New Massachusetts Retainage Law on Private Projects
Recently, Massachusetts Gov, Deval Patrick signed a new retainage law that will have significant effect on the construction industry. It includes several favorable provisions for subcontractors, including a much lower cap (5 percent) on retainage of each progress payment and expedited payment schedules for completed projects.
The law, which goes into effect Nov. 6, will:
• increase cash flow for all contractors and subcontractors
• improve the project close-out process, to benefit contractors and owners
• support development and the construction industry's resurgence
The new Massachusetts “Retainage Law” will apply to any contract arising from a private construction project where the prime contract value is $3 million or more and for which a lien may be established. Retainage will be limited to 5 percent of each progress payment; new procedures and timing requirements apply to retainage release. The new law contains provisions for determining the date of substantial completion, which in turn triggers new requirements and timing for submission of punch lists and invoicing for release of retainage. The law also specifies the amounts that may be withheld from retainage payments to cover incomplete or defective work, missing deliverables and claims.
Perhaps the most visible provision of the new law is the 5 percent ceiling on retainage withholdings: No longer will owners or general contractors be allowed to withhold 10 percent or more to ensure performance.