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Can a GC hold funds from one project to another?

CaliforniaLien WaiversPayment DisputesPrompt PaymentRetainageSlow Payment

We are a sub tier subcontractor and our GC put a hold on funds for "project a". The reason is because the tier above us (who we are subcontracted to) will not provide an unconditional lien release for "project b". They are 2 different projects with 2 different contracts. I would think that this is illegal due to prompt payment laws? We have been paid in full including retention for project b.

1 reply

Aug 13, 2020
Generally, no - a contractor cannot legally withhold payment from one job due to an unrelated issue on another job. As you mentioned above, CA's prompt payment laws restrict the reasons for which payment can be withheld. Really, withholding should only be done pursuant to a valid retainage agreement or in response to an issue on the job. And, even if there is an issue on the job, the value of payment being withheld must directly tie to the value of the issue which causes payment to be withheld. You can learn more about those rules here: California Prompt Payment Guide & FAQs; and California Retainage Rules & FAQs. As a practical matter, asking the contractor for direct payment or to use joint checks might speed up payment. Or, providing an unconditional waiver for the job where full payment was made might do the same. Putting pressure on the customer to resolve the payment issue would also be a worthwhile pursuit. And, of course, threatening to file a lien claim or threatening to pursue another payment claim due to the improper withholding might get the job done, too.
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