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Laurie R. Hager
503.243.1661 x 220
 

Suppliers Beware: New Law Segregates Rights Under Residential and Commercial CCB Bonds

November 2009

Laurie R. Hager
503.243.1661 x 220

In June 2009, Governor Kulingoski signed into law Senate Bill 204, which creates new rules for surety bonds obtained by Oregon contractors licensed with the Construction Contractors Board ("CCB").  The new rules become effective on January 1, 2010.  Generally, the new rules will affect claimants' abilities to assert CCB bond claims on residential and commercial construction projects in Oregon.  Under CCB rules, a residential project is one in which a contractor performs work on any of the following:  a house, a structure with one or more dwelling units that is four stories or less above grade, a condominium, an independent rental residential unit or other residential dwelling unit that is part of a larger structure, a modular home, a manufactured home, and a floating home.  Generally, the CCB considers all other types of projects to be commercial.

Each contractor is registered with the CCB under a residential or commercial license, or both.  Additionally, each contractor must file with the CCB a surety bond that is designated as residential, commercial, or both, depending on the contractor's license.  Under the current law (effective until 1/1/2010), the contractor's bond may generally cover and pay claims on commercial and residential projects without regard to the contractor's license or bond type.  Beginning in January 2010, however, claimants will have no access to a residential surety bond for claims related to commercial projects.  Likewise, claimants on residential projects will no longer have claims against a commercial surety bond.

The new law will deter some owners from hiring residential contractors for commercial projects in order to protect their CCB bond rights.  Suppliers, however, typically do not have the same level of knowledge of a project as an owner or subcontractor, since suppliers many times do not even visit the jobsite.  Suppliers, therefore, may not know whether the project is residential or commercial.  The new law, thus, could adversely affect suppliers' abilities to collect from contractors' CCB bonds. 

Suppliers and other potential claimants who will not visit the project site should create a practice of looking up a contractor's CCB bond information on the CCB's website (http://www.oregon.gov/CCB/), and require the contractor/customer to confirm the address of the project and whether the project is residential or commercial prior to providing material on credit.  While this may not be practical or necessary for small orders, it will be useful for multiple or larger orders for which the supplier wishes to protect its CCB bond rights. 

THIS ARTICLE IS NOT INTENDED TO BE (AND SHOULD NOT BE USED AS) A SUBSTITUTE FOR LEGAL ADVICE SINCE LEGAL ADVICE MAY ONLY BE GIVEN IN RESPONSE TO INQUIRIES REGARDING SPECIFIC FACTUAL SITUATIONS. 

Laurie Hager is a member of the Business Litigation and Construction Law Groups.  She can be reached at 503-227-1111 or laurie@sussmanshank.com

Related Practice Areas

Construction

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