Historical article — context updated September 7, 2026. The text below describes a proposal discussed in 2011. It should not be used as a statement of today's retainage requirements.
For covered private construction contracts, current General Business Law § 756-c addresses the retainage cap and release deadline. Its 1% monthly interest provision concerns retainage not timely released; it does not establish the proposed general interest-bearing escrow arrangement described below. Contract date and statutory coverage must be checked.
See the updated New York retainage guide and Kushnick Pallaci PLLC's construction contract review services.
Original 2011 commentary
Assembly bill A05023, if passed, would require owners to deposit retainage sums into an escrow based interest bearing account. The law would allow owners to keep the security of retainage until the project is complete and signed off on but would also allow the subcontractors whose money is being withheld (the retainage) to earn interest so that it is worth a bit more to them when they finally receive it. The law would provide that retainage earns interest at the rate of 1 percent per month. If the law is successful, that means that retainage might be a more valuable investment than the stock market!This proposal has failed in the senate before so stay tuned to see if it makes its way into law this year.
Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law. He can be reached at (631) 752-7100 or vtp@kushnicklaw.com
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