Retainage and Substantial Completion: 2016 Proposal and Current Law

Current-law update — September 7, 2026

The article below is a historical discussion of a 2016 proposal. Its references to the law as it stood then should not be used as a statement of today's retainage requirements.

Later legislation, Chapter 657 of the Laws of 2023, changed the rules for covered contracts entered into on or after November 17, 2023. General Business Law § 756-a now addresses a contractor's final invoice to the owner upon substantial completion as defined or contemplated by the contract. § 756-c imposes a 5% retainage ceiling and limits downstream retainage to the owner's actual percentage. Coverage exclusions and the contract date remain important.

For an explanation of the current rules, read our updated Prompt Payment Act guide. Kushnick Pallaci PLLC assists with construction payment and retainage provisions.

---

Original 2016 legislative commentary

Every once in a while the New York Legislature has an idea that catches the attention of the construction industry.  Once such idea is set forth in Assembly Bill 10446 which was sent to the committee on economic development on May 27, 2016.

This proposed amendment to the General Business Law (specifically section 756) has a few interesting components:

1. It would amend section 756 and add a definition of “substantial completion.”  The bill proposes to define substantial completion as “the state in the progress of the project when the work required by the construction contract with the project owner is sufficiently complete in accordance with the construction contract so that the project owner may occupy or utilize the work for its intended use…”  This definition is not so out there or different from the generally understood meaning of the term (and some contracts even specifically define substantial completion in almost this exact manner).  However, codifying the definition of such a critical term in the construction industry is a big step.  It will be interesting to see how the committee considers this term.
2. It would amend section 756-a of the General Business Law to allow subcontractors to submit a final invoice for payment upon reaching substantial completion (using the new definition).  Notably, the current version of 756-a says that a subcontractor can submit a final invoice “upon the contractor’s performance of all the contractor’s obligation under the contract.”  The current phrase is admittedly vague but the proposed definition of substantial completion isn’t exactly black and white.  One this is certain:  the new language would be far more beneficial to subcontractors.  For example, when the punch list remains outstanding the the subcontractor has not “peformed all of his obligations under the contract.”  But when the punch list is outstanding the project has most likely reached substantial completion.  This could be a different of days, weeks or even months in terms of when the subcontractor would be permitted to issue a final invoice.
3. Finally, and not least of all, the bill would amend section 756-c of the General Business Law to put a specific fixed cap on retainage.  Currently, the law only says that retainage is limited to a “reasonable amount.”  You can almost guarantee that the owner, general contractor and subcontractor have a different view of what exactly constitutes a reasonable amount.  But the revised section 756 would limit retainage to no more than 5%.

Right now the bill is in its infancy and may die in a committee somewhere along the way.  As of this writing, there are no floor votes scheduled for the bill.   But it is one that is worth keeping an eye on: especially for subcontractors.

Home Improvement Contracts: Subcontractor and Insurance Disclosures

Reviewed September 7, 2026.

The original post discussed a proposal requiring subcontractor identification and a new cancellation right. Those proposed terms should not be treated as the current text of General Business Law § 771.

For covered home improvement contracts, the current statute requires a signed writing with contractor identification, scope, price, timing and specified notices and payment terms. It also requires a disclosure, before the contractor or subcontractor begins work, of the existence of property or casualty insurance covering the scope of that work, including the insurer's contact information.

Coordinate statutory and negotiated requirements

The contract or local rules may separately require subcontractor identification, approval, licensing or insurance documentation. Specify the procedure for substitutions and who remains responsible for performance.

Section 771 contains a cancellation notice tied to the owner's signing, with a defined emergency exception. Do not substitute the old proposal's suggested right to cancel whenever a subcontractor is identified. Review the complete current statute and applicable local requirements before using a form.

Kushnick Pallaci PLLC assists clients throughout New York with home improvement and construction contract review. Contact 631-752-7100 or vtp@kushnicklaw.com.

Attorney Advertising. General information, not legal advice.

Construction Legislation: Historical September 2011 Proposals

Historical article — context updated September 7, 2026. This is a September 2011 roundup of proposed legislation. The bill descriptions below record what was under discussion then; they do not establish current legal requirements or the later outcome of any proposal. Check the legislative session and enacted law before relying on a bill number.

For current background, consult this blog's updated retainage guide, RPAPL § 881 on adjoining-property access and Kushnick Pallaci PLLC's information on construction access agreements.

---

Original September 2011 legislative roundup

Every few months here at the New York Construction Law Update I try to provide you with a list of potentially important statutory amendments that will impact the construction industry.  As always there are a number of interesting changes in the pipeline.  Of course some of these have been pending for years without any real progress.  So without further ado...

A00317:  Would amend the NYC administrative code and provide that owners of property adjacent to construction sites are entitled to advanced notice of construction, demolition or excavation work and would provide that the owners must be given proof of insurance and a copy of the permit for the work.

A00706:  Provides that developers must establish an escrow account and deposit a certain percentage of the estimated total project costs into the account to protect adjacent landowners against potential damages from construction, demolition, underpinning, excavation, etc.

A01317:  Would establish a new independent building review agency to oversee construction project in the City of New York.  This bill has been proposed in the past and I have often asked isn't this the job of the New York City Department of Buildings?  If the DOB cannot effectively do their job perhaps better management or oversight of the agency is in order rather than creating an entirely new agency.  

A05827:  Would increase the threshold where a professional land surveyor, architect or engineer must be used from $5,000 (public) and $10,000 (private) to $50,000.

A07090:  Would prohibit lawsuits against architects, engineers or construction professionals brought more than ten years after the allegedly defective structure is designed (architect or engineer) and built (contractor).

A08473:  Would eliminate retainage for material suppliers on private and public projects.

A02321:  Would amend the definition of "excavation" for statutory purposes of protecting underground facilities.

A00105:  Would enhance penalties against unscrupulous home improvement contractors for a number of issues.

This is, of course, not an exhaustive list of potential amendments under consideration.  It is simply a list of those that I find to be the most interesting and which I believe would have the most widespread impact if they were adopted.

Vincent T. Pallaci is a New York construction lawyer.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com

Protecting Neighbors During Construction: Security, Insurance and Access Terms

Reviewed September 7, 2026.

This article originally discussed 2011 Assembly Bill A706, an escrow proposal for neighboring-property damage. Its proposed fund and 60-day claims process should not be assumed to govern a present project.

Use the protections available for the actual work

A negotiated access agreement can address the work, protection and monitoring, insurance, restoration, security where agreed, and procedures for reporting and resolving damage. The amount and release of any security should be stated clearly.

The current RPAPL 881 governs qualifying court applications for adjoining-property access after permission is refused. It addresses documents, insurance, duration, compensation and responsibility for actual damage. It does not establish the old proposal's automatic project-cost escrow and 60-day recovery procedure.

Before neighboring work begins, document existing conditions and obtain relevant plans and coverage information. If damage occurs, prioritize safety, preserve evidence and promptly investigate insurance and legal remedies. Do not wait for a supposed statutory escrow process that has not been established for the project.

Kushnick Pallaci PLLC assists clients throughout New York with construction access agreements and neighboring-property protections. Contact 631-752-7100 or vtp@kushnicklaw.com.

Attorney Advertising. General information, not legal advice.

Current Construction Law Resources for New York Contractors

Reviewed September 7, 2026.

The original article listed proposed bills for 2011 concerning public bidding, wages, safety, building standards, indemnity and neighboring-property damage. Bill numbers repeat across legislative sessions, and a proposal's description does not establish an enacted obligation.

Start with current law and the project facts

• For public bidding and separate trade contracts, review the owner's procurement rules and statutes such as General Municipal Law § 101.
• For construction indemnity and payment-bond exhaustion clauses, consult General Obligations Law § 5-322.1.
• For neighboring access, review RPAPL 881 and applicable local protections.
• For New York City construction requirements, use DOB's code resources together with later amendments and project-specific applicability rules.

Before revising a contract or compliance procedure, confirm the enacted text, effective date, covered work and transition provisions. Wage, environmental and safety requirements also require their own review; this is a starting checklist, not a complete compliance inventory.

Kushnick Pallaci PLLC assists clients throughout New York with construction contract and compliance review. Contact 631-752-7100 or vtp@kushnicklaw.com.

Attorney Advertising. General information, not legal advice.

Construction Safety Training: Current New York Requirements

Reviewed September 7, 2026.

The original post described a proposed OSHA training bill. Current training requirements depend on the project, role and applicable state and local rules.

Public work and New York City sites

Labor Law § 220-h requires specified public-work contracts of at least $250,000 to include certification of an OSHA-approved construction safety and health course lasting at least ten hours before covered workers begin work.

For covered New York City sites, DOB's current SST guidance generally requires 40 hours for workers and 62 hours for supervisors, subject to the applicable card and entry rules. The guidance also reflects 2026 mental-health training and renewal changes. An expired card cannot be used on site merely because a renewal window remains open.

Verify before assigning work

Check site coverage, the person's duties, card validity, approved providers and any task-specific instruction required by OSHA or local law. A ten-hour course alone does not satisfy every project's requirements. Retain training records and verify subcontractor compliance with the contract and applicable rules.

Kushnick Pallaci PLLC assists clients throughout New York with construction safety compliance and OSHA representation. Contact 631-752-7100 or vtp@kushnicklaw.com.

Attorney Advertising. General information, not legal advice.