Kentucky Retainage Guide and FAQs

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Kentucky Retainage Overview

Kentucky Retainage Requirements

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Retainage 10% Icon
10% Retainage Limit

Retainage must not exceed 10%

Payment Period 30 Days Icon
30 Day Pay Period

Within 30 days after substantial completion of a project, retainage funds shall be released less an amount equal to 200% of the estimated cost of work remaining. Retainage funds must be released within 30 days after substantial completion of the project. If any work remains upon substantial completion, up to 200% of the amount of the remaining work may continue to be withheld as retainage.

NO
PROCESS
There's No Process to Recover

Not specified

No Escrow Icon
Not Held In Escrow

In Kentucky, contractors and owners do not need to hold retainage funds in a separate escrow account.

Retainage 10% Icon
10 Percent

Retainage cannot exceed 10%.

Payment Period 30 Days Icon
30 Day Pay Period

"
Retainage must be released within 30 days after substantial completion, but 200% of the estimated cost of any incomplete work may still be withheld."

YES
PROCESS
There is a Process to Recover

Yes, retainage release is predicated on timely, proper, and undisputed request for payment.

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Retainage serves two general purposes: (1) To provide an incentive to the contractor or subcontractor to complete the project; and (2) To give the owner some protection against problems like liens, contractual defaults, delays, and more.  In most states, laws exist to regulate how the parties use the retainage concept, mostly protecting some parties against abuse of the tool from others. The following are resources, legal information, and frequently asked questions about Kentucky’s retainage requirements. The Kentucky retainage statutes are reproduced below on this page.

Kentucky Retainage Frequently Asked Questions

Kentucky Retainage Private Projects FAQs

Does Kentucky limit the amount of retainage that can be withheld from a contractor?

Retainage must not exceed 10%. Upon 50% completion of the project, the retainage must be reduced to 5%.

How long can a party withhold retainage in Kentucky?

Within 30 days after substantial completion of a project, retainage funds shall be released less an amount equal to 200% of the estimated cost of work remaining. Within 15 days of retainage funds being released to the contractor, the contractor shall release to the subcontractors their proportional shares of the retainage.

Does Kentucky require retained funds be deposited in a special account? Can securities be substituted for retainage?

This is not specified in the Kentucky retainage statute.

Is there a specific notice required to recover retainage in Kentucky?

This is not specified in the Kentucky retainage statute.

Kentucky Retainage Public Projects FAQs

Does Kentucky limit the amount of retainage that can be withheld from a contractor?

Retainage must not exceed 10%. Upon 50% completion of the project, retainage must be reduced to 5%. Upon substantial completion of the project, the contractor may withhold up to 200% of the estimated incomplete work still required under the contract.

How long can a party withhold retainage in Kentucky?

Within 30 days after substantial completion of a project, retainage funds may be released less the 200% of the estimated cost of uncompleted work still required contract. Subcontractors must receive retainage funds within 15 days of the funds being released to the contractor.

Does Kentucky require retained funds be deposited in a special account? Can securities be substituted for retainage?

This is not specified in the Kentucky retainage statute.

How can I make a claim to recover retainage in Kentucky?

Contractor or subcontractor must submit a timely, properly completed, and undisputed request for payment.

Is there a specific notice required to recover retainage in Kentucky?

See above.

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Kentucky Retainage Statute FAQs

Getting informed about prompt payment laws is important. An examination of Kentucky’s retainage laws, the rules and regulations related to the amount and timing of allowable retained payments, is important to know your rights and responsibilities as a party on a construction project. Kentucky’s specific laws can be found in: KY. Rev. Stat. Ann. §§ 371.410(1) and 371.410(2), and are reproduced below.

Retainage Statute

§ 371.410(1):

Notwithstanding any provision of the Kentucky Revised Statutes to the contrary, until fifty percent (50%) of the construction project has been completed in accordance with the contract, a contracting entity, contractor, or subcontractor may withhold no more than ten percent (10%) retainage from the amount of any undisputed payment due, and retainage held after fifty-one percent (51%) of the construction project has been completed shall not be more than five percent (5%) of the total contract amount.

§ 371.410(2):

Within thirty (30) days after substantial completion of a construction project, the contracting entity or contractor shall release the retainage less an amount equal to two hundred percent (200%) of the contracting entity’s reasonably estimated cost of the balance of any contractor’s or subcontractor’s contractually obligated, yet uncompleted, work remaining. The contracting entity’s agent shall determine the reasonably estimated cost due under this subsection. The contracting entity, contractor, and any subcontractor with work yet to be completed shall mutually agree with the schedule for completion of the work necessary for release of final payment. Within fifteen (15) business days after the retainage has been released by the contracting entity to the contractor, the contractor shall release to the subcontractors their proportional shares of the retainage. For purposes of this subsection, “substantial completion” is the point at which, as certified in writing by the contracting entity, a project is at the level of completion, in strict compliance with the contract, where:

(a) Necessary approval by public regulatory authorities has been given;

(b) The owner has received all required warranties and documentation; and

(c) The owner may enjoy beneficial use or occupancy and may use, operate, and maintain the project in all respects, for its intended purpose.

Partial use or occupancy shall not necessarily result in the project being deemed substantially complete and shall not be evidence of substantial completion.

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