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The 5 percent retainage is not limited to commercial construction correct?I recently dealt with a contractor that was threatening subs to withhold payments from separate contracted jobs due to problems with different jobs In which they were paid in full on. So my question is, can you legally withhold monies from one contract against another?

3 months ago

My wife works for a roofing company and her boss is asking her to withhold payments from subs on roofs they did in 2017 that had problems. They have separate contracts for each individual job.

Senior Legal Associate Levelset

That’s an interesting question, and I’m sorry to hear she’s been put in this position. First and foremost: retainage cannot be withheld from one job resulting from alleged issues with some other, completely unrelated job. While retainage is generally allowed in some capacity, it’s limited to the job at hand. So, once payment has been made in full for a job, latent issues that pop up afterward shouldn’t result in payment being withheld from some other job.

As far as commercial vs. residential jobs – it appears that retainage is limited to 5% both commercial and residential construction projects. But, 5% is just that – a limit. Of course, keep in mind that retainage is also limited by what’s in the contract. So, if the contract for residential construction work does not provide for the withholding of retainage, it probably shouldn’t be withheld. And, if retainage limits are set out under the contract, those limits should generally be followed (so long as they’re at 5% or below, in Minnesota).

Also – keep in mind that Minnesota’s retainage rules are changing in August of 2019. Keep an eye out, because we’ll be releasing a breakdown of those new rules before they go into effect. In the meantime, you can read the rules for yourself here.

For more information on retainage rules and practices, these resources will be valuable:
(1) Minnesota Retainage Overview, FAQs, and Statutes
(2) Retainage in Construction | Guide, FAQs, Rules, & Help
(3) Ultimate Guide to Retainage in the Construction Industry.

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