North Dakota 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 North Dakota’s retainage requirements. The North Dakota retainage statutes are reproduced below on this page.

North Dakota Retainage for Private Projects FAQs

North Carolina Retainage FAQs

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

Retainage is limited to no more than 10% of each estimate presented.

How long can a party withhold retainage in North Dakota?

Once more than 50% of work is complete, no retainage is allowed to be withheld. Once the project is 95% complete, 95% of withheld funds may be released.

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

Retainage must be deposited in a North Dakota financial institution account bearing interest, with the interest accruing to the contractor.

How can I make a claim to recover retainage in North Dakota?

This is not specified in the North Dakota retainage statute.

Is there a specific notice required to recover retainage in North Dakota?

This is not specified in the North Dakota retainage statute.

North Dakota Retainage for Public Projects FAQ

North Dakota Retainage FAQs

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

Retainage is limited to no more than 10%.

How long can a party withhold retainage in North Dakota?

Once more than 50% of work is complete, no retainage is allowed to be withheld. Once project is 95% complete, 95% of withheld funds may be released.

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

Retainage funds must be deposited in a North Dakota financial institution account bearing interest, with the interest accruing to the contractor.

How can I make a claim to recover retainage in North Dakota?

This is not specified in the North Dakota retainage statute.

Is there a specific notice required to recover retainage in North Dakota?

This is not specified in the North Dakota retainage statute.

North Dakota Retainage Statutes

Getting informed about prompt payment laws is important. An examination of North Dakota’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. North Dakota’s specific laws can be found in: N.D. Cent. Code §43-07-23, § 40-22-37, §61-35-103 and § 54-18-18; and are reproduced below.

Retainage Statute on Private Projects

§43-07-23: Allowable retention of Estimates; Interest on Retainage

Contracts entered between persons for the performance of work to be done by a contractor, except those contracts subject to section 40-22-37 or 48-01.2-13, or contracts governed by federal statutes or regulations which require other provisions with respect to retention, are subject to a maximum retention on amounts due under the contract as follows: retention of ten percent of each estimate presented is allowable until such time as the project is fifty percent complete, with no further retainage on estimates during the continuance of the contract. If the owner, governing board, or authorized committee invests the retained estimate funds, the interest earned on those retained funds is payable at the time of final payment on the contract to the contractor on whose account the moneys were held.

§ 40-22-37: Contractor shall be paid during progress of work; Retainage; Failure to pay; Rate of interest; Investment of retainage

If the contractor to whom a contract is let properly performs the work therein designated, the governing body, at least once in each calendar month during the continuance of such contract work, shall meet, receive, and consider estimates furnished by the agent, engineer, or architect acting for the municipality or if not so furnished, then by the contractor, and shall allow such estimates in an amount of the estimated value of the labor and material furnished upon such contract, and of the material then upon the ground for use in such contract, subject to retentions equal to ten percent of each estimate presented until such time as the project is fifty percent completed, with no further retainage on estimates during the continuance of the contract. The governing body may, however, upon completion of ninety-five percent of the contract according to the estimates, pay to the contractor ninety-five percent of the amount retained from previous estimates. Any amount retained after ninety-five percent completion of the contract shall be paid to the contractor in such amounts and at such times as are approved by the municipality, upon estimates by its agent, engineer, or architect or the contractor, with final payment of all moneys due to the contractor to be made immediately following completion and acceptance of the project. The governing body, immediately after considering and allowing any such estimate, shall certify and forward the same to the city auditor or other official having the power to draw warrants, who forthwith shall draw a warrant upon the proper fund and transmit the same promptly to the contractor entitled thereto. In case the governing body shall fail or neglect to receive and allow such estimate or certify any estimate or final payment upon completion and acceptance or the proper officer required to issue such warrant shall fail or neglect to issue a warrant as provided herein, for a period of more than thirty days from the date of such estimate or completion date, then said estimate or final payment, together with any retainage properly payable, shall draw interest from its date at the rate per annum of two percentage points below the Bank of North Dakota prime interest rate as set thirty days from the date of such estimate or completion date until the issuance of a proper warrant therefor. Such interest shall be computed and added to the face of said estimate, final payment, or retainage by the officer required to issue such warrant, shall be included in the warrant when drawn, and shall be charged to the fund from which payment for the improvement is to be made. On the amounts of estimates retained, as provided herein, the governing board, authorized committee, or public body in charge of such work may invest or deposit the retained amounts in any financial association or institution in North Dakota earning interest or dividends for the benefit of the contractor. Any amounts so invested or deposited shall remain in the name of the governing board, authorized committee, or public body in charge of such work until final payment of all money due to the contractor is to be made. Further, no contractor shall use such account in any manner whatsoever until released and received by the contractor upon completion of the contract.

Retainage Statute on Public Projects

§43-07-23: Allowable retention of Estimates; Interest on Retainage

Contracts entered between persons for the performance of work to be done by a contractor, except those contracts subject to section 40-22-37 or 48-01.2-13, or contracts governed by federal statutes or regulations which require other provisions with respect to retention, are subject to a maximum retention on amounts due under the contract as follows: retention of ten percent of each estimate presented is allowable until such time as the project is fifty percent complete, with no further retainage on estimates during the continuance of the contract. If the owner, governing board, or authorized committee invests the retained estimate funds, the interest earned on those retained funds is payable at the time of final payment on the contract to the contractor on whose account the moneys were held.

§ 40-22-37: Contractor shall be paid during progress of work; Retainage; Failure to pay; Rate of interest; Investment of retainage

If the contractor to whom a contract is let properly performs the work therein designated, the governing body, at least once in each calendar month during the continuance of such contract work, shall meet, receive, and consider estimates furnished by the agent, engineer, or architect acting for the municipality or if not so furnished, then by the contractor, and shall allow such estimates in an amount of the estimated value of the labor and material furnished upon such contract, and of the material then upon the ground for use in such contract, subject to retentions equal to ten percent of each estimate presented until such time as the project is fifty percent completed, with no further retainage on estimates during the continuance of the contract. The governing body may, however, upon completion of ninety-five percent of the contract according to the estimates, pay to the contractor ninety-five percent of the amount retained from previous estimates. Any amount retained after ninety-five percent completion of the contract shall be paid to the contractor in such amounts and at such times as are approved by the municipality, upon estimates by its agent, engineer, or architect or the contractor, with final payment of all moneys due to the contractor to be made immediately following completion and acceptance of the project. The governing body, immediately after considering and allowing any such estimate, shall certify and forward the same to the city auditor or other official having the power to draw warrants, who forthwith shall draw a warrant upon the proper fund and transmit the same promptly to the contractor entitled thereto. In case the governing body shall fail or neglect to receive and allow such estimate or certify any estimate or final payment upon completion and acceptance or the proper officer required to issue such warrant shall fail or neglect to issue a warrant as provided herein, for a period of more than thirty days from the date of such estimate or completion date, then said estimate or final payment, together with any retainage properly payable, shall draw interest from its date at the rate per annum of two percentage points below the Bank of North Dakota prime interest rate as set thirty days from the date of such estimate or completion date until the issuance of a proper warrant therefor. Such interest shall be computed and added to the face of said estimate, final payment, or retainage by the officer required to issue such warrant, shall be included in the warrant when drawn, and shall be charged to the fund from which payment for the improvement is to be made. On the amounts of estimates retained, as provided herein, the governing board, authorized committee, or public body in charge of such work may invest or deposit the retained amounts in any financial association or institution in North Dakota earning interest or dividends for the benefit of the contractor. Any amounts so invested or deposited shall remain in the name of the governing board, authorized committee, or public body in charge of such work until final payment of all money due to the contractor is to be made. Further, no contractor shall use such account in any manner whatsoever until released and received by the contractor upon completion of the contract.

§61-35-103: Contractor to be paid during progress of work; Retainage; Failure to pay; Rate of interest; Investment of retainage.

If the contractor to whom a contract is let properly performs the work designated in the contract, the board, at least once in each calendar month during the continuance of the contract work, shall meet and receive and consider estimates furnished by the agent, engineer, or architect acting for the district or if not so furnished, then by the contractor, and shall allow such estimates in an amount of the estimated value of the labor and material furnished upon the contract, and of the material then upon the ground for use in the contract, subject to retentions as follows: ten percent of each estimate presented until such time as the project is fifty percent completed, with no further retainage on estimates during the continuance of the contract. Upon completion of ninety-five percent of the contract according to the estimates, the board may pay to the contractor ninety-five percent of the amount retained from previous estimates. Any amount retained after ninety-five percent completion of the contract must be paid to the contractor in such amounts and at such times as are approved by the district, upon estimates by its agent, engineer, or architect or the contractor, with final payment of all moneys due to the contractor to be made immediately following completion and acceptance of the project. Immediately after considering and allowing any such estimate, the board shall certify and forward the same to the district treasurer or other official having the power to draw bonds, who forthwith shall draw a warrant upon the proper fund and transmit the same promptly to the contractor. If the board fails or neglects to receive and allow such estimate or certify any estimate or final payment upon completion and acceptance or the proper officer required to issue such warrant fails or neglects to issue a warrant as provided in this section, for a period of more than thirty days from the date of such estimate or completion date, then the estimate or final payment, together with any retainage properly payable, draws interest from its date at the rate per annum of two percentage points below the Bank of North Dakota prime interest rate as set thirty days from the date of such estimate or completion date until the issuance of a proper warrant. Interest must be computed and added to the face of the estimate, final payment, or retainage by the officer required to issue the warrant, must be included in the warrant when drawn, and must be charged to the fund from which payment for the improvement is to be made. On the amounts of estimates retained, as provided in this section, the board, authorized committee, or public body in charge of the work may invest or deposit the retained amounts in any financial association or institution in this state earning interest or dividends for the benefit of the contractor. Any amounts so invested or deposited must remain in the name of the board, authorized committee, or public body in charge of the work until final payment of all money due to the contractor is to be made. Further, a contractor may not use or pledge such amount in any manner until released and received by the contractor upon completion of the contract.

§ 54-18-18: Contractor to be paid during progress of work; Retainage; Failure to pay; Rate of interest; Investment of retainage

If the contractor to whom a contract for construction or the provision of equipment to the association is let properly performs the work therein designated, the mill manager, at least once in each calendar month during the continuance of the contract work, shall meet, receive, and consider estimates furnished by the agent, engineer, or architect acting for the association or if not so furnished, then by the contractor, and shall allow such estimates in an amount of the estimated value of the labor and material furnished upon the contract, and of the material then upon the ground for use in the contract, subject to retentions of ten percent of each estimate presented until the time the project is fifty percent completed, with no further retainage on estimates during the continuance of the contract. Notwithstanding the requirements of any other law, the industrial commission may authorize the mill manager to prepay for equipment prior to delivery to the construction site if the industrial commission determines:

1. Prepayment is in the best interest of the association;

2. The association’s interest will be adequately protected; and

3. The equipment is of a type that is not fungible and could not be sold except at a discount to another because it is constructed to specifications required by the association

Upon completion of ninety-five percent of the contract according to the estimates, the association may pay to the contractor ninety-five percent of the amount retained from previous estimates. Any amount retained after ninety-five percent completion of the contract must be paid to the contractor in such amounts and at such times as are approved by the association, upon estimates by its agent, engineer, or architect or the contractor, with final payment of all moneys due to the contractor to be made immediately following completion and acceptance of the project. Immediately after considering and allowing any such estimate, the association shall certify and promptly draw a warrant upon the proper fund and transmit it to the contractor entitled to it. If the association fails or neglects to receive and allow the estimate or certify any estimate or final payment upon completion and acceptance for a period of more than thirty days from the date of the estimate or completion date, then the estimate or final payment, with any retainage properly payable, shall draw interest from its date at the rate per annum of two percentage points below the Bank of North Dakota prime interest rate as set thirty days from the date of the estimate or completion date until the issuance of a proper warrant therefor. Such interest must be computed and added to the face of the estimate, final payment, or retainage by the officer required to issue the warrant, must be included in the warrant when drawn, and must be charged to the fund from which payment for the improvement is to be made. On the amounts of estimates retained, as provided herein, the association may invest or deposit the retained amounts in the Bank of North Dakota earning interest or dividends for the benefit of the contractor. Any amount so invested or deposited must remain in the name of the association until final payment of all moneys due to the contractor is to be made. Further, no contractor shall use such account in any manner whatsoever until released and received by the contractor upon completion of the contract.