A newly-enacted amendment to the New York General Business Law is designed to reduce delays in final payments to contractors, limit the amount of the contract sum (“retainage”) that can be withheld and revises the triggering event for the contractor’s entitlement to final payment.
- This applies to all private commercial construction projects valued at $150,000 or more.
- Retainage on private construction projects is capped at 5%; and
- Contractor may submit a final invoice for the full amount of retainage upon achieving substantial completion.
The new bill amends N.Y. General Business Law Section 756-c so that no more than 5% of the contract sum can be withheld as retainage from a contractor or subcontractor on a construction project equal to or greater than $150,000. In addition to the 5% cap, lower-tier contracts are limited to “the actual percentage retained by the owner” where the prime contract is lower than 5%. Previously, project owners, contractors, and subcontractors could agree to withhold “a reasonable amount” of retainage on downstream parties.
The new bill also amends N.Y. General Business Law Section 756-a to allow contractors to submit invoices for final payment once the contractor reaches substantial completion (as substantial completion is defined in the contract or contemplated by the terms of the contract). Previously, contractors had to wait until they completed all contract obligations (including final completion of the project) before a final invoice could be submitted.
These changes to New York law take effect immediately and apply to contracts entered into on or after November 17, 2023.
