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Retainage on equipment

New YorkConstruction ContractRetainage
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Anonymous contractor
Jun 24, 2020

We are a manufacturer's rep for commercial HVAC equipment - meaning we purchase from the manufacturer and then ship it to a job site. We bill the mechanical contractor who ordered it from us and they do the installation (set the unit, piping, etc.) and then part of our obligation is to provide a factory authorized company to officially start up the unit, who we hire and pay as a subcontractor. Question is - when we bill the mechanical contractor for the unit, they are holding 10% retainage on our invoices. Note that we do not bill the entire amount of our sale to them (for example, if the unit is $25,000, we bill only $24,000 and leave $1,000 balance to bill when the unit has been satisfactorily started up. Do they have the right to hold this 10% of the $24,000? If not, can I get a copy of the law that addresses this? Thanks!

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Anonymous contractor
Jul 8, 2020
On New York commercial projects, retainage is set out by the contract and will be allowed as long as the amount being withheld is reasonable. So, if your agreement with your customer allows for 10% retainage, generally, it can be withheld. If the agreement doesn't specifically allow that retainage will be withheld, then it probably shouldn't be withheld - and it might be a good idea to discuss the matter with the customer to clear the air and adjust the agreement, as necessary. To cite statute - GBS § 756-c states that retainage can be withheld upon mutual agreement between the relevant parties, as long as that amount doesn't exceed the retainage being withheld by the owner. For further discussion on retainage, these resources might be helpful: - New York Retainage Laws | A Guide to Public & Private Projects - New York Retainage Guide and FAQs - The Ultimate Guide to Retainage in the Construction Industry
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