We hired a sub-tier contractor on a job, we are the sun contractor. The sub-tier could not finish the work, they required more laborers. We had to hire other contractors to complete the work. Can we keep the retainage from the sub-tier contractor for work he did not complete?
Florida's laws only specifically regulate retainage on public projects, if the project at issue is a private work of improvement, retainage will be regulated by the contract. However, the general purpose of retainage is to:
1) To provide an incentive to the contractor or subcontractor to complete the project; &
2) To give the owner (or other upper-tier party) some protection against problems like liens, contractual defaults, delays, and more.
Usually, if there is a good faith dispute about the work retainage amounts may be withheld. On Florida public projects, the amoutn withheld can be up to 150% of the value of the disputed work / work to be completed.
If the contract is not explicit with respect to retainage, payment overall can generally be withheld when a party is in material breach of the contract or there is some other bona fide good faith dispute over the work. However, there are a lot of considerations to take into account with respect to when it is appropriate to withhold payment, and when a party is in breach of the contract. While it is usually allowed to withhold payment when the work is not done, and others had to be hired to complete or fix deficient work, there may be arguments on the sub-sub's side with respect to payment. For example, if the kept/unpaid amount is greater than the difference between the contract price and the value of the work provided, the excess should generally be paid so that the party is compensated for the work actually done.