John S. Higgins – November 28, 2011
Ohio legislators have contemplated retainage reform for years. New legislation is being drafted to attempt reform retainage on private construction projects (LSC 129 1897).
Ohio legislators have contemplated retainage reform for years. New legislation is being drafted to attempt reform retainage on private construction projects (LSC 129 1897). The proposed legislation includes the following provisions:
No owner, contractor, subcontractor, material supplier, or lower tier subcontractor or lower tier material supplier shall withhold retainage greater than 2% on any construction contract for a private improvement.
Any provision of a construction contract, agreement or understanding, or specification, or other documentation that is made a part of a construction contract, agreement or understanding that purports to authorize additional retainage is void and unenforceable as against public policy. This provision would be added to R.C. 4113.62 “Construction Contract Provisions Against Public Policy.”
Chapter 13111 of the Ohio Revised code would provide the definitions for private owner, contractor, improvement, etc. on private project.
A contractor cannot withhold retainage from a sub or supplier in a percentage greater than the retainage being withheld from it. For example, if an Owner is withholding 2% retainage from a general contractor, the GC may not withhold more than 2% retainage from its subs or suppliers.
Violations and failure to make prompt payments may result in an award of attorneys’ fees and 18% interest.
While the legislation has not yet been formally introduced, if introduced and passed it could have a large impact on the industry. Although previous attempts to pass such retainage reform have been unsuccessful the progress of this proposed legislation should be watched as “interested party” meetings have been held.