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Is retainage legal in Texas given the situation described below?

TexasRetainage

We are a small engineering firm that does not perform construction work or installation of materials. We were contracted to provide materials in accordance with someone else's design, perform an instructional visit to the job site to train the contractor to install the materials correctly, and finally to provide acceptance testing and approval of their installation. In our proposal we have language that prohibits the with holding of retainage if we did not install the materials, but our client with held the money anyway. Do we have any recourse and if so, what?

2 replies

Aug 18, 2021

An engineering firm that is not undertaking actual construction work on a project to improve real property would not be considered an "original contractor" for the purposes of the 10% retainage requirement.

If your contract does not envision retainage being withheld, and the owner is doing so, then the owner is in breach of contract. The breach of contract could entitle you to file your own mechanic's lien against the project.

Retain a construction attorney to evaluate your legal situation and to provide advice.

You should consider preparing a letter to mail by certified mail, return receipt requested, to the owner to set out the facts and to demand the relief that you want. Make sure that your letter is professional and business like as it may be evidence later.

If need be, consider filing suit in small claims court (assuming that your claim is less than $20,000), using your letter as evidence.

Good luck.

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Aug 18, 2021

I agree with Brian. 

I'll add that leveraging mechanics lien rights by sending notices and mechanics lien threats, like a Notice of Intent to Lien, could also force payment even when you might not be ready to pursue a mechanics lien or to take legal action. More on that here: What is A Notice of Intent to Lien And Should I Send One? 

But, as always, retaining a TX construction lawyer to advise you based on your situation and documentation is a great way to confidently pursue unpaid construction debts.

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