Rules of retainage

State laws have been changing regarding payment of retainage for construction projects

Often prompted by lobbying efforts by the American Subcontractors Association, state legislatures have enacted an array of statutes governing retainage on construction projects. These statutes generally seek to limit the rate of retainage, particularly on large projects, to 5 percent of the contract amount and expedite the release of retainage when there is no problem justifying withholding it.

Three statutes

Massachusetts is the most recent state to enact legislation limiting retainage to 5 percent. Following negotiations between the Associated Subcontractors of Massachusetts and Associated General Contractors of Massachusetts,

Massachusetts enacted a statute in August 2014 applicable to private construction contracts entered into on or after Nov. 6, 2014. The new law limits the rate of retainage on private construction projects to 5 percent of each progress payment. The 2014 statute is the first legislation in Massachusetts governing retainage on private construction projects but applies only to projects with a prime contract value of $3 million or more and where a lien could be established. The statute applies to subcontracts as long as the prime contract with the owner is $3 million or more.