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HF 878

as introduced - 91st Legislature (2019 - 2020) Posted on 02/11/2019 03:54pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to contracts; modifying retainage requirements for building and construction
contracts; amending Minnesota Statutes 2018, section 337.10, subdivisions 4, 5.


Section 1.

Minnesota Statutes 2018, section 337.10, subdivision 4, is amended to read:

Subd. 4.

Progress payments and retainages.

(a) Unless the building and construction
contract provides otherwise, the owner or other persons making payments under the contract
must make progress payments monthly as the work progresses. Payments shall be based
upon estimates of work completed as approved by the owner or the owner's agent. A progress
payment shall not be considered acceptance or approval of any work or waiver of any defects

(b) Retainage on a building and construction contract may not exceed five percent. An
owner or owner's agent may reduce the amount of retainage and may eliminate retainage
on any monthly contract payment if, in the owner's opinion, the work is progressing
satisfactorily. Nothing in this subdivision is intended to require that retainage be withheld
in any building or construction contract.

new text begin (c) The maximum retainage percentage allowed for a building and construction contract
is the retainage percentage withheld by the public agency or owner from the prime contractor.
new text end

new text begin (d) Withholding retainage for warranties or warranty work is prohibited.
new text end

new text begin (e) Retainage must be released within 30 days of the completed improvement date. For
purposes of this paragraph, the completed improvement date is the last day of work or the
last day an item of skill, material, or machinery is provided, whichever occurs first.
new text end

new text begin (f) Retainage withheld under this subdivision must be held in an interest-bearing escrow
account or trust account at a banking institution whose principal place of business is
Minnesota. The reserved retainage and interest must be released and paid only to the person
for whom the retainage was reserved.
new text end

new text begin (g) A prime contractor must include the name, address, and telephone number of the
responsible agent in any construction contract with a subcontractor. Upon written request
of a subcontractor who has not been paid for work as required under this section, the
responsible agent must notify the requesting subcontractor when a progress payment,
retainage payment, or final payment has been made to the prime contractor.
new text end

new text begin (h) Any dispute regarding retainage payment, incomplete work, or defective work must
be documented. Documentation created under this paragraph must be provided to all parties
to the dispute.
new text end

deleted text begin (c)deleted text end new text begin(i) Paragraphs (c) to (h) apply to all contracts governed by sections 15.71 to 15.74.
new text end This subdivision does not apply to contracts for professional services as defined in sections
326.02 to 326.15.

Sec. 2.

Minnesota Statutes 2018, section 337.10, subdivision 5, is amended to read:

Subd. 5.


new text begin(a) new text endFor deleted text beginthe purposedeleted text endnew text begin purposesnew text end of this section,new text begin the terms in this
subdivision have the meanings given them.
new text end

new text begin (b) new text end"Building and construction contract" has the meaning given deleted text beginthe termdeleted text end in section

new text begin (c) "Responsible agent" means the public contracting agency's representative, the owner's
authorized agent, or the person who entered into a contract with the prime contractor.
new text end