Colorado Retainage Guide and FAQs

As used in this article 46, unless the context otherwise requires:

(1) “Contract” means a contract to construct, alter, or repair a structure on or improvement on real property.

(2) “Contractor” means a person that is a party to a contract with a property owner.

(3) “Property owner” means a private person with an interest, including a leasehold interest, in real property or in a real property fixture that has entered into a contract with a contractor.

(4) “Retainage” means a percentage of:

(a) a contract or subcontract price retained from a contractor or subcontractor as assurance that the contract or subcontract will be satisfactorily completed; or

(b) a supply agreement price as assurance that the goods, materials, or equipment meets the specifications necessary for satisfactory performance of a contract or subcontract.

(5)

(a) “Subcontract” means an agreement:

(I) To perform a portion of the work required by a contract; and

(II) To furnish or perform on-site labor, with or without furnishing materials.

(b) To be a subcontract, an agreement need not be made directly with a contractor; the agreement may be made with a subcontractor or a subsequent subcontractor.

(6) “Subcontractor” means a person that enters into a subcontract with a contractor, a subcontractor, or a subsequent subcontractor.

(7) “Subsequent subcontractor” includes a person who has signed a subcontract with a sub-subcontractor, a sub-sub-subcontractor, or any additional level of subcontractor.

(8) “Supply agreement” means an agreement to provide materials, goods, or equipment to a contractor or subcontractor.

(1) Except as provided in subsection (2) of this section, this article 46 applies to:

(a) a contract that:

(I) Has a price of at least one hundred fifty thousand dollars; and

(II) Is made between a property owner and a contractor;

(b) a subcontract to a contract described in subsection (1)(a) of this section, notwithstanding that the subcontract price is less than one hundred fifty thousand dollars; and

(c) a supply agreement that is made to supply materials, goods, or equipment used to perform a contract notwithstanding that the supply agreement price is less than one hundred fifty thousand dollars.

(2) This article 46 does not apply to:

(a) a single contract that governs the building of either:

(I) One single-family dwelling; or

(II) One multifamily dwelling with no more than four family dwelling units; or

(b) a contract with a public entity, as defined in section 24-91-102 (3).

(1) A property owner, Contractor, or subcontractor shall not withhold as retainage more than five percent of the price of the work completed under the contract or subcontract. Making a partial payment under this subsection (1) is not acceptance or approval of some of the work or of a waiver of defects in the work.

(2) This article 46 addresses only the amount of retainage that may be withheld by a property owner, contractor, or subcontractor and does not change, override, or invalidate any other provision in a contract, subcontract, or supply agreement. Such a provision includes, but is not limited to:

(a) a provision relating to timing of a payment, including final payment;

(b) a provision requiring satisfactory performance of the work of the Contract, Subcontract, or supply agreement before payment is due;

(c) a provision allowing a property owner, Contractor, or subcontractor to withhold payment or deduct from any payment otherwise due any backcharges or other amounts as authorized by the Contract, Subcontract, or supply agreement; or

(d) a provision relating to a condition precedent that must be satisfied before a payment is due to a contractor, Subcontractor, sub-Subcontractor, or supplier. A condition precedent includes a requirement that:

(I) a contractor must actually receive payment from the property owner to be obliged to make payment to a subcontractor or supplier; or

(II) a subcontractor must actually receive payment from the contractor to be obliged to make payment to a subsequent subcontractor or supplier.

To receive payment under this article 46, the recipient of the payment must provide an executed lien waiver for amounts actually paid if required by the contract, Subcontract, or Supply agreement.

(1)

(a) A public entity awarding a contract exceeding one hundred fifty thousand dollars for the construction, alteration, or repair of any highway, public building, public work, or public improvement, structure, or system, including real property as defined in section 24-30-1301(15), shall authorize partial payments of the amount due under such contract at the end of each calendar month, or as soon thereafter as practicable, to the contractor, if the contractor is satisfactorily performing the contract. The public entity shall pay at least ninety-five percent of the calculated value of completed work. The withheld percentage of the contract price of any contracted work, improvement, or construction may be retained until the contract is completed satisfactorily and finally accepted by the public entity.

(b) The public entity shall make a final settlement in accordance with section 38-26-107, C.R.S., within sixty days after the contract is completed satisfactorily and finally accepted by the public entity.

(c) If the public entity finds that satisfactory progress is being made in any phase of the contract, it may, upon written request by the contractor, authorize final payment from the withheld percentage to the contractor or subcontractors who have completed their work in a manner finally acceptable to the public entity. Before the payment is made, the public entity shall determine that satisfactory and substantial reasons exist for the payment and shall require written approval from any surety furnishing bonds for the contract work.

(2) Whenever a contractor receives payment pursuant to this section, the contractor shall make payments to each of his subcontractors of any amounts actually received which were included in the contractor’s request for payment to the public entity for such subcontracts. The contractor shall make such payments within seven calendar days of receipt of payment from the public entity in the same manner as the public entity is required to pay the contractor under this section if the subcontractor is satisfactorily performing under his contract with the contractor. The subcontractor shall pay all suppliers, sub-subcontractors, laborers, and any other persons who provide goods, materials, labor, or equipment to the subcontractor any amounts actually received which were included in the subcontractor’s request for payment to the contractor for such persons, in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. If the subcontractor fails to make such payments in the required manner, the subcontractor shall pay said suppliers, sub-subcontractors, and laborers interest in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. At the time the subcontractor submits a request for payment to the contractor, the subcontractor shall also submit to the contractor a list of the subcontractor’s suppliers, sub-subcontractors, and laborers. The contractor shall be relieved of the requirements of this subsection (2) regarding payment in seven days and interest payment until the subcontractor submits such list. If the contractor fails to make timely payments to the subcontractor as required by this section, the contractor shall pay the subcontractor interest as specified by contract or at the rate of fifteen percent per annum whichever is higher, on the amount of the payment which was not made in a timely manner. The interest shall accrue for the period from the required payment date to the date on which payment is made. Nothing in this subsection (2) shall be construed to affect the retention provisions of any contract.

(3) (Deleted by amendment, L. 2011, (HB 11-1115), ch. 211, p. 912, §2, effective August 10, 2011.)

The contractor under any contract exceeding one hundred fifty thousand dollars made or awarded by any public entity, pursuant to which sums are withheld to assure satisfactory performance of the contract, may withdraw the whole or any portion of the said sums withheld if the contractor deposits acceptable securities with the public entity. The contractor shall take such actions as the public entity may require to transfer the securities or a limited interest in the securities, including a security interest, and to authorize the public entity to negotiate the acceptable securities and to receive the payments due the public entity pursuant to law or the terms of the contract, and, to the extent there are excess funds resulting from said negotiation, the balance shall be returned to the contractor. Such acceptable securities so deposited at all times shall have a market value at least equal in value to the amount so withdrawn. If at any time a public entity determines that the market value of the acceptable securities theretofore deposited has fallen below the amount so withdrawn, the public entity shall give notice thereof to the contractor, who forthwith shall deposit additional acceptable securities in an amount sufficient to reestablish a total deposit of securities equal in value to the amount so withdrawn.

Any amount deducted by a public entity, pursuant to law or the terms of a contract, from the retained payments otherwise due to the contractor thereunder shall be deducted first from that portion of the retained payments for which no acceptable securities have been substituted and then from the proceeds of any deposited acceptable securities, in which case, the contractor shall be entitled to receive the interest, coupons, or income only from those acceptable securities which remain on deposit after such amount has been deducted.

All retained payments and interest thereon disbursed to any contractor under any contract with a public entity covered under this article shall be disbursed to each subcontractor by the contractor. The disbursement of such retained payments and interest shall be in proportion to the respective amounts of retained payments, if any, which the contractor theretofore has withheld from his subcontractors if the subcontractor has performed under his contract with the contractor.