§ 9-304. Retention proceeds

   (a) "Retention proceeds" defined. -- In this section, "retention proceeds" means moneys earned but retained under the terms of a contract or subcontract:

   (1) By an owner to guarantee performance of the contract by a contractor;

   (2) By a contractor to guarantee performance of a subcontract by a subcontractor; or

   (3) By a subcontractor to guarantee performance of a subcontract by another subcontractor.

(b) Applicability of section. -- This section does not apply to:

   (1) A contract in an amount less than $ 250,000; or

   (2) A contract or subcontract for a project funded wholly or in part by or through the Department of Housing and Community Development.

(c) Limit of proceeds. -- Except as provided in this section:

   (1) If a contractor has furnished 100% security to guarantee the performance of a contract and 100% security to guarantee payment for labor and materials, including leased equipment:

      (i) The retention proceeds under the terms of a contract may not exceed 5% of the contract price; and

      (ii) The retention proceeds of any payment due under the terms of a contract from an owner to a contractor may not exceed 5% of the payment;

   (2) The retention proceeds of any payment due under the terms of a contract from a contractor to a subcontractor may not exceed the percentage of retention proceeds from the owner to the contractor; and

   (3) The retention proceeds of any payment due under the terms of a contract from a subcontractor to another subcontractor may not exceed the percentage of retention proceeds from the contractor to the subcontractor.

(d) Withholding of additional amount. -- This section may not be construed to prohibit the withholding of any amount due:

   (1) From the owner to the contractor if the owner reasonably determines that the contractor's performance under the contract provides reasonable grounds for withholding the additional amount;

   (2) From the contractor to any subcontractor if the contractor reasonably determines that the subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount; or

   (3) From a subcontractor to another subcontractor if the subcontractor determines that the other subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount.

HISTORY: 2008, ch. 390, § 2.