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Maryland Legislature Caps Retainage

April 16, 2008  |  from Bowie & Jensen, LLC Construction Law Forum

At the end of the 2008 General Session in Annapolis, the General Assembly passed Senate Bill 313, which places a 5% retainage cap on construction contracts in excess of $250,000.00, when a performance and payment bond is furnished. The bill requires the contractor to furnish 100% security to guarantee performance of the contract and 100% security to guarantee payment for labor and materials. Further, the retention proceeds of any payment due from a contractor to a subcontractor may not exceed the percentage of retainage from the owner to the contractor. This also applies to subcontractors and lower-tiered subcontractors.

This new law will not prohibit withholding of any amount due from the owner to the contractor, contractor to subcontractor, or subcontractor to lower-tiered subcontractor if the non-paying party reasonably determines that the contractor or subcontractor’s performance under the contract provides reasonable grounds for withholding the additional amount. Upon approval by the Governor, this new law will take effect on October 1, 2008.

Filed: Construction-Law