From the Desk of Marvin L. Johnson

To:       All Capacity Building Warehouse Members

Date:    May 7, 2014

For those of you who struggle with understanding some of the laws surrounding “Contract Retention” please read the article below;

A Summary of Missouri’s Retainage Statutes: How Much can be Withheld and What Happens if too much is Withheld?

Joseph Blanner – Partner at McCarthy, Leonard & Kaemmerer

1) How much retainage can be withheld on private construction projects?

The statutes set the maximum amount of retainage that can be withheld from progress payments at 10%.

However, Section 436.303 of the Revised Statutes also indicates, “that the contract may provide that if the contractor’s performance is not in accordance with the terms of the contract or agreement, the owner may retain additional sums to protect the owner’s interest in satisfactory performance of the contract or agreement”. Thus, additional amounts can be withheld as retainage, so long as it is authorized by the contract and is being withheld to protect the owner from some deficiency in the contractor’s performance of the contract.

2) When does retainage have to be released?

The owner must release all retainage, less an amount equal to 150% of the cost to complete any remaining or incomplete contract items, within thirty days of substantial completion. See Section 436.324 RSMo.

3) Does a subcontractor whose work was completed early on in a project have to wait for the release of its retainage?

Pursuant to Section 436.321 RSMo., “If it is determined that a subcontractor’s performance has been satisfactorily completed and the subcontractor can be released prior to substantial completion of the entire project without risk to the owner involving the subcontractor’s work, the contractor shall request such adjustment in retainage, if any, from the owner as necessary to enable the contractor to pay the subcontractor in full, and the owner shall as part of the next contractual payment cycle release the subcontractor’s retainage to the contractor, who shall in turn as part of the next contractual payment cycle release such retainage as is due the subcontractor. ”

4) What happens if an owner does not release retainage or withholds too much?

Pursuant to Section 436.333 RSMo., the Court is authorized to award interest at a rate of 1 1/2 percent per month and reasonable attorney’s fees on amounts wrongfully withheld.

5) Do the retainage statutes apply to subcontractors?

Yes. Pursuant to Section 436.315 RSMo., “Subcontractors and sub-subcontractors of every tier shall comply with the provisions of sections 436.300 to 436.336 in their relations with their sub-subcontractors and suppliers and shall be bound by the same obligations to their sub-subcontractors and suppliers as contractors are to their subcontractors. ”