Is retention required to be paid by a certain time?

2 months ago

We are a subcontractor typically hired by GCs in California. In the past, we haven’t received our retention until the GC gets paid, which can sometimes be a year or longer after we finished our work. Is there any sort of deadline around when the GC is required to pay us our retention?

Managing Partner Gibbs Giden LLP

Good morning!

It is a fantastic question. Generally speaking, the GC gets paid retention within 45 days from completion of a private project (Civil Code § 8812) or 60 days from completion of a public project (Public Contract Code § 7107). If you monitor the project, you have a decent idea about when your GC is likely to receive its retention.

Of course, if you are an early trade contractor, you may want to negotiate for at least partial early release of your retention (e.g., 50% of your retention within 30 days of completion of your scope). This is a common deal point to discuss during contract negotiation. Also, although many GCs insist on “pay when paid” clauses, you can negotiate an ultimate end to this time frame (e.g., “…in any event, no later than 90 days from completion of subcontractor’s scope of work.”)

Finally, you may already know that prompt payment statutes exist on both private and public projects to ensure that GCs do not hold your money. Here is a quick summary:

PRIVATE PROJECTS:
-Direct Contractor to Subcontractor Progress Payments (and Subcontractor to Sub-Tier Trade Contractors): 7 days after receipt [B&P Code § 7108.5]
-Direct Contractor to Subcontractor Retention Payments:10 days after receipt [CC § 8814]

MOST PUBLIC PROJECTS:
– Direct Contractor to Subcontractor Progress Payments (and Subcontractor to Sub-Tier Trade Contractors): 7 days after receipt (waivable) [B&P Code § 7108.5 and PCC § 10262]
– Direct Contractor to Subcontractor Retention Payments:7 days after receipt [PCC § 7107]

I hope this is helpful!

—CN

Disclaimer: NOTE: The information presented here is general in nature and is not intended nor should be construed as legal advice for any particular case or client. The content contained herein is published online for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel. This posting does not create any attorney-client relationship and is neither intended to constitute an advertisement nor a solicitation.
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