Can a GC hold retention from one job location for another location of work performed?

3 months ago

retention of approx., $3000 is bening held in lieu of another location completed

Senior Legal Associate Levelset

I’m sorry to hear you’ve had trouble getting your hands on retainage – retention practices in the construction industry can be abusive, at times. While retention can feel like a lawless game, California is pretty strict about how retainage payments are handled – and retainage from one location cannot be used as ransom to complete another project. In fact, in California, retainage amounts that aren’t directly related to some good faith dispute can’t be withheld on the same job – much less when there’s no good reason for withholding retention on some other job.

Keep in mind though – if retainage practices have been set out in the contract for work, or if the prime contractor hasn’t been paid themselves – retainage might not yet be due. But, where retainage is being improperly withheld, interest penalties and further liability could come into play. So, threatening to make a claim for retainage could be an effective tool for recovering retainage payments.

Further, keep in mind that whenever payment is owed but not actually made for construction work performed, those amounts will generally give rise to mechanics lien rights. And, by threatening to utilize a mechanics lien, many prospective claimants find that they can grease the wheels toward payment. At the same time – trying to talk out the issue before resorting to a mechanics lien threat or an actual lien filing is almost always a preferable option, and sending a document like a Notice of Intent to Lien or proceeding with a mechanics lien filing could impact relationships.

For more information on California’s retainage laws, these resources will be valuable: (1) California Retainage Overview; and (2) California Retainage Laws Make More Sense After Supreme Court Ruling.

For more information on California mechanics lien rights, this should be helpful: California Lien & Notice Overview.

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