retainage vs prompt payment

2 weeks ago

What if State Law allows 5% Retainage. Do Prompt Payment Requirements negate the Developer or GC from holding Retainage?
Retainage Act provisions says “A. Except as provided in Subsection B of this section, all construction contracts shall provide that payment for amounts due, except for retainage, shall be paid within twenty-one days after the owner receives an undisputed request for payment.”
Prompt Payment Law says “When making payments, an owner, contractor or subcontractor shall not retain, withhold, hold back or in any other manner not pay amounts owed for work performed”

Thanks!
Miriam

Senior Legal Associate Levelset

By and large, New Mexico prohibits the use of retainage on its constructon projects. However, as mentioned in your question, retainage is allowed for a few specific project types.

Exceptions to New Mexico’s prohibition on retainage

The “Except as provided in Subsection B…” language comes from  § 57-28-5 of the New Mexico retainage statute. Section B allows a local public entity to withhold payment when grant money is a source of funding. Additionally, New Mexico Statute § 67-3-48 allows for retainage to be withheld on public road work projects.

On all other New Mexico construction projects, retainage is not permitted to be withheld.

Specific exceptions created by statute are generally preferred over broad, sweeping provisions

When specific exceptions are created by law, those exceptions will generally stand – even when, conceivably, they may run counter to another, more broad statutory provision or requirement. So, when the exceptions to New Mexico’s retainage rules apply to those very specific circumstances, retainage is generally allowable. But, if the exception does apply, it’s likely fair to assume that the exception wouldn’t then be nullified by a broad prompt payment requirement.

Additional resources

For more information on New Mexico’s retainage and prompt payment laws, here are two great resources:

– New Mexico Retainage Guide and FAQs
– New Mexico Prompt Payment Guide and FAQs

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