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New Law Changes Retainage Limitations on Construction Contracts

October 27, 2010

Recently the Connecticut General Assembly passed legislation and the Governor approved the same, mandating a reduction in the maximum amount of retainage on certain construction contracts from seven and one-half percent (7.5%) to five percent (5%) (Public Act No. 10-148 revises Conn. Gen. Stat. Sec. 42-158k and is applicable to construction contracts entered into on or after October 1, 2010).

 

Existing statutory law provides that construction contracts subject to the new retainage cap means “any contract for the construction, renovation or rehabilitation . . . including any improvements to real property that are associated with such construction, renovation or rehabilitation, or any subcontract for [such work] between an owner and a contractor, or between a contractor and a subcontractor or subcontractors or between a subcontractor and any other subcontractors” (Conn. Gen. Stat. Sec 42-158i).  The statute further excludes from the provision of this retainage cap: 1) public works or other building contract entered into with the State of Connecticut, the United States, any other state and any municipality or other political subdivision of Connecticut or any other state; 2) a contract or project funded or insured by the U.S. Department of Housing and Urban Development; 3) a contract between an owner and a contractor for $25,000 or less or a subcontract which results from such a prime contract; and 4) a contract for a building intended for residential occupancy containing four or less units.

 

The following statutory retainage caps for other construction contracts remain unchanged:

 

  • Contracts with Connecticut state agencies other than the Department of Transportation: 10%
  • Contracts with Connecticut Department of Transportation: 2½%
  • Contracts with Connecticut municipalities: 5%

 

If you have any questions regarding this new public act, please feel free to contact one of the following construction practice attorneys: Barry C. Hawkins at bhawkins@goodwin.com or Arnold K. Shimelman at ashimelman@goodwin.com.

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