Louisiana Retainage Guide and FAQs

A. When, under the provisions of this Part, a contract in the amount of fifty thousand dollars or more is entered into between an owner and a contractor and if in accordance with the terms of such contract funds earned by the contractor are withheld as retainage by the owner from periodic payments due to the contractor then such funds shall be deposited by the owner into an interest bearing escrow account. The provisions of this Section shall not apply to a contract for a single family residence or double family residence. The provisions of this Section also shall not apply to a contract for the construction or improvement of the following types of industrial facilities that are, or will be, engaged in activities defined or classified under one or more of the following subsectors, industry groups, or industries of the 1997 North American Industry Classifications System (NAICS):

(1) 22111 electric power generation.

(2) 321 wood products manufacturing.

(3) 322 paper manufacturing.

(4) 324 petroleum and coal products manufacturing.

(5) 325 chemical manufacturing.

(6) 326 plastics and rubber products manufacturing.

(7) 331 primary metals manufacturing.

(8) 562211/562212 hazardous and solid waste landfills.

(9) 422710 bulk stations and materials.

(10) 486110 crude oil pipelines.

(11) 486910 refined petroleum products pipelines.

(12) 486210 natural gas pipelines.

(13) 486990 other pipelines.

(14) 211112 natural gas processing plants.

B. An escrow account under the provisions of this Section shall be located at a qualified financial institution and shall be under the control of an escrow agent. The escrow account and escrow agent shall be selected by mutual agreement between the owner and the contractor.

C. Upon completion of the work that is the subject of the contract, the funds, including any interest located in the escrow account shall be released from escrow under the following conditions:

(1) If there are no existing claims by the owner, the whole amount shall be paid to the contractor within three business days upon receipt by the escrow agent of a written release signed by the contractor and the owner.

(2) If there is a dispute between the owner and contractor and the contract does not provide for binding arbitration of such dispute:

(a) Undisputed amounts shall be released by the escrow agent within three business days of receipt of a notarized request of the contractor.

(b) Disputed amounts that are the subject of a judicial proceeding shall be released by the escrow agent within three business days of the receipt of a final order by the court. Upon receipt of the order of the court, the escrow agent shall pay the contractor or owner such amounts as are determined by the court.

(3) If there is a dispute between the owner and contractor and the contract provides for binding arbitration of such dispute, the following shall occur:

(a) Undisputed amounts shall be released by the escrow agent within three business days of receipt of a notarized request of the contractor.

(b) Disputed amounts that are the subject of binding arbitration under the contract shall be released by the escrow agent within three business days of the receipt of a final order by the arbitrator who has been selected by mutual agreement between the owner and the contractor. Upon receipt of the order of the arbitrator, the escrow agent shall pay the contractor or owner such amounts as are determined by the arbitrator under the rules as defined in the contract between the owner and the contractor.

D. Receipt by the escrow agent or the qualified financial institution in which the escrow account is maintained of what purports to be a written release signed by the contractor and owner, or an order by a court or arbitrator, shall be a full release and discharge of the escrow agent for transfer of funds to the contractor. Neither the escrow agent nor the qualified financial institution in which the escrow account is maintained shall be held liable to any party based on any claim that the written release is unauthorized, forged, or otherwise fraudulent.

E. Neither the escrow agent nor the qualified financial institution in which the escrow account is maintained pursuant to the provisions of this Section shall have any liability to the owner, contractor, or any other person when complying with the provisions of this Section.

Acts 2010, No. 638, §1; Redesignated from R.S. 4815 by Acts 2019, No. 325, §4.

NOTE: Former R.S. 9:4815 redesignated as R.S. 9:4857 by Acts 2019, No. 325.

NOTE: See Acts 2019, No. 325, §§6, 7, and 10, regarding applicability.

A. No contracts for the construction, alteration, or repair of any public works executed in conformity with this Part shall provide that the state or any of its agencies, boards, or subdivisions or any other public entity letting such a contract may withhold payment of more than ten percent of the contract price on projects of less than five hundred thousand dollars, and five percent of the contract price on projects of five hundred thousand dollars or more until the expiration of forty-five days after the recordation of formal acceptance of such work, or notice of default by the contractor or subcontractor. Such provision for withholding of payment shall in no way change or affect the liability of the letting agency or of the contractor, subcontractor, or their sureties.

B. All public works contracts shall contain a clause stating that any punch list generated during a construction project shall include the cost estimates for the particular items of work the design professional has developed based on the mobilization, labor, material, and equipment costs of correcting each punch list item. The design professional shall retain his working papers used to determine the punch list items cost estimates should the matter be disputed later. The contracting agency shall not withhold from payment more than the value of the punch list. Punch list items completed shall be paid upon the expiration of the forty-five day lien period. The provisions of this Section shall not be subject to waiver, nor shall these provisions apply to the Department of Transportation and Development.

A. Under any contract awarded under the provisions of this Chapter, the contractor may, with written consent of his surety company, from time to time, withdraw the entire amount retained from payments due the contractor pursuant to the terms of the contract, or any portion thereof, by depositing with the state treasurer for state contracts, or the treasurer or secretary of a public entity for other than state contracts, the following security, or a combination thereof, in an amount equal to the amount of funds being withdrawn:

(1) Certificates of deposit issued by commercial banks located in the state of Louisiana. The certificates shall not exceed the maximum dollar amount secured by the Federal Deposit Insurance Corporation. The certificates shall be negotiable, with payment of accrued interest, or shall be accompanied by an irrevocable power of attorney executed by the owner of the certificate in favor of the treasurer of the state or other public entity.

(2) Certificates of deposit issued by savings and loan associations located in the state of Louisiana. The certificates shall not exceed the maximum dollar amount secured by the Federal Deposit Insurance Corporation. The certificates shall be negotiable, with payment of accrued interest, or shall be accompanied by an irrevocable power of attorney executed by the owner of the certificate in favor of the treasurer of the state or other public entity.

B. The treasurer of the state or other public entity shall, after the date of substantial completion of the work, as defined in R.S. 38:2241.1, collect all interest or income on the security deposited and shall, by and with written consent of the contractor’s surety, pay such interest or income to the contractor. Prior to the date of substantial completion, all interest or income on the security deposited shall accrue to the state or other public entity.

C. In the event that the contractor shall default in performance of the contract or any portion thereof, the securities deposited by him in lieu of the amount withheld, and all interest or income accruing on said securities may be negotiated or sold by the state or other public entity and the proceeds of said negotiation or sale used as if the proceeds represented the payments withheld under the terms of the contract.

D. The provisions of this Section shall have no effect on the prohibition against the Louisiana Department of Transportation and Development’s withholding of payments.

E. The provisions of this Section shall not apply to the office of facility planning and control of the division of administration.

A.

(1) The Department of Transportation and Development shall insert a clause in the specifications of all contracts let and awarded as a result of public lettings for the construction, improvement, maintenance, or repair of any road, highway, bridge, or appurtenance thereto or any other Department of Transportation and Development facility, providing for the retainage of amounts constituting a percentage of the gross value of the completed work as may be provided for in the contract. Retained amounts for projects which cost less than five hundred thousand dollars shall not exceed ten percent of the gross value of the completed work. Retained amounts for projects which cost five hundred thousand dollars or more shall not exceed five percent of the gross value of the completed work.

(2) Final payment of the retained amounts to the contractor under the contract to which the retained amount relates shall be made after certification by the secretary or his duly appointed designee that the work has been satisfactorily completed and is accepted in accordance with the contract, plans, and specifications, and forty-five days have lapsed from filing the notice of final acceptance with the office of the recorder of mortgages in the parish where the work has been done. Any interest earned on the retained amounts shall be credited to the Transportation Trust Fund.

B., C. Repealed by Acts 2001, No. 413, § 2.

D. If the contractor furnishes the department a retainage bond equal to ten percent of the contract amount for projects less than five hundred thousand dollars or five percent of the contract amount for projects five hundred thousand dollars or more, the department shall not withhold retainage.