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Retainage Escrow Accounts and Retainage on Materials

Two questions regarding retainage: 1. I understand that in Louisiana the owner is required to put retainage in an interest bearing escrow account. How do I, as the GC make claim to the interest? 2. Is retainage also passed on to material suppliers or only subcontractors?

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Apr 20, 2020

Louisiana’s Private Works Act at La. R.S. 9:4817 establishes the mandatory escrow of retainage funds on certain private projects. The mandatory escrow of retainage funds only applies to private contracts of $50,000 or more that permit the owner to withhold retainage from periodic payments due the contractor. Further, the requirement only exists relative to contracts between an owner and contractor. The statute provides that the escrow account shall be interest bearing and located at a qualified financial institution selected by mutual agreement between the owner and the contractor. Upon completion of the work, the funds, including interest, shall be paid to the contractor as follows: • If there are no existing claims by the owner, the whole amount shall be paid to the contractor within three business days upon receipt by the escrow agent of a written release signed by the contractor and the owner. If there is a dispute as to payment between the owner and contractor, then the procedure changes with respect to the disputed amounts: • Undisputed amounts shall be released by the escrow agent within three business days of receipt of a notarized request of the contractor. • Disputed amounts that are the subject of a judicial proceeding or binding arbitration shall be released by the escrow agent within three business days of the receipt of a final order by the court or arbitrator. Upon receipt of the order, the escrow agent shall pay the contractor or owner such amounts as are determined by the court or arbitrator. While these are the general rules, keep in mind that the facts of every case are different and may lead to a different result. For instance, in addition to the general rules above, La. R.S. 9:4817 completely exempts several types of residential and industrial construction projects from the mandatory escrow requirements. As such, we recommend that you consult with a local construction attorney who can best evaluate the facts of your case and your rights under the law. If I can be of any further assistance, I can be reached via email at beng@spsr-law.com or by telephone at (504) 569-2992.

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