Retention Bill Turning Construction Payments Upside Down About to Pass

By: Geoff Bryce

Senate Bill SB1636 awaits the governor’s signature and most construction attorneys believe it will pass.

In short, the bill states that at the start of the construction contract, retainage can be 10% but after 50%, complete retention can only be 5%.

A myriad of questions are left open, some of which are:

1. Does the statute apply to first tier contractors only?
2. Does the statute apply to second tier contractors? Assuming a paid-if-paid clause, and the general contractor does not pay the subcontractor—does the subcontractor have a claim?
3. What about the third tier subcontractor? Does the second tier subcontractor have to pay the third tier subcontractor when the third tier meets 50%?
4. What constitutes 50% complete? Hours? Dollars? Completion of CPM schedule?

Once enacted, the true impact will likely be settled in court.