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Can a commercial GC withhold progress payments from past months for punch?

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We are seeing and increased incidence of general contractors withholding progress payments from past months for completion of punch list. In example, we were just told progress payment submitted as an August invoice was on hold pending punch completion. Isn't that what retainage is for? Is that legal?

1 reply

Dec 29, 2021

The legal analysis would start with a review of the contract and then extend to invoices, and communications which have occurred.

Typically, a general contractor can withhold sufficient money to cover the costs of remedying deficient work performed by a subcontractor. For example, if half of a subcontractor's work is defective and may have to be replaced, the general contractor would likely withhold more than the 10% retainage.

If all that is left is a punch list and the retainage should cover the costs of having another subcontractor perform the punch list work, then the general contractor should not withhold more than the retainage.

The affected subcontractor should consider preparing a letter to mail by certified mail, return receipt requested, to the general contractor to set out the facts and to demand the relief that is appropriaate. Make sure that the letter is professional and business like as it may be evidence later.

Good luck.

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