In parts one and two of this series, we discussed the Tennessee laws in place to protect contractors and subcontractors on construction projects and the Senate bill that may drastically alter these laws. Now, a Memphis construction attorney will be discussing how this bill applies to the laws intended to protect owners on Tennessee construction projects. No matter where you fall in the construction hierarchy, it benefits you to consult with the experienced Memphis construction attorneys at Cotney Construction Law for all of your construction-related legal concerns.
Current Tennessee Retainage Laws
As we’ve covered previously, Tennessee has unique retainage laws in place. In the State of Tennessee, a maximum of five percent of the total contract price can be withheld and placed in a third-party escrow account. This incentivizes contractors and subcontractors to complete a project in a satisfactory and timely manner as stipulated by the contract. Owners are required to pay their contractors within 90 days of project completion. General contractors must also comply with these retainage laws and have 10 days to pay subcontractors and material suppliers upon receiving payment from the owner.
How Retainage Laws Could Change
While Senate Bill 324 is currently deferred until 2020, it would require owners to pay general contractors within 30 days from the last day of the month that the project is completed. The 10-day deadline for general contractors to pay their subcontractors would remain unchanged.
The Penalties for Withholding Retainage Once a Project Is Complete
There’s no telling what the final version of this bill may look like. What remains clear is that the penalties for violating Tennessee retainage law are severe. Failure to properly distribute retainage funds can result in a Class A misdemeanor, a fine of $3,000, and a recurring citation for ongoing offenses. Tennessee’s low retainage caps as compared to other states means that many contractors are unknowingly violating retainage laws. A contractor in Tennessee can easily find themselves in legal trouble if they fail to stay up-to-date on state laws. Partner with the experienced Memphis construction attorneys at Cotney Construction Law to ensure that your current and future contracts protect your rights while maintaining compliance with all state and federal laws.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.