Owner is delaying release of all retainage AFTER project completion due to warranty items, not completion of work. Isn’t this NOT what retention is withheld for?
2 replies
May 19, 2020
Retainage should not be withheld to force compliance with warranty agreements long after project completion. That's not what retainage is intended for. In fact, withholding retainage until after the warranty period is redundant - the warranty is the hook that pulls the contractors, subs, suppliers, etc. back to the job site to repair the work. And, retainage should generally be released upon the completion of work or some short time thereafter.
In Texas, an owner must typically release retainage within 30 days of project completion. So, if the owner is attempting to withhold retainage beyond that timeframe, then payment remedies - like sending a payment demand letter, pursuing legal in court or small claims court, sending the debt to collections, etc. - may be appropriate. And, if there's still time on the clock, then filing a mechanics lien could be a really effective recovery tool (and merely threatening a lien claim can be, too).
For further discussion on Texas' retainage requirements: Texas Retainage Guide and FAQs.
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May 22, 2020
ANSWER:
The time to pay retainage depends on when the contract between the owner and the contractor is completed. The owner is required to retain 10 percent of the contract price from payments due the contractor during the progress of the work, and for 30 days after the work is completed. "Completion” of the contract between the owner and the contractor means the actual completion of the work, including any extras or change orders reasonably required or contemplated under the original contract, other than warranty work or replacement or repair of the work performed under the contract.
This response is not intended (1) to create an attorney-client relationship between you and Fahl & Donaldson, PLLC; or (2) to be legal advice to you or your company. This response is for general information. We strongly encourage you to consult with your attorney on your specific legal matter, as each matter is unique.