Today's Law As Amended

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AB-975 School facilities: lease-leaseback contracts: contractor relief.(2015-2016)

As Amends the Law Today


 Section 5111 is added to the Public Contract Code, to read:

 (a) This section shall apply retroactively to a project for the construction, alteration, repair, or improvement of any structure, building, or other improvement of any kind that was leased through an instrument pursuant to Section 17406 of the Education Code before July 1, 2015. If at any time the instrument is determined to be invalid by a court of competent jurisdiction, the contractor who entered into the instrument with the school district shall be entitled to be paid the reasonable cost of the labor, equipment, materials, and services furnished by the contractor before the date of the determination that the instrument is invalid if all of the following conditions are met:
(1) The contractor proceeded with construction, alteration, repair, or improvement based upon a good faith belief that the instrument was valid.
(2) The school district has reasonably determined that the work performed is satisfactory.
(3) Contractor fraud did not occur in the obtaining or performance of the instrument.
(b) In no event shall payment to the contractor pursuant to this section exceed the contractor’s costs as included in the instrument plus the cost of any approved change orders.
(c) Notwithstanding subdivision (a), this section shall not affect any protest and legal proceedings, whether contractual, administrative, or judicial, to challenge the award of the public works contract, nor affect any rights under Section 337.1 or 337.15 of the Code of Civil Procedure.
SEC. 2.
 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
As a result of a California appellate court decision that was published on June 1, 2015, that called into question the legality of lease-leaseback school construction agreements, school districts have indicated that additional legal challenges are now forthcoming. These challenges may seek disgorgement of all funds from the general contractor for projects that have been completed or are under construction, which may bankrupt even the most stable contractor. In order to ensure that contractors are not subject to disgorgement in these legal challenges if the contractor relied upon a good faith belief that the instrument was valid, it is necessary that this act take effect immediately.