Home>Levelset Community>Legal Help>contractor is holding 10% retention

contractor is holding 10% retention

CaliforniaRecovery OptionsRetainage

I have completed my subcontractor work on a project over 3 months ago. I believe the project has been completed for months. GC is holding 10% retention on 100% work completion for 3 months.

1 reply

Jan 9, 2019
I'm sorry to hear about that. First, I'll mention that the most powerful tool in construction payment recovery is typically a mechanics lien. If there's time, filing a mechanics lien for amounts that owed but unpaid is often a good option. However, California has strict notice and deadline rules surrounding lien claims. For one, in order to preserve the right to lien, a subcontractor must provide preliminary notice within 20 days of first furnishing labor and/or materials to the job. Regarding the timeframe - California subs and suppliers will generally have 90 days after the completion of the project to file a mechanics lien. That is, unless a Notice of Completion or Cessation was filed, marking the end of the project. Where such a notice has been filed, a lien claimant will only have 30 days from that notice to file their lien claim. Of course, regardless of whether the notice or deadline requirements leave a claimant ineligible to file a valid and enforceable lien, a claimant can still utilize the threat of lien in order to compel payment - and using such a threat before actually filing a mechanics lien can help to recover payment while also avoiding further dispute. By showing a project owner and contractor that you are prepared to file a lien, you can show them you mean business about recovering payment. zlien discusses that idea in depth here: What is a Notice of Intent to Lien, and Should You Send One? Of course, California also has rules that strictly apply to the payment of retainage, and the potential penalties under those rules can also be leveraged for payment. In California, retainage between the project owner and their prime contractor must be released within 45 days of project completion. Once the contractor receives their retention payment, that contractor must release retention amounts to their subs and suppliers within 10 days of receiving payment. Note, though, that if there's a dispute over retainage, a party may be entitled to withhold up to 150% of the disputed amount. But any amounts withheld due to a dispute must be directly tied to the dispute (so a contractor can't just hold funds that aren't directly related to a dispute). When funds are improperly withheld, the party who is owed payment is entitled to 2% interest per month as a sort of "late fee". However, in order to actually receive interest, a claimant may need to file suit to recover improperly retained amounts. The good news there, being, that if a claimant prevails in such a suit, they might be awarded attorney fees. Still - litigation can be risky, so utilizing the mere threat of making a retainage claim can be an effective tool for recovery, too. For more background on California's mechanics lien rules, this article may be helpful: California Lien & Notice FAQs. For more on California Retainage and Prompt Payment rules, zlien has resources on that too: California Retainage FAQs and California Prompt Payment FAQs.
0 people found this helpful