Retainage

Cash flow scarcities, payment delays and disagreements are common problems that result from retainage. This can make it problematic to pay for labor, materials and overhead costs. The purpose of retainage is to incentivize contractors to complete a job according to the contract terms and to the owner’s satisfaction by withholding a portion of their payment until substantial completion of the project.

On November 17, 2023, Gov. Kathy Hochul signed Senate Bill S.3539/A.4167, also known as the 5 Percent Retainage Bill, into law. This bill amends the New York General Business Law Sections 756-a and 756-c relating to payment and retainage in construction contracts. The purpose of this new law is to decrease delays in the release of retainage on private construction projects that have met substantial completion.

A copy of the bill can be found at the following link: www.nysenate.gov/legislation/bills/2023/S3539.

Retainage is a critical component in construction contracts, as it creates the necessary security EVENTS 2024 Off The Wall | 5 measures for all of the parties involved. It ensures that the contractor does not abandon the project and completes the work on time and according to the terms of the contract. Though retainage can lead to cash flow problems, all the parties can mitigate the risk by clearly documenting the terms and creating a payment schedule that allows flexibility for all of the parties.

Retainage laws vary by state, so it’s important to know the regulations in your area. Before you sign a contract, do your research, and make sure you understand the retainage requirements and compare them to industry standards. Retainage is such a complex and controversial topic in the construction industry and varies by market, project and contract. So, it is imperative for contractors and subcontractors to be aware of current trends and challenges in retainage.

I look forward to seeing everyone at the upcoming WC&C Annual Convention in Naples, Florida, at the beginning of March. For more information, please visit www.wcc-ny.com/events-lineup.

Michael Weber, President