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The question is legality and rights to Escrow $ being held in NY as a subcontractor for 12 months now

New YorkConstruction Contract

Im a tile subcontractor for a lager corp we have not worked for them over 12 months at this point. We are told after 12 months they will release our escrow ck that was 3/29/19 so technically due today .I just want to have the legality in what they owe as far as interest for last 12 months plus what the legality for them to pay at this point in NY How should I Proceed ? Im sending a letter of intent for retainage this week any other advice would be great. Thanks

1 reply

Apr 7, 2020

New York's retainage statute doesn't require that retainage be withheld in escrow - for public or private projects. Thus, it also doesn't require that retainage be withheld in an interest-bearing escrow account. So, since the statute doesn't provide much guidance there, it will probably come down to the terms of the contract. If the contract allows for retainage to be kept in escrow, and if the contract also requires that interest be paid then it should generally be paid. If the contract is silent on interest, then it's anyone's guess - but it might be safer to assume that interest won't be included. However, as we'll discuss below, there are strict timeframes for releasing retainage in New York. And, if a customer withholds retainage too long, they'll generally be liable for interest penalties. So, by bringing a claim to collect on that interest - or at least threatening to do so - it should be possible to collect interest. And, for help doing that, consulting with a New York construction attorney would be invaluable.

New York's retainage timeline and interest requirements

The timeframe for releasing retainage depends on whether the project is public or private. You can find background info on both public or private projects in NY here: New York Retainage Guide and FAQs. For private projects - retainage must generally be released within 30 days of the completion or acceptance of the improvement (i.e. the project as a whole). And if an owner, contractor, or other party fails to pay retainage on time, then interest will accrue at 1% per month. For public projects - the public owner must release retainage to their contract within 45 days (shortened to 30 days in NYC) of the project completion or acceptance. And, that contractor must then release payment to their subs and suppliers within 7 days. If that retainage is paid late, interest penalties will apply. Notably, though - if the project hasn't been completed, then retainage deadlines may not have begun to run. And, in that case, it may be up to the claimant and their customer to work out a better arrangement.

Collecting retainage payments

Mechanics lien claims are a great way to force payment. And, as you mentioned above, sending a Notice of Intent to Lien can be a very useful tool for forcing payment before actually having to proceed with a lien claim. Still - pursuing legal claims will be an option, too. And, consulting with a New York attorney is the best way to ensure you understand your rights and make the best recovery decision. For more information on retainage as well as New York lien claims, these resources will be useful. - Retainage Guide & FAQs - The Ultimate Guide to Retainage in the Construction Industry - New York Mechanics Lien Guide and FAQs - How to File a New York Mechanics Lien – Step By Step Guide to Get You Paid

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