New Mexico Retainage Guide and FAQs

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New Mexico Retainage FAQs

New Mexico Retainage Overview

New Mexico Retainage Requirements


  • Private Jobs
  • Public Jobs
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Retainage icon
Retainage Limit

Prohibited


Payment Period Icon
Pay Period

Prohibited


NO
PROCESS
There's No Process to Recover

N/A - retainage prohibited


No Escrow Icon
Not Held In Escrow

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

Retainage 5% Icon
5 Percent

Retainage generally not allowed. For road projects, retainage is allowed up to 5%.


21
DAYS
Pay Period

Public body must generally pay contractor within 21 days of receipt for undisputed request for payment.


NO
PROCESS
There's No Process to Recover

N/A - retainage not generally allowed.

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 New Mexico’s retainage requirements. The New Mexico retainage statutes are reproduced below on this page.

New Mexico Retainage Frequently Asked Questions

New Mexico Retainage Private Projects FAQs

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

Retainage is prohibited in New Mexico. However, scheduling payments such that there is a line item for a “closeout payment” after work is substantially performed may be allowed – this is usually 5% or 10% of the contract value.

How long can a party withhold retainage in New Mexico?

Retainage prohibited in New Mexico.

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

Retainage prohibited in New Mexico.

How can I make a claim to recover retainage in New Mexico?

Retainage prohibited in New Mexico.

Is there a specific notice required to recover retainage in New Mexico?

Retainage prohibited in New Mexico.

New Mexico Retainage Public Projects FAQs

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

Retainage generally not allowed. However, scheduling payments such that there is a line item for a “closeout payment” after work is substantially performed may be allowed. This is usually 5% or 10% of contract value.

For road projects, retainage is allowed up to 5%.

How long can a party withhold retainage in New Mexico?

Public body must pay contractor within 21 days of receipt for undisputed request for payment. A local public body may make payment within 45 days after submission of an undisputed request for payment when grant money is a source of funding.

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

Retainage not generally allowed in New Mexico.

How can I make a claim to recover retainage in New Mexico?

Retainage not generally allowed, but to receive scheduling payments, a contractor or subcontractor must submit a undisputed request for payment.

Is there a specific notice required to recover retainage in New Mexico?

See above.

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New Mexico Retainage Statutes

Getting informed about prompt payment laws is important. An examination of New Mexico’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. New Mexico’s specific laws can be found in: N.M. Stat. Ann. § 57-28-5, § 57-28-5 and § 67-3-48, and are reproduced below.

Retainage Statute on Private Projects

§ 57-28-5: Payments; prompt pay required; withholding prohibited

A. Except as provided in Subsection B of this section, all construction contracts shall provide that payment for amounts due shall be paid within twenty-one days after the owner receives an undisputed request for payment. Payment by the owner to the contractor may be made by first-class mailing, electronic funds transfer or by hand delivery of the undisputed amount of a pay request based on work completed or service provided under the contact. If the owner fails to pay the contractor within twenty-one days after receipt of an undisputed request for payment, the owner shall pay interest to the contractor beginning on the twenty-second day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until the payment is issued. If an owner receives an improperly completed invoice, the owner shall notify the sender of the invoice within seven days of receipt in what way the invoice is improperly completed, and the owner has no further duty to pay on the improperly completed invoice until it is resubmitted as complete.

B. A local public body may make payment within forty-five days after submission of an undisputed request for payment when grant money is a source of funding, if:

(1) the construction contract specifically provides in a clear and conspicuous manner for a payment later than twenty-one days after submission of an undisputed request for payment; and

(2) the following legend or substantially similar language setting forth the specified number of days appears in clear and conspicuous type on each page of the plans, including bid plans and construction plans:

“Notice of Extended Payment Provision

This contract allows the owner to make payment within _____ days after submission of an undisputed request for payment.”

C. All construction contracts shall provide that contractors and subcontractors make prompt payment to their subcontractors and suppliers for amounts owed for work performed on the construction project within seven days after receipt of payment from the owner, contractor or subcontractor. If the contractor or subcontractor fails to pay the contractor’s or subcontractor’s subcontractor and suppliers by first-class mail or hand delivery within seven days of receipt of payment, the contractor or subcontractor shall pay interest to the subcontractors and suppliers beginning on the eighth day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until payment is issued. These payment provisions apply to all tiers of contractors, subcontractors and suppliers.

D. A creditor shall not collect, enforce a security interest against, garnish or levy execution on those progress payments or other payments that are owed by an owner, contractor or subcontractor to a person, or the owner’s contractor’s or subcontractor’s surety, who has furnished labor or material pursuant to a construction contract.

E. When making payments, an owner, contractor or subcontractor shall not retain, withhold, hold back or in any other manner not pay amounts owed for work performed.

Retainage Statute on Public Projects

§ 57-28-5: Payments; prompt pay required; withholding prohibited

A. Except as provided in Subsection B of this section, all construction contracts shall provide that payment for amounts due shall be paid within twenty-one days after the owner receives an undisputed request for payment. Payment by the owner to the contractor may be made by first-class mailing, electronic funds transfer or by hand delivery of the undisputed amount of a pay request based on work completed or service provided under the contact. If the owner fails to pay the contractor within twenty-one days after receipt of an undisputed request for payment, the owner shall pay interest to the contractor beginning on the twenty-second day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until the payment is issued. If an owner receives an improperly completed invoice, the owner shall notify the sender of the invoice within seven days of receipt in what way the invoice is improperly completed, and the owner has no further duty to pay on the improperly completed invoice until it is resubmitted as complete.

B. A local public body may make payment within forty-five days after submission of an undisputed request for payment when grant money is a source of funding, if:

(1) the construction contract specifically provides in a clear and conspicuous manner for a payment later than twenty-one days after submission of an undisputed request for payment; and

(2) the following legend or substantially similar language setting forth the specified number of days appears in clear and conspicuous type on each page of the plans, including bid plans and construction plans:

“Notice of Extended Payment Provision

This contract allows the owner to make payment within _____ days after submission of an undisputed request for payment.”

C. All construction contracts shall provide that contractors and subcontractors make prompt payment to their subcontractors and suppliers for amounts owed for work performed on the construction project within seven days after receipt of payment from the owner, contractor or subcontractor. If the contractor or subcontractor fails to pay the contractor’s or subcontractor’s subcontractor and suppliers by first-class mail or hand delivery within seven days of receipt of payment, the contractor or subcontractor shall pay interest to the subcontractors and suppliers beginning on the eighth day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until payment is issued. These payment provisions apply to all tiers of contractors, subcontractors and suppliers.

D. A creditor shall not collect, enforce a security interest against, garnish or levy execution on those progress payments or other payments that are owed by an owner, contractor or subcontractor to a person, or the owner’s contractor’s or subcontractor’s surety, who has furnished labor or material pursuant to a construction contract.

E. When making payments, an owner, contractor or subcontractor shall not retain, withhold, hold back or in any other manner not pay amounts owed for work performed.

§ 67-3-48: Partial payments on road contracts; progress estimates; limitation; division of amounts

Partial payments may be made on any contract for highway improvement under the provisions of this act, as the work progresses. Progress estimates shall be based on materials in place and labor expended thereon, but no more than ninety-five percent of the contract price of the work shall be paid in advance of the full completion of such contract and its acceptance by the state highway engineer. The state and county shall each pay its proportionate share of such partial payments on the certification of the amount thereof by the state highway engineer.

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