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TN Retainage Amount


We have a GC advising us that their TN project has special circumstances requiring them to hold out 10% of retainage. I have asked them to send us documents showing why they would need to hold that amount out. So far, we haven't received anything. Are there special circumstances that would require a privately owed college to have the right to hold out more than 5% in retainage?

1 reply

Jun 27, 2018
That's interesting, and requesting the GC's reasoning in writing is a good idea. In Tennessee, for both public and private projects, the maximum amount of retainage that can be withheld is 5%. Specifically, 66-34-103(a) of the Tennessee Prompt Payment Act reads "All construction contracts on any project in this state, both public and private, may provide for the withholding of retainage; provided, however, that the retainage amount may not exceed five percent (5%) of the amount of the contract." The Tennessee retainage laws do not appear to allow for the withholding of excessive retainage due to "special circumstances." " Further, under 66-34-103(e)(1) and (2), failure to comply with retainage requirements can result in a Class A misdemeanor, subject to a fine of $3,000. Further, each day that a party fails to comply with the retainage laws will result in a separate violation - so penalties can rack up quickly. Informing a contractor that is not in compliance with retainage laws that penalties may be incurred could help get a retainage policy back on track. Granted, that could certainly put a strain on a working relationship. Before mentioning potential penalties, a subcontractor from whom excessive retainage is being withheld might want to first insist upon receiving reasoning for the excess retainage in writing. If excess retainage persists, mentioning potential penalties and a willingness to make a claim to recover excess retainage might encourage a contractor to comply with retainage laws.
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