If I’m a sub on a job and have done over 50% of my work under contract, but the overall job is not 50% complete, can the GC still hold 10% on my future pay apps?
1 reply
Feb 4, 2020
First, note that Alabama contractors cannot withhold retainage at a rate which exceeds what's being withheld from them by the owner. i.e. If the owner is withholding 8% retainage from a contractor, then that contractor can withhold a maximum of 8% retainage from their subs.
Alabama retainage and the 50% rule
Further, as you hinted at above, after a project is 50% owners can no longer withhold additional payment from their contractors. And, the retainage withheld up to that point will constitute the retainage that's withheld for the entire job.
Contractors are similarly limited to what they can withhold from their subs. § 8-29-3(j) states that "after 50 percent completion has been accomplished, no further retainage shall be withheld" from a subcontractor. And, that language completely mirrors § 8-29-3(i) which creates the limitation on what an owner can withhold from their contractor.
So, because the language appears exactly in the same way, it would follow, then, that a retainage could be withheld from a subcontractor until the project is 50% complete. What's more, that section calls for "50 percent completion" and not something like "50% completion of that subcontractor's work." Though, there's likely an argument to be made that the 50% rule should come into play after the relevant subcontractor's work is 50% complete, not simply the entire project. From what I can gather, though, there doesn't seem to be a consensus on how to treat that rule.
For further discussion on Alabama retainage, or to read the relevant retainage statutes yourself, this resource should be valuable: Alabama Retainage Guide, FAQs, and Statutes.