In 2023 the state established retainage and interest requirements for contractors and subcontractors in private construction projects, excluding single-family residential construction with less than 12 units.

An owner, contractor, or subcontractor may withhold as retainage up to 5 percent of the contract price of the work completed for private construction projects.  Partial payment is not acceptance or approval of some of the work or a waiver of defects in the work.  The owner, contractor, or subcontractor must pay interest at the rate of 1 percent per month on the final payment due the contractor or subcontractor.  The interest commences 30 days after the contractor or subcontractor completes and the owner accepts the work under the contract, and it runs until final payment is tendered to the contractor or subcontractor.  State law provides certain deadlines for notifications to be sent regarding the completion of work and the acceptance or rejection of work.

In lieu of retainage, a subcontractor or contractor may tender, and a contractor or owner must accept, a retainage bond, which must meet certain requirements.  If an owner accepts a bond in lieu of retained funds, the contractor must accept like bonds from any subcontractors or suppliers from which the contractor has retained funds.

Suppliers are added to the requirements for retainage, interest, and notifications in private construction projects, excluding single-family residential construction with less than 12 units.  An owner or contractor may withhold as retainage up to 5 percent of the contract price from suppliers, and must pay interest to suppliers at the rate of 1 percent per month on the final payment, which accrues beginning 30 days after the supplier completes and the owner accepts the work under the contract.  A supplier may tender a retainage bond in lieu of retainage, so long as it meets certain requirements.