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Texas law on construction retainage vs construction contract

TexasRetainage

Retainage is not mentioned in the new private residential construction contract. Texas state law requires home owner to withhold a 10% retainer. The project is 70% complete. Retainage has not been withheld so far. Can the home owner retroactively require funds already paid be refunded as retainage or place in trust escrow or withhold due payments as retention until retainer the 10% retainer law has been met.

1 reply

May 1, 2021

If the property is the owner's homestead (the owner owns it and intends to live there), then the contractor would have to perfect a homestead mechanic's lien contract with the statutory lien warnings set out in Texas Property Code sections 53.254, et seq., and have husband and wife sign a written contract, and file the contract with the county clerk. These steps typically do not happen. Without these steps, any lien filing would be invalid.

If there is no ability to file a mechanic's lien, the homestead owner is not required to withhold 10% (or any amount of) retainage.

If the contract does not provide for retainage, then the withholding of retainage could be a breach of contract.

Retain a construction attorney to evaluate your legal situation, and to provide advice.

Good luck.

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