BILL ANALYSIS
| Senate Research Center | S.B. 841 |
| 89R2055 CS-F | By: Hughes |
| | Business & Commerce |
| | 4/1/2025 |
| | As Filed |
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Under current law, a trustee who, intentionally or knowingly or with intent to defraud, directly or indirectly retains, uses, disburses, or otherwise diverts construction trust funds without first fully paying all current or past due obligations incurred by the trustee to the beneficiaries of the trust funds is considered to have misapplied the trust funds. Certain general contractors have reported instances in which a subcontractor or supplier on a construction project takes payment from the general contractor but then pockets that money without in turn paying any money owed to additional subcontractors or suppliers. Currently, however, general contractors cannot pursue these stolen funds through the courts as only the parties who were not paid have that legal remedy available to them. S.B. 841 seeks to make this legal remedy available also to any assignee of the party that did not receive payment by classifying an assignee as a beneficiary of any trust funds paid or received.
As proposed, S.B. 841 amends current law relating to the beneficiaries of trust funds paid or received in connection with an improvement on specific real property.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 162.003(a), Property Code, to provide that a person who is an artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or who furnishes labor or material for the construction or repair of an improvement on specific real property in this state, or the assignee of that person, is a beneficiary of any trust funds paid or received in connection with the improvement and to make a nonsubstantive change.
SECTION 2. Amends Subchapter A, Chapter 162, Property Code, by adding Section 162.0031, as follows:
Sec. 162.0031. BENEFICIARY'S ASSIGNMENT OF INTEREST IN UNPAID TRUST FUNDS. Prohibits an assignment by a beneficiary of the beneficiary's interest in unpaid trust funds under Chapter 162 (Construction Payments, Loan Receipts, and Misapplication of Trust Funds) from being enforced unless:
(1) the assignment is made in writing not earlier than the date the assignee has paid the beneficiary in good and sufficient funds for the assignment and not made as part of the beneficiary's construction contract; and
(2) the assignee is a beneficiary, trustee, or property owner under the contract for the construction or repair of an improvement on real property in connection with which the payment of trust funds is made.
SECTION 3. Effective date: September 1, 2025.
