS 701.005), is repealed.

SECTION 10. ORS 701.010 is amended to read:

701.010. The Construction Contractors Board may adopt rules to make licensure optional for persons who offer, bid or undertake to perform work peripheral to construction, as defined by administrative rule of the Construction Contractors Board. The following persons are exempt from licensure under this chapter:

(1) A person who is constructing, altering, improving or repairing personal property.

(2) A person who is constructing, altering, improving or repairing a structure located within the boundaries of any site or reservation under the jurisdiction of the federal government.

(3) A person who furnishes materials, supplies, equipment or finished product and does not fabricate them into, or consume them, in the performance of the work of a contractor.

(4) A person working on one structure or project, under one or more contracts, when the aggregate price of all of that person’s contracts for labor, materials and all other items is less than $500 and such work is of a casual, minor or inconsequential nature. This subsection does not apply to a person who advertises or puts out any sign or card or other device [which] that might indicate to the public that [that] the person is a contractor.

(5) An owner who contracts for work to be performed by a licensed contractor. This subsection does not apply to a person who, in the pursuit of an independent business, constructs, remodels, repairs or for compensation and with the intent to sell the structure, arranges to have constructed, remodeled or repaired a structure with the intent of offering the structure for sale before, upon or after completion. It [shall be] is prima facie evidence that there was an intent of offering the structure for sale if the person who constructed, remodeled or repaired the structure or arranged to have the structure constructed, remodeled or repaired does not occupy the structure after its completion.

(6) A person performing work on a property that person owns or performing work as the owner’s employee, whether the property is occupied by the owner or not, or a person performing work on that person’s residence, whether or not that person owns the residence. This subsection does not apply to a person performing work on a structure owned by that person or the owner’s employee if [such] the work is performed, in the pursuit of an independent business, with the intent of offering the structure for sale before, upon or after completion.

(7) A person licensed in one of the following trades or professions when operating within the scope of that license:

(a) An architect licensed by the State Board of Architect Examiners.

(b) A registered professional engineer licensed by the State Board of Examiners for Engineering and Land Surveying.

(d) A sewage disposal system installer licensed by the Department of Environmental Quality.

(e) A landscaping business licensed under ORS 671.510 to 671.710 that constructs fences, decks, arbors, driveways, walkways or retaining walls when:

(A) Performed in conjunction with landscaping work; or

(B) Not performed in conjunction with landscaping work and that has filed a bond under ORS 671.690 (1)(b).

(f) A pesticide operator licensed under ORS 634.116 who does not conduct inspections for wood destroying organisms for the transfer of real estate.

(8) A person who performs work subject to this chapter as an employee of a contractor.

(9) A manufacturer of a manufactured home constructed under standards established by the federal government.

(10) A person involved in the movement of:

(a) Modular buildings or structures other than manufactured structures not in excess of 14 feet in width.

(b) Structures not in excess of 16 feet in width when [they] the structures are being moved by their owner if [such] the owner is not a contractor required to be licensed under this chapter.

(11) A commercial lending institution or surety company that arranges for the completion, repair or remodeling of a structure. As used in this subsection, “commercial lending institution” means any bank, mortgage banking company, trust company, savings bank, savings and loan association, credit union, national banking association, federal savings and loan association, insurance company or federal credit union maintaining an office in this state.

(12) A real estate licensee as defined in ORS 696.010 or the employee of that licensee when performing work on a structure that the real estate licensee manages under a contract.

(13) Units of government other than those specified in ORS 701.005 (6)(b) and (c).

SECTION 11. ORS 701.055 is amended to read:

701.055. (1) A person shall not undertake, offer to undertake or submit a bid to do work as a contractor unless that person has a current, valid license issued by the Construction Contractors Board. A partnership, corporation or joint venture may do such work, offer to undertake such work or submit a bid to do such work only if that partnership, corporation or joint venture is licensed under this chapter. A partnership or joint venture shall be deemed licensed for the purpose of offering to undertake work as a contractor on a [nonresidential] structure if any one of the partners or joint venturers whose name appears in the name under which the partnership or joint venture does business is licensed under this chapter.

(2) A licensed partnership or corporation shall notify the board immediately upon any change in licensed partners or corporate officers. If a partnership no longer has a licensed partner, the partnership may not conduct activities that require a license under this chapter.

(3) A city, county or the State of Oregon shall not issue a building permit to anyone required to be licensed under this chapter that does not have a current, valid license. Each county, city or the State of Oregon that requires the issuance of a permit as a condition precedent to construction, alteration, improvement, demolition, movement or repair of any building or structure or the appurtenances to the structure shall also require that each applicant for such permit file as a condition to issuing the permit a written statement, subscribed by the applicant, that the applicant is licensed under the provisions of this chapter, giving the license number and stating that the license is in full force and effect, or, if the applicant is exempt from the provisions of this chapter, listing the basis for the exemption. The city, county or the State of Oregon shall list the contractor’s license number on the permit obtained by that contractor.

(4) If the applicant for a building permit is exempt from licensure under the provisions of ORS 701.010 (6), the city, county or State of Oregon shall supply the applicant with an Information Notice to Property Owners About Construction Responsibilities. The city, county or State of Oregon shall not issue a building permit for a residential structure to the applicant until the applicant signs a statement in substantially the following form:

______________________________________________________________________________

(a) I have read and understand the Information Notice to Property Owners About Construction Responsibilities; and

(b) I own, reside in or will reside in the completed dwelling. My general contractor is______, Construction Contractors Board license no.____, license expiration date_____. I will instruct my general contractor that all subcontractors who work on this dwelling must be licensed with the Construction Contractors Board; or

(d) I will be my own general contractor and, if I hire subcontractors, I will hire only subcontractors licensed with the Construction Contractors Board.

(e) If I change my mind and do hire a general contractor, I will contract with a general contractor who is licensed with the Construction Contractors Board and I will immediately notify the office issuing this building permit of the name of the general contractor______.

______________________________________________________________________________

(5) The board shall adopt by rule a form entitled “Information Notice to Property Owners About Construction Responsibilities” that shall describe, in nontechnical language and in a clear and coherent manner using words in their common and everyday meaning, the responsibilities property owners are undertaking by acting as their own general contractor and the problems that could develop. The responsibilities described in the form shall include, but not be limited to:

(a) Compliance with State of Oregon and federal laws regarding social security tax, income tax and unemployment tax.

(b) Workers’ compensation insurance on workers.

(6) The board shall develop and furnish to the city, county and State of Oregon building permit offices, at no cost to these offices, the Information Notice to Property Owners About Construction Responsibilities and the statement to be signed by the permit applicant.

(7) Every city and county that requires the issuance of a business license as a condition precedent to engaging, within the city or city and county, in a business which is subject to regulation under this chapter, shall require that each licensee and each applicant for issuance or renewal of such license file, or have on file, with such city or city and county, a signed statement that such licensee or applicant is licensed under the provisions of this chapter.

(8) It [shall be] is prima facie evidence of doing business as a contractor when a person for that person’s own use performs, employs others to perform, or for compensation and with the intent to sell the structure, arranges to have performed any work described in ORS 701.005 [(3)] (2) if within any one 36-month period that person offers for sale two or more newly built structures on which that work was performed.

(9) Licensure under this chapter is prima facie evidence that the licensee conducts a separate, independent business.

(10) The provisions of this chapter shall be exclusive and no city, county or other political subdivision shall require or issue any registrations, licenses or surety bonds, nor charge any fee for the regulatory or surety registration of any contractor licensed with the board. However, nothing in this subsection shall limit or abridge the authority of any city or county to:

(a) License and levy and collect a general and nondiscriminatory license fee levied upon all businesses, or to levy a tax based upon business conducted by any firm within said jurisdiction, or to limit the authority of any city or county with respect to contractors not required to be licensed under this chapter; or

(b) Require a contractor to pay a fee, post a bond or require insurance when the city, county or political subdivision is contracting for the service of the contractor.

(11)(a) Every contractor shall maintain a list that includes the following information about all subcontractors or other contractors performing work on a project for that contractor:

(A) Names and addresses.

(B) License numbers.

(b) The list referred to in paragraph (a) of this subsection shall be delivered to the board within 72 hours after a request made during reasonable working hours.

(12) A contractor shall not hire any subcontractor or other contractor to perform work unless the subcontractor or contractor is licensed under this chapter or exempt from licensure under the provisions of ORS 701.010.

(13) A consumer notification form designed to specifically inform a property owner what the property owner should do to protect themselves in a residential repair, remodel or construction project shall be prepared by the board and provided at no cost to all licensed contractors. The form shall be delivered by a contractor to the property owner when the contractor submits a bid or proposal for work on a residential structure. The form shall include an explanation of the meaning of licensure, including a statement that licensure is not an endorsement of a contractor’s work, and an explanation of the bond and insurance levels required of contractors for the benefit of property owners. The form shall not be larger than one side of a sheet of paper that is 8-1/2 inches by 11 inches, and the contractor may reproduce the form on the contractor’s bid proposal.

(14) A contractor shall not perform work subject to this section for an owner of a residential structure without a written contract if the aggregate contract price exceeds $2,500. If the price of such contract was initially less than $2,500, but during the course of performance of the contract exceeds that amount, the contractor shall mail or otherwise deliver a written contract to the owner not later than five days after the contractor knows or should reasonably know that the contract price will exceed $2,500. Failure to have a written contract will not void the contract.

(15) Except as provided in ORS 671.540, a contractor that is not licensed under ORS 671.560 shall hire a person licensed under ORS 671.560 to perform landscaping work.

SECTION 12. ORS 701.085 is amended to read:

701.085. (1) A person who wishes to obtain a license as a contractor or renew a license shall file with the Construction Contractors Board a surety bond with one or more corporate sureties authorized to do business in this state in the amount set forth in subsections (2) to (5) of this section.[, conditioned] The surety bond must provide that the applicant, with regard to work subject to this chapter, will pay claims ordered paid by the board under ORS [701.140] 701.145 or section 4 of this 2001 Act. Bonds filed under this subsection shall remain in effect for at least one year or until depleted by claims paid under ORS [701.140] 701.150, unless the surety sooner cancels the bond. At the discretion of the surety the bond may be continued for an additional period by continuation certificate. The aggregate liability of the surety under the bond for claims against the bond shall not exceed the penal sum of the bond no matter how many years the bond is in force. No extension by continuation certificate, reinstatement, reissue or renewal of the bond shall increase the liability of the surety.

(2) A general contractor shall obtain a surety bond in the amount of $15,000.

(3) A specialty contractor shall obtain a surety bond in the amount of $10,000.

(4) A consultant shall obtain a surety bond in the amount of $10,000.

(5) The board may reduce the amount of the surety bond required by this section to $5,000 for a contractor upon a showing that the contractor does not perform work as a contractor exceeding $40,000 in gross annual volume and does not enter into contracts that exceed $5,000. [These contractors shall be designated as limited contractors.] The board shall designate the contractor as a limited contractor.

(6) If the amount the licensee must pay against the bond under this section exceeds the amount of the bond, the board shall suspend the contractor’s license until the amount owed is paid. The board, as a condition of ending the suspension, may require a contractor requesting reinstatement of a license to file a bond of an amount up to five times as much as the amount required ordinarily of a licensee under this section.

(7) The board by rule may establish conditions for applicants or persons licensed under this chapter under which the applicant or licensee must file a bond of an amount up to five times as much as the amount required ordinarily of an applicant or licensee under this section. The board may reduce the amount of bond it would otherwise require if the contractor demonstrates satisfactory completion of approved elective classes on dispute resolution and prevention, basic accounting and record keeping or such other classes as the board may prescribe.

(8) The bond required under this section is for the exclusive purpose of payment of final orders and arbitration awards of the board in accordance with this chapter.

(9) Upon determination under ORS 701.145 or section 4 of this 2001 Act of a claim [under ORS 701.140] against a contractor who holds a bond required under this section, the board shall notify the surety on the bond of the final order in a manner determined by the board by rule. The notification shall include a list of all claims upon which a final order has been issued.

(10) [No] A suit or action may not be commenced against a surety on a bond required under this section until 30 days after the date that the surety is notified by the board under ORS [701.140] 701.150 that payment is due on the claim.

(11) In any action against a surety on a bond under this section that is based on the failure of the surety to pay a claim or on the denial of a claim by the surety, the court may award:

(a) Costs;

(b) Reasonable attorney fees to the prevailing party as part of the costs; and

(c) [If the surety is ordered to pay a claim on the bond that] Twice the amount of any damages that the board ordered the surety to pay on the claim, if the surety arbitrarily and capriciously refused to pay upon order of the board[, twice the amount of damages against the surety as ordered by the board].

SECTION 13. ORS 701.140 is amended to read:

701.140. [The Construction Contractors Board shall only accept and make determinations for damages against contractors licensed under this chapter. If upon final determination and order by the board a contractor fails to pay a claim determined against the contractor by the board, the board shall notify the surety that payment is due from the bond required under ORS 701.085. Claims that involve contracts for work on nonresidential structures or the appurtenances thereto, except claims by owners of nonresidential property when the total contract is $25,000 or less, shall be resolved by a court of competent jurisdiction or through arbitration as provided under ORS 701.145. Claims that involve contracts for work on residential structures or the appurtenances thereto and claims by owners of nonresidential property when the total contract is $25,000 or less may be resolved directly by the board as set forth in this section. The board shall only accept and make determination of the following types of claims:] A claim made against a licensed contractor’s bond required by ORS 701.085 must arise from the performance, or a contract for the performance, of work that is subject to this chapter. The claim must be of one or more of the following types:

(1) [Claims] A claim against a contractor by the owner of a [residential] structure or other real property for the following [in performing any work subject to this chapter]:

(a) Negligent work.

(b) Improper work.

(2) [Claims] A claim against a contractor by the owner of a [residential] structure or other real property to discharge, or to recoup funds expended in discharging, a lien established under ORS 87.010 to 87.060 and 87.075 to 87.093 under circumstances described under this subsection. If the claim is processed under ORS 701.145, the Construction Contractors Board may reduce [any amount adjudged by the board under this section] a claim by any amount the claimant owes the contractor. The board shall [only determine] process claims described [under] in this subsection under ORS 701.145 only if:

(a) The owner [has] paid the contractor for that contractor’s work subject to this chapter; and

(b) A lien is filed against the property of the owner under ORS 87.010 to 87.060 and 87.075 to 87.093 because the contractor failed to pay the person claiming the lien for that person’s contribution toward completion of the improvement.

(3) [Claims] A claim against a licensed subcontractor by a licensed contractor for the following [in performing any work subject to this chapter]:

(a) Negligent work;

(b) Improper work; or

(4) [Claims] A claim by [persons] a person furnishing labor to a contractor.

(5) [Claims] A claim, as limited by rule of the board, by [persons] a person furnishing material or renting or supplying equipment to a contractor. The minimum limit set by the board shall not exceed $150.

[(6) Claims against a contractor by anyone who is injured as a result of the contractor’s failure to comply with the requirements of ORS 454.605 to 454.755 or rules adopted by the Environmental Quality Commission under ORS 454.625.]

(6) A claim by a subcontractor against a contractor for unpaid labor or materials arising out of a contract.

SECTION 14. ORS 701.145 is amended to read:

701.145. For a claim described in section 3 (1) of this 2001 Act involving work on a residential structure or an appurtenance thereto, a claim described in section 3 (2) of this 2001 Act involving work on a small commercial structure or an appurtenance thereto that is not resolved under section 4 of this 2001 Act, or an owner’s claim described in section 3 (4) of this 2001 Act involving work on a large commercial structure or an appurtenance thereto that is not resolved under section 4 of this 2001 Act:

(1) [Any] The person having [a] the claim [against a contractor of the type referred to in ORS 701.140 may] must file with the Construction Contractors Board a statement of the claim in [such form as the board prescribes] a form prescribed by the board.

(2) The board may [refuse to accept, or refuse at any time to continue processing, a] suspend processing of the claim if:

(a) The same facts and issues involved in the claim have been submitted to a court of competent jurisdiction for determination or have been submitted to any other entity authorized by law or the parties to effect a resolution [and] or settlement; or

[(b) The claimant does not permit the contractor against whom the claim is filed to be present at any inspection made by the board;]

[(c) The board determines that the contractor against whom the claim is filed is capable of complying with recommendations made by the board relative to the claim, but the claimant does not permit the contractor to comply with the recommendations. However, The board may refuse to accept or further process a claim under this paragraph only if the contractor was licensed at the time the work was first performed and is licensed at the time the board makes its recommendations;]

[(d)] (b) The board determines that the nature or complexity of the claim is such that a court is the appropriate forum for the adjudication of the claim.[; or]

(3) The board may dismiss or close the claim as established by rule of the board if any of the following conditions apply:

(a) The claimant does not permit the contractor against whom the claim is filed to be present at an on-site investigation made by the board.

(b) The board determines that the contractor against whom the claim is filed is capable of complying with recommendations made by the board relative to the claim, but the claimant does not permit the contractor to comply with the recommendations. The board may refuse to accept or further process a claim under this paragraph only if the contractor was licensed at the time the work was first performed and is licensed at the time the board makes its recommendations.

[(e)] (c) The amount in controversy is less than an amount adopted by the board and not more than $250.

[(3) The board shall not process a claim, including a claim based upon a court judgment or arbitration award, unless the claim is filed in a timely manner as follows:]

[(a) If the owner of a new structure files the claim, the board must receive the claim not later than one year after the date the structure was first occupied or two years after completion, whichever comes first.]

[(b) If the owner of an existing structure files the claim, the board must receive the claim not later than one year after the date the work was substantially completed.]

[(c) Regardless of whether the claim involves a new or existing structure, if the owner files the claim because the contractor failed to begin the work, the board must receive the claim not later than one year after the date the parties entered into the contract.]

[(d) Regardless of whether the claim involves a new or existing structure, if the owner files the claim because the contractor failed to substantially complete the work, the board must receive the claim not later than one year after the date the contractor ceased work on the structure.]

[(e) If a licensed contractor files the claim against a licensed contractor performing work as a subcontractor on a new structure, the board must receive the claim not later than 14 months after the date the structure was first occupied or two years after completion, whichever comes first.]

[(f) If a licensed contractor files the claim against a licensed contractor performing work as a subcontractor on an existing structure, the board must receive the claim not later than 14 months after the work on the structure was substantially completed.]

[(g) If a licensed contractor files the claim against a licensed contractor performing work as a subcontractor, because the subcontractor failed to substantially complete the work, the board must receive the claim not later than 14 months after the date the subcontractor ceased to work on the structure.]

[(h) If a material or equipment supplier, an employee, or a licensed subcontractor files the claim, the board must receive the claim not later than one year after the date the licensee incurred the indebtedness.]

(4) Upon acceptance of the statement of claim, the board shall give notice to the contractor against whom the claim is made and shall initiate proceedings to determine the validity of the claim. If, after investigation, the board determines that a violation of this chapter or of any rule adopted thereunder has occurred, or damage has been caused by the [licensee] contractor, the board may recommend to the [licensee] contractor such action as the board considers appropriate to compensate the claimant. If the contractor performs accordingly, the board shall give that fact due consideration in any subsequent disciplinary proceeding brought by the board. If a claim is for less than $1,000, the board may process the claim without conducting an on-site investigation.

[(5) Except for claims by owners of nonresidential property when the total contract is $25,000 or less and those claims that are settled through binding arbitration under subsection (9) of this section, any person with a claim against a contractor involving nonresidential structures shall bring an action upon the bond required by ORS 701.085, as provided in subsections (6) to (8) of this section, in a court of competent jurisdiction or through binding arbitration in compliance with ORS 36.300 to 36.365. At the option of the claimant, a person having a claim as an owner of nonresidential property when the total contract is $25,000 or less may elect to bring an action upon the bond in this same manner. In such instances, all other statutes and rules applicable to the processing of claims in accordance with subsections (5) to (8) of this section apply.]

[(6) Except as set forth in subsection (5) of this section, in order to have access to the bond required by ORS 701.085, the claimant in an action against a contractor involving nonresidential structures must deliver a copy of the complaint to the board and to the surety on the bond by certified mail, return receipt requested, within 90 days of the date the complaint was filed. The surety shall not be joined as a party to the action, but shall have the absolute right to intervene in the action. If notice is so given, except as provided in subsection (8) of this section, the surety that received notice shall be bound by any judgment entered in the action, unless within 30 days of receipt of such notice, the surety delivers to the claimant or the claimant’s attorney of record and to the board by certified mail, return receipt requested, or by facsimile machine or form of transmission with an acknowledgement, a notice that the surety is not the surety that should have received the claimant’s notice. If the claimant disputes the validity of the surety’s notice, or if the surety disputes the validity or timeliness of the delivery of the complaint, the claimant may join the surety as a defendant or the surety may join as a party in the action. If the surety elects to intervene in the action or is joined as a party to the action, it shall be bound by all issues of fact and law determined by the court, which issues shall not then be subject to review by the board. The date the board receives a copy of the complaint shall be the date the board uses to establish the priority of the claim.]

[(7) If a court issues a judgment against a contractor in an action involving nonresidential structures, the claimant shall deliver a certified copy of the judgment to the board and to the surety within 30 days of the date of entry of the judgment in order to retain a claim against the bond. The entry of a final judgment against the contractor shall fully and finally conclude the contractor’s involvement concerning participation in any and all proceedings to determine whether its bond is subject to payment of the claim. The contractor shall not be a party to the administrative process set forth in subsection (8) of this section, which shall proceed with the claimant and surety as the only parties.]

[(8)(a) Upon receipt of a timely filed copy of the judgment specified in subsection (7) of this section, the board shall issue a proposed order in the amount of the judgment, together with any court costs, interest and attorney fees awarded by the court. The board’s determination of the claim shall be limited only to determinations of whether the claim comes within the jurisdiction of the board and is subject to payment by the surety. The proposed order shall be issued in such form as to indicate the surety’s maximum liability to the claimant. If there are no exceptions filed to the proposed order within the time period provided therefor after issuance of the proposed order, the proposed order shall become final without any further action required by the board. The surety’s right to except to the proposed order based upon a judgment, except where the surety has elected to intervene in the action as set forth in subsection (6) of this section, shall be limited to the following issues:]

[(A) Whether the claim was timely filed with the board as provided in subsection (3) of this section.]

[(B) Whether the surety received timely notice as provided in subsections (6) and (7) of this section.]

[(C) Whether the claim is for work subject to this chapter provided within the State of Oregon.]

[(D) The extent of the surety’s liability to the claimant.]

[(b) The provisions of ORS 701.150 (4) shall in all events apply and the surety shall be entitled to except to the proposed order as to the specific monetary liability of the surety in connection with all claims then pending. The surety shall not be required to pay any claim under subsection (7) of this section until such time as it receives notice from the board under ORS 701.140 that claims are ready for payment.]

[(9) With the prior agreement of the claimant and licensee, the board may resolve the claim through binding arbitration under rules adopted by the board generally in conformance with ORS 36.300 to 36.365. The board may also use the arbitration procedure to resolve a construction dispute between any persons who agree to follow the rules of the board.]

[(10) The board may require claims of less than $1,000 to be subject to mediation or resolved through binding arbitration. Notwithstanding the provisions of subsection (4) of this section, the board is not required to investigate claims of less than $1,000.]

[(11) The board may apply the provisions of subsections (5) to (8) of this section to any arbitration decision as it would to a judgment of a court whether the arbitration decision is rendered by the board or by independent arbitration.]

[(12) Contested case hearings before the board must be conducted by a hearing officer assigned from the Hearing Officer Panel established by section 3, chapter 849, Oregon Laws 1999. The board may delegate authority to the hearing officer to issue a final order in any matter.]

[(13) The board by rule may require a deposit not to exceed $100 for the filing of a claim, the filing of a request for hearing or the filing of exceptions. Such deposit is recoverable by the party.]

[(14) Sections 2 to 21, chapter 849, Oregon Laws 1999, do not limit in any way the ability of the board to make full use of alternative dispute resolution, including mediation or arbitration, to resolve claims against contractors filed under the provisions of this section. In assigning hearing officers for hearings conducted under the provisions of this section, the chief hearing officer of the Hearing Officer Panel established under section 3, chapter 849, Oregon Laws 1999, shall defer to board requests.]

(5) If the board is unable to resolve the claim under subsection (4) of this section, the board may issue a contested case notice under ORS 183.415 and:

(a) Issue a proposed default order under ORS 183.415 to become effective only if a party does not request a contested case hearing; or

(b) Refer the matter for hearing.

(6) The board shall send a copy of the notice and any proposed order described in subsection (5) of this section to the surety on the contractor bond required by ORS 701.085.

SECTION 15. ORS 701.145, as amended by section 173, chapter 849, Oregon Laws 1999, is amended to read: