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Is it legal for the general contractor to hold retainage the duration of the warranty?

HawaiiConstruction ContractRetainage

I finished a federal project and it was accepted as complete. all lien releases are in and clear. I was told by the GC that they are holding our retainage for the duration of the warranty. Is this legal?

1 reply

Mar 9, 2020
Retainage is generally allowed on federal jobs, if the parties agree to it. But, if the contract for work didn't specify that retainage would be withheld, then a customer shouldn't withhold retainage on a federal job. And, a customer's improperly withholding retainage on a federal construction project can create a world of pain for that customer if they're overbilling the public agency. Plus, if retainage is specifically allowed by the contract, then it should only be withheld for the amount of time allowed by the contract. Withholding retainage for the entire period of the warranty seems quite excessive. And, the mere inclusion of a warranty doesn't mean that the customer is entitled to hold retainage until that warranty elapses. That's the point of a warranty - for the party who performed work to come back and make repairs, as needed. So, when there's a warranty in place, holding onto retainage as well is a bit like wearing a belt with suspenders. As mentioned above, though, retainage on federal jobs will usually be highly dependent on the contract. So, for the most clarity on how long retainage can be withheld on your job, it'd be wise to consult with a local construction attorney who's got familiarity with federal construction projects. They'll be able to review the project documentation as well as other communications about retainage, then advise on how best to move forward and get paid.
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