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Do HUD funded projects trump State retainage laws?

I'm a subcontractor in Tennessee where we have a 5% retainage law. We recently completed two large HUD funded projects for a GC who is holding 10% based on HUD requirements. Does Federal trump State in this instance as the fines for holding more than 5% in TN are hefty.

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Dec 13, 2019

The rules related to retainage (like the rules related to bond protection, and preliminary notice requirements, if any) are based on the project type. Federal projects, are governed by federal law, no matter where the physical work of improvement is located. State or local projects, however, are governed by state law. With respect to retainage, there can be differences between hat is allowed by federal rules and requirements, and the limits and deadlines imposed by state law, like Tennessee's. If the project at issue is being contracted for by the U.S. Dept. of Housing and Urban Development, it is likely a federal project, to which federal rules apply.

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