Home>Levelset Community>Legal Help>In the State of Utah, is all retainage withheld, whether by owner to prime contractor or prime contractor to subcontractor, subject to the stipulation that it must be maintained in an interest bearing account?

In the State of Utah, is all retainage withheld, whether by owner to prime contractor or prime contractor to subcontractor, subject to the stipulation that it must be maintained in an interest bearing account?

UtahRetainage

We are an out of state prime contractor who will be performing construction services for an owner building a restaurant in the state of Utah. We normally withhold 5-10% retention from the payments to our subcontractors and the owners we work for withhold the same from payments made to our company. Must the owner have a separate account for our retainage that earns interest for the duration of the project and will we, in turn, have to maintain a separate account for the retainage we hold from payments to our subcontractor?

1 reply

Jun 27, 2018

That's a really good question. In Utah, the maximum retainage between an owner and their contractor retainage is 5% of the payment owed. i.e. An owner may only hold 5% of what they owe to a contractor as retainage. A contractor may only retain the same percentage that the owner is withholding from the contractor (again, maximum 5%), and so-on down the line.

Further, under § 13-8-5(4) of the Utah retainage statute, amounts withheld as retainage shall be placed in an interest-bearing account and accounted for separately from other amounts paid under the contract. This requirement applies only to retainage withheld by owners or public agencies.

There are, however, two requirements imposed on prime contractors. First, once retainage has been received from the owner, they will have 10 days to pass retainage funds down to the subs and or suppliers. The second is that any interest that accrued on the retainage funds, must be distributed proportionately to the subs and suppliers as well.

For further resources check out our Utah Retainage Overview

0 people found this helpful

Helpful