Colorado Retainage Overview

Retainage serves two general purposes: (1) To provide an incentive to the contractor or subcontractor to complete the project; and (2) To give the owner some protection against problems like liens, contractual defaults, delays, and more.  In most states, laws exist to regulate how the parties use the retainage concept, mostly protecting some parties against abuse of the tool from others. The following are resources, legal information, and frequently asked questions about Colorado’s retainage requirements. The Colorado retainage statutes are reproduced below on this page.

Colorado Retainage for Private Projects FAQs

Colorado Retainage FAQs

Does Colorado limit the amount of retainage that can be withheld from a contractor?

Colorado does not appear to regulate retainage on private projects.

How long can a party withhold retainage in Colorado?

This is not specified in the Colorado retainage statute for private projects.

Does Colorado require retained funds be deposited in a special account? Can securities be substituted for retainage?

This is not specified in the Colorado retainage statute for private projects.

How can I make a claim to recover retainage in Colorado?

This is not specified in the Colorado retainage statute for private projects.

Is there a specific notice required to recover retainage in Colorado?

This is not specified in the Colorado retainage statute for private projects.

Colorado Retainage for Public Projects FAQ

Colorado Retainage FAQs

Does Colorado limit the amount of retainage that can be withheld from a contractor?

Colorado law authorizes that up to 5% of the contract price may be retained from a contractor.

How long can a party withhold retainage in Colorado?

The retainage may be withheld until the contract is completed satisfactorily and finally accepted by the public entity. Upon request by the contractor, the public entity can release the retainage if satisfied with the progress being made. Whenever such contractor receives payment, it has 7 calendar days to pay its subcontractors.

Does Colorado require retained funds be deposited in a special account? Can securities be substituted for retainage?

Colorado law does not require retained funds be deposited in a special account. However, the law does allow for securities to be substituted for retainage.

How can I make a claim to recover retainage in Colorado?

There is no specific process set out by Colorado law.

Is there a specific notice required to recover retainage in Colorado?

There is no specific notice required by statutory law.

Colorado Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Colorado’s retainage laws, the rules and regulations related to the amount and timing of allowable retained payments, is important to know your rights and responsibilities as a party on a construction project. Colorado’s specific laws can be found in: Col. Rev. Stat. § 24-91-103 and §§ 24-91-105, -108, and are reproduced below.

Retainage Statute on Private Projects

N/A

Colorado does not provide a retainge statue for private projects.

Retainage Statute on Public Projects

§ 24-91-103: Public Entity; Contracts; Partial Payments

(1) (a) A public entity awarding a contract exceeding one hundred fifty thousand dollars for the construction, alteration, or repair of any highway, public building, public work, or public improvement, structure, or system, including real property as defined in section 24-30-1301 (15), shall authorize partial payments of the amount due under such contract at the end of each calendar month, or as soon thereafter as practicable, to the contractor, if the contractor is satisfactorily performing the contract. The public entity shall pay at least ninety-five percent of the calculated value of completed work. The withheld percentage of the contract price of any contracted work, improvement, or construction may be retained until the contract is completed satisfactorily and finally accepted by the public entity.

(b) The public entity shall make a final settlement in accordance with section 38-26-107, C.R.S., within sixty days after the contract is completed satisfactorily and finally accepted by the public entity.

(c) If the public entity finds that satisfactory progress is being made in any phase of the contract, it may, upon written request by the contractor, authorize final payment from the withheld percentage to the contractor or subcontractors who have completed their work in a manner finally acceptable to the public entity. Before the payment is made, the public entity shall determine that satisfactory and substantial reasons exist for the payment and shall require written approval from any surety furnishing bonds for the contract work.

(2) Whenever a contractor receives payment pursuant to this section, the contractor shall make payments to each of his subcontractors of any amounts actually received which were included in the contractor’s request for payment to the public entity for such subcontracts. The contractor shall make such payments within seven calendar days of receipt of payment from the public entity in the same manner as the public entity is required to pay the contractor under this section if the subcontractor is satisfactorily performing under his contract with the contractor. The subcontractor shall pay all suppliers, sub-subcontractors, laborers, and any other persons who provide goods, materials, labor, or equipment to the subcontractor any amounts actually received which were included in the subcontractor’s request for payment to the contractor for such persons, in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. If the subcontractor fails to make such payments in the required manner, the subcontractor shall pay said suppliers, sub-subcontractors, and laborers interest in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. At the time the subcontractor submits a request for payment to the contractor, the subcontractor shall also submit to the contractor a list of the subcontractor’s suppliers, sub-subcontractors, and laborers. The contractor shall be relieved of the requirements of this subsection (2) regarding payment in seven days and interest payment until the subcontractor submits such list. If the contractor fails to make timely payments to the subcontractor as required by this section, the contractor shall pay the subcontractor interest as specified by contract or at the rate of fifteen percent per annum whichever is higher, on the amount of the payment which was not made in a timely manner. The interest shall accrue for the period from the required payment date to the date on which payment is made. Nothing in this subsection (2) shall be construed to affect the retention provisions of any contract.

(3) (Deleted by amendment, L. 2011, (HB 11-1115), ch. 211, p. 912, 2, effective August 10, 2011.)

§ 24-91-105: Withdrawal by Contractor of Sums withheld - Security Deposit Required

The contractor under any contract exceeding one hundred fifty thousand dollars made or awarded by any public entity, pursuant to which sums are withheld to assure satisfactory performance of the contract, may withdraw the whole or any portion of the said sums withheld if the contractor deposits acceptable securities with the public entity. The contractor shall take such actions as the public entity may require to transfer the securities or a limited interest in the securities, including a security interest, and to authorize the public entity to negotiate the acceptable securities and to receive the payments due the public entity pursuant to law or the terms of the contract, and, to the extent there are excess funds resulting from said negotiation, the balance shall be returned to the contractor. Such acceptable securities so deposited at all times shall have a market value at least equal in value to the amount so withdrawn. If at any time a public entity determines that the market value of the acceptable securities theretofore deposited has fallen below the amount so withdrawn, the public entity shall give notice thereof to the contractor, who forthwith shall deposit additional acceptable securities in an amount sufficient to reestablish a total deposit of securities equal in value to the amount so withdrawn.

§ 24-91-108: Retained Payments - Amount Deducted by Public Entity

Any amount deducted by a public entity, pursuant to law or the terms of a contract, from the retained payments otherwise due to the contractor thereunder shall be deducted first from that portion of the retained payments for which no acceptable securities have been substituted and then from the proceeds of any deposited acceptable securities, in which case, the contractor shall be entitled to receive the interest, coupons, or income only from those acceptable securities which remain on deposit after such amount has been deducted.

§ 24-91-109: Retained Payments - disbursement

All retained payments and interest thereon disbursed to any contractor under any contract with a public entity covered under this article shall be disbursed to each subcontractor by the contractor. The disbursement of such retained payments and interest shall be in proportion to the respective amounts of retained payments, if any, which the contractor theretofore has withheld from his subcontractors if the subcontractor has performed under his contract with the contractor.