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what step need to be taken to protect subcontractor's rights to recover retainage ?

TennesseeMechanics LienRetainageRight to Lien

All progress payments have been made and I wish to protect my rights to collect retainage as a subcontractor on a commercial project. I am coming close to 90 days since my last presence on the job.

1 reply

Nov 19, 2019
Protecting the right to recover retainage can be a little tricky in Tennessee due to the state's mechanics lien deadline running a bit shorter than the deadline to release retainage. In any case: one of the best ways to ensure the right to recover retainage is to keep mechanics lien rights alive. Retainage represents amounts owed for work that's been performed - so, those amounts should be lienable in most cases. Ultimately, if a subcontractor wants to file a mechanics lien for their unpaid retainage amounts, that subcontractor is entitled to file a mechanics lien - but that lien must be filed within 90 days of last furnishing labor or materials to the project. More on Tennessee mechanics lien rights, here: Tennessee Mechanics Lien Guide and FAQs.

Options for recovering Tennessee retainage payments outside of the mechanics lien process

Of course, a claimant can also elect not to file a mechanics lien if they believe retainage will soon be paid. But, if a claimant forgoes their right to file a mechanics lien for retainage, they may be a little limited in their options for recovering payment.

Invoice reminders

Sometimes, all it takes is a little push to speed up payment. Sending a document like an invoice reminder might work to get paid - nudging a customer in the right direction may be all it takes.

Payment demand letters

Escalating things a step further with a payment demand letter could be helpful, too. Sending a demand letter that contains specific legal threats (including, potentially, the claims discussed below) can work as an even stronger push for payment.

Legal claims

Payment is a crucial term for any construction contract. And, if payment isn't being made as the contract requires, failure to pay could result in a breach of contract claim for the unpaid party. What's more, Tennessee has specific retainage laws that impose penalties on contractors who fail to timely release payment to their subs. A contractor must be retainage paid by their owner within 90 days of the substantial completion of the project, then that contractor must pay their subs within 10 days of their receipt of payment. And, if a contractor has been paid in full but failed to timely pay their sub, the subcontractor will generally have a legal claim to recover retainage and be entitled to interest penalties. These are just two remedies that may be available. If retainage is being slow paid, it could be helpful to consult with a local construction attorney to best assess what options are on the table - especially where the deadline to lien has come and gone.

Small claims court can streamline legal claims

Depending on the size of the dispute, if legal claims do become necessary to recover retainage, Tennessee small claims court might be an option to streamline legal claims. In Tennessee, a claimant can file suit in small claims court for disputes of $25,000 or less. I hope this was helpful in shedding some light on different options for recovering retainage. For more on the topic, these resources should be valuable:
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