Section 8-29-3
Timely payments to contractors and subcontractors; noncompliance with chapter; percentage of retainage on payments.
(a) When a contractor has performed pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials, to the owner or owner's representative, the owner shall timely pay the contractor by mailing via first class mail or delivering the amount of the pay request or invoice in accordance with the payment terms agreed to by the owner and the contractor, the agreed upon payment terms must be specified in all contract documents, but if payment terms are not agreed to, then within 30 days after receipt of the pay request or invoice.
(b) When a subcontractor has performed pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials to a contractor in sufficient time to allow the contractor to include the application, request, or invoice in his or her own pay request submitted to an owner, the contractor shall timely pay to the subcontractor in accordance with the payment terms agreed to by the contractor and subcontractor, but if payment terms are not agreed to, then within seven days of receipt of payment from owner by mailing via first class mail or delivering the amount received for the subcontractor's work and materials based on work properly completed or service properly provided under the contract.
(c) When a sub-subcontractor has performed labor or supplied materials for a subcontractor pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials to a subcontractor in sufficient time to allow the subcontractor to include the application, request, or invoice in his or her own pay request submitted to a contractor, the subcontractor shall timely pay the sub-subcontractor in accordance with the payment terms agreed to by the subcontractor and sub-subcontractor but if payment terms are not agreed to, then within seven days of receipt of payment from contractor by mailing via first class mail or delivering the amount received for the sub-subcontractor's work and materials based on work properly completed or service properly provided under the contract.
(d) If the owner, contractor, or subcontractor does not make payment in compliance with this chapter, the owner, contractor, or subcontractor shall be obligated to pay his or her contractor, subcontractor, or sub-subcontractor interest at the rate of one percent per month (12% per annum) on the unpaid balance due.
(e) A contractor who receives a payment under subsection (a) or otherwise, from an owner in connection with a contract shall pay each of its subcontractors the portion of the owner's payment to the extent of that subcontractor's interest in the owner's payment. The payment shall include interest, if any, that is attributable to work properly performed or materials suitably stored by that subcontractor if payment for stored materials is provided for in the contract. The payment required by this subsection shall be made not later than the seventh day after the date the contractor receives the owner's payment.
(f) The percentage of retainage on payments by the contractor to the subcontractor shall not exceed the percentage of retainage on payments made by the owner to the contractor. Any percentage of retainage on payments made by contractor to the subcontractor that exceeds the percentage of retainage on payments made by the owner to the contractor shall be subject to interest to be paid by the contractor to the subcontractor at the rate of one percent per month (12% per annum).
(g) The percentage of retainage on payments by the subcontractor to the sub-subcontractor shall not exceed the percentage of retainage on payments made by the contractor to the subcontractor. Retainage on payments made by the subcontractor to the sub-subcontractor that exceeds the percentage of retainage on payments made by the contractor to the subcontractor shall be subject to interest paid at the rate of one percent per month (12% per annum).
(h) For the purposes of this chapter, retainage means that money, or other security as agreed to by the parties to a construction contract, earned by the contractor, subcontractor or lower tier sub-subcontractor, or supplier for work properly performed or materials suitably stored if payment for stored materials is provided for in the contract, which has been retained by the owner conditioned on final completion and acceptance of all work in connection with a project or projects by the contractor, subcontractor or lower tier sub-subcontractor, or supplier.
(i) A construction contract on any project in this state may provide for the owner's withholding of retainage from payments to its contractor for work performed by that contractor on a construction project. There shall be retained not more than 10 percent of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site, and after 50 percent completion has been accomplished, no further retainage shall be withheld. If an owner withholds an amount greater than that allowed by this subsection, the owner shall be liable to the contractor for interest accruing on the excess amount withheld at the rate of one percent per month. Nothing herein is intended to limit or alter the paying party's right to withhold or not approve payment on grounds set forth in the parties' contract or the grounds set forth in Section 8-29-4 or otherwise for work not properly performed or payment not earned; rather, this section is intended only to establish a maximum amount of retainage, establish the timing for release of retainage, and provide for the payment of interest for improperly held retainage.
(j) A construction contract on any project in this state may provide for the contractor's withholding of retainage from payments to its subcontractors for work performed by the subcontractors on a construction project. There shall be retained not more than 10 percent of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site, and after 50 percent completion has been accomplished, no further retainage shall be withheld. If a contractor withholds an amount greater than that allowed by this subsection, the contractor shall be liable to the subcontractor for interest accruing on the excess amount withheld at the rate of one percent per month.
(k) A construction contract on any project in this state may provide for the subcontractor's withholding of retainage from payments to its sub-subcontractors or material suppliers for work performed by such sub-subcontractors or material suppliers on a construction project. There shall be retained not more than 10 percent of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site, and after 50 percent completion has been accomplished, no further retainage shall be withheld. If a subcontractor withholds an amount greater than that allowed by this subsection, the subcontractor shall be liable to the sub-subcontractor or material supplier for interest accruing on the excess amount withheld at the rate of one percent per month.
(l)(1) The owner shall release and pay retainage to the contractor for work completed on any construction contract no later than 60 days after the completion of the contractor's work defined in its contract with the owner, or no later than 60 days after substantial completion of the project, whichever occurs first, and in both events, with all necessary certificates of occupancy having been issued. The contractor shall release and pay retainage to its subcontractors for work completed pursuant to the terms of this chapter.
(2) For the purposes of this subsection, substantial completion means the stage in the progress of the project when the project or designated portion thereof is sufficiently complete in accordance with the contract documents with all necessary certificates of occupancy having been issued so that the owner may occupy or utilize the project for its intended purpose.
(m) The provisions of subsections (h) through (l) shall not apply to any construction project for or by an electric utility regulated by the Public Service Commission.
(n) Nothing herein limits or alters the paying party's right to withhold or not approve payment on grounds set forth in the party's contract or the grounds set forth in Section 8-29-4 or otherwise for work not properly performed or payment not earned; rather, this section is intended only to establish a maximum amount of retainage, establish the timing for release of retainage, and provide for the payment of interest for improperly held retainage. Also, the paying party may condition payment on the receipt of a full release of any lien of the contractor, subcontractor, or sub-subcontractor for the amount of work being paid.
(o) All loans and loan proceeds related to a construction project, and the disbursem*nt and use thereof, are governed solely by the terms of the documents evidencing and securing the loan, and contractors, subcontractors, and sub-subcontractors have no lien or rights in any such loan, loan proceeds, or the disbursem*nt or use thereof.
(Acts 1995, No. 95-380, p. 775, §3; Act 2011-647, p. 1646, §1.)
As an expert in construction law and contract management, I have a deep understanding of the legal frameworks and regulations governing the construction industry. My experience in this field enables me to provide valuable insights into the provisions outlined in Section 8-29-3 of the relevant legal code.
Section 8-29-3: Timely payments to contractors and subcontractors; noncompliance with chapter; percentage of retainage on payments.
(a) Timely Payments to Contractors: When a contractor completes work and submits a payment request or invoice to the owner, the owner is obligated to make timely payments. The payment terms must be agreed upon in the contract documents. If not specified, payment must be made within 30 days after receipt of the pay request or invoice.
(b) Timely Payments to Subcontractors: Similarly, when a subcontractor submits a payment request or invoice to a contractor in time for inclusion in the owner's payment, the contractor must make timely payments to the subcontractor, as per agreed-upon terms or within seven days if not specified.
(c) Timely Payments to Sub-Subcontractors: Sub-subcontractors are also protected by this section, ensuring that they receive timely payments from subcontractors based on the agreed-upon terms or within seven days of the contractor's payment receipt.
(d) Interest for Noncompliance: If the owner, contractor, or subcontractor fails to make payments in compliance with this chapter, they are obligated to pay interest at a rate of one percent per month (12% per annum) on the unpaid balance.
(e) Contractor's Payment to Subcontractors: Contractors receiving payments from owners must pay their subcontractors, including interest if applicable, within seven days after receiving the owner's payment.
(f) Retainage Percentage Limits (Contractor to Subcontractor): The percentage of retainage on payments by the contractor to the subcontractor cannot exceed the percentage retained by the owner from the contractor. Any excess is subject to interest.
(g) Retainage Percentage Limits (Subcontractor to Sub-Subcontractor): Similar to (f), the percentage of retainage on payments by the subcontractor to the sub-subcontractor cannot exceed the percentage retained by the contractor. Excess retainage is subject to interest.
(h) Definition of Retainage: Retainage is defined as money or other security retained by the owner, contractor, subcontractor, or sub-subcontractor for work properly performed or materials suitably stored, conditioned on final completion and acceptance of all work.
(i) Maximum Retainage for Owners: Owners may withhold not more than 10 percent of the estimated amount until 50 percent completion. Exceeding this limit makes the owner liable for interest on the excess amount withheld.
(j) Maximum Retainage for Contractors: Contractors may withhold not more than 10 percent until 50 percent completion, with liability for interest on excess withholdings.
(k) Maximum Retainage for Subcontractors: Subcontractors may withhold not more than 10 percent until 50 percent completion, with liability for interest on excess withholdings.
(l) Release and Payment of Retainage: Owners shall release and pay retainage to the contractor within 60 days after project completion or substantial completion, and contractors shall release and pay subcontractors.
(m) Exemption for Electric Utilities: The provisions from (h) to (l) do not apply to construction projects for or by electric utilities regulated by the Public Service Commission.
(n) Conditions for Payment: This section does not limit the paying party's right to withhold payment for valid reasons as set forth in the contract or Section 8-29-4. It establishes maximum retainage, timing for release, and interest for improperly held retainage.
(o) Loans and Loan Proceeds: All matters related to loans and loan proceeds for construction projects are governed solely by the terms of the loan documents, and contractors, subcontractors, and sub-subcontractors have no lien or rights in such financial arrangements.
In conclusion, Section 8-29-3 comprehensively addresses timely payments, retainage limits, and interest for noncompliance, providing a framework for fair and transparent transactions in the construction industry.
