32-1129.02.  [Performance and payment by contractor, subcontractor or
material supplier; conditions; interest]{.underline}

A.  Notwithstanding the other provisions of this section, performance by
a contractor, subcontractor or material supplier in accordance with the
provisions of a construction contract entitles the contractor,
subcontractor or material supplier to payment from the party with whom
the contractor, subcontractor or material supplier contracts.

B.  If a subcontractor or material supplier has performed in accordance
with the provisions of a construction contract, the contractor shall pay
to its subcontractors or material suppliers and each subcontractor shall
pay to its subcontractors or material suppliers, within seven days of
receipt by the contractor or subcontractor of each progress payment or
final payment, the full amount received for such subcontractor\'s work
and materials supplied based on work completed or materials supplied
under the subcontract. Payment shall not be required pursuant to this
subsection unless the subcontractor or material supplier provides to the
contractor or subcontractor a billing or invoice for the work performed
or material supplied in compliance with the terms of the contract
between the parties. Each subcontractor or material supplier shall
provide a waiver of any mechanic\'s or materialman\'s lien conditioned
upon payment for the work completed or material supplied. The contractor
or subcontractor may require that such conditional waivers of lien be
notarized. Any diversion by the contractor or subcontractor of payments
received for work performed pursuant to a contract, or failure to
reasonably account for the application or use of such payments,
constitutes grounds for disciplinary action by the registrar of
contractors. Violations of this section shall be grounds for suspension
or revocation of a license or other disciplinary action by the registrar
pursuant to section 32‑1154, subsections B, C and D. The subcontractor
or material supplier may notify the registrar of contractors and the
owner in writing of any payment less than the amount or percentage
approved for the class or item of work as set forth in this section.

C.  Nothing in this section prevents the contractor or subcontractor, at
the time of application or certification to the owner or contractor,
from withholding such application or certification to the owner or
contractor for payment to the subcontractor or material supplier for
unsatisfactory job progress, defective construction work or material not
remedied, disputed work, failure to comply with other material
provisions of the construction contract, third party claims filed or
reasonable evidence that a claim will be filed, failure of the
subcontractor to make timely payments for labor, equipment and
materials, damage to a contractor or another subcontractor or material
supplier, reasonable evidence that the subcontract cannot be completed
for the unpaid balance of the subcontract sum or a reasonable amount for
retention that does not exceed the actual percentage retained by the
owner.

D.  If a periodic or final payment to a subcontractor or material
supplier is delayed by more than seven days after receipt of periodic or
final payment by the contractor or subcontractor, the contractor or
subcontractor shall pay its subcontractor or material supplier interest,
except for periods of time during which payment is withheld pursuant to
subsection C of this section, beginning on the eighth day, at the rate
of one and one‑half per cent per month or a fraction of a month on the
unpaid balance or at such higher rate as the parties agree.

E.  Any licensed contractor, licensed subcontractor or material supplier
who files a complaint with the registrar of contractors under this
section shall be required to post a surety bond or cash deposit of five
hundred dollars or one‑half of the amount due, whichever is less, with
the registrar to secure the payment of claims under this section. If the
complaint is determined by the registrar to be without merit and
frivolous, the registrar shall order the person who filed the complaint
to pay one‑half of the amount of the required surety bond or cash
deposit to the respondent and one‑half to the registrar for deposit into
the state general fund. If no claim may be made under this section
against the surety bond or cash deposit, the surety bond or cash deposit
shall be returned to the complainant. The surety bond or cash deposit
shall be in the name of the licensee or material supplier who files the
complaint and shall be subject to claims by the registrar of contractors
and the respondent licensee as provided in this section. The surety bond
or cash deposit shall be conditioned upon and provide for payment upon
the presentation of a certified copy of the order of the registrar and a
certification by the complainant of nonpayment within thirty days after
the order becomes final. The surety bond shall be executed by the
complainant as principal with a corporation duly authorized to transact
surety business in this state. Evidence of the surety bond shall be
submitted to the registrar in a form acceptable to the registrar. The
cash deposit shall be deposited, pursuant to sections 35‑146 and 35‑147,
by the registrar in the contractors prompt pay complaint fund and shall
be held for the payment of claims.

F.  In any action or arbitration brought to collect payments or interest
pursuant to this section, the successful party shall be awarded costs
and attorney fees in a reasonable amount.