Bill Text: MS SB2762 | 2024 | Regular Session | Enrolled
Bill Title: Retainage; further define and outline the process related to.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2024-04-19 - Approved by Governor [SB2762 Detail]
Download: Mississippi-2024-SB2762-Enrolled.html
MISSISSIPPI LEGISLATURE
2024 Regular Session
To: Business and Financial Institutions
By: Senator(s) Williams, Sparks
Senate Bill 2762
(As Sent to Governor)
AN ACT TO ESTABLISH A MAXIMUM AMOUNT OF RETAINAGE AND ESTABLISH THE TIMING FOR RELEASE OF RETAINAGE WITH RESPECT TO THE PERFORMANCE OF CERTAIN CONTRACTS AND TO PROVIDE FOR THE PAYMENT OF INTEREST FOR IMPROPERLY HELD RETAINAGE; TO DEFINE CERTAIN TERMS FOR THE PURPOSES OF THIS ACT; TO PROVIDE TYPES OF CONTRACTS TO WHICH THE PROVISIONS OF THIS ACT DO NOT APPLY; TO AMEND SECTIONS 31-5-15 AND 31-5-33, MISSISSIPPI CODE OF 1972, TO DEFINE THE TERM "RETAINAGE" FOR PURPOSES OF CERTAIN PUBLIC WORKS CONTRACTS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. (1) For the purposes of this section, the following words and phrases shall have the meanings ascribed in this section unless the context clearly indicates otherwise:
(a) "Retainage" means that money, or other security as agreed to by the parties to a construction contract, earned by the contractor, subcontractor or lower-tier sub-subcontractor or supplier, as the case may be, for work properly performed or materials suitably stored if payment for stored materials is provided for in the contract, which has been retained by the owner conditioned on final completion and acceptance of all work in connection with a project or projects by the contractor, subcontractor or lower-tier sub-subcontractor or supplier.
(b) "Final completion" shall mean the stage of the project at which all work has been completed in accordance with the contract requirements, including, but not limited to, the completion of punch list items, the submission of contractual close-out documents, equipment manuals, warranty documents or other like required deliverables.
(2) (a) A construction contract on any project in this state which provides for progress payments in installments based upon an estimated percentage of completion with a percentage of the contract proceeds to be retained by the owner pending final completion of the contract may provide for the owner's withholding of retainage from payments to its contractor for work performed by that contractor on a construction project. However, there may not be retained more than five percent (5%) of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site. If an owner withholds an amount greater than that allowed by this paragraph (a), the owner shall be liable to the contractor for interest accruing on the excess amount withheld at the rate of one percent (1%) per month.
(b) A construction contract on any project in this state which provides for progress payments in installments based upon an estimated percentage of completion with a percentage of the contract proceeds to be retained by the contractor pending final completion of the contract may provide for the contractor's withholding of retainage from payments to its subcontractors for work performed by the subcontractors on a construction project. However, there may not be retained more than five percent (5%) of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site. If a contractor withholds an amount greater than that allowed by this paragraph (b), the contractor shall be liable to the subcontractor for interest accruing on the excess amount withheld at the rate of one percent (1%) per month.
(c) A construction contract on any project in this state which provides for progress payments in installments based upon an estimated percentage of completion with a percentage of the contract proceeds to be retained by the subcontractor pending final completion of the contract may provide for the subcontractor's withholding of retainage from payments to its sub-subcontractors or material suppliers for work performed by such sub-subcontractors or material suppliers on a construction project. However, there may not be retained more than five percent (5%) of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site. If a subcontractor withholds an amount greater than that allowed by this paragraph (c), the subcontractor shall be liable to the sub-subcontractor or material supplier for interest accruing on the excess amount withheld at the rate of one percent (1%) per month.
(d) The five percent (5%) retainage described in paragraphs (a), (b) and (c) of this subsection shall apply to all items of work required to achieve final completion. Any amounts held above the five percent (5%) for items of work required to achieve final completion shall be subject to interest accruing on the excess amount at the rate of one percent (1%) per month.
(3) The owner shall release and pay retainage to the contractor for work completed on any construction contract no later than sixty (60) days after the final completion of the contractor's work provided all necessary certificates of occupancy have been issued. The contractor shall release and pay retainage to its subcontractors and subcontractors shall release and pay retainage to their sub-subcontractors for work completed pursuant to the requirements of Section 87-7-5, Mississippi Code of 1972.
(4) Nothing in this section limits or alters the paying party's right to withhold or not approve payment on grounds set forth in the party's contract, subcontract or sub-subcontract for work not properly performed or payment not earned; rather, this section is intended only to establish a maximum amount of retainage and provide for the payment of interest for improperly held retainage. Also, the paying party may condition payment on the receipt of payment from the party with whom the paying party contracted and a full release of any lien of the contractor, subcontractor or sub-subcontractor, as the case may be, for the amount of work being paid. For purposes of this subsection (4), "the paying party" shall mean the party in direct contractual privity with the party asserting that payment is due to it and, accordingly, shall not include any financial institution or other lender that is the source of the funds at issue.
(5) A party may not waive by contract or otherwise the right to receive interest, as provided for in this section.
(6) A contractor, subcontractor or sub-subcontractor may file a civil action solely against the party contractually obligated for the payment of the amount claimed to recover the amount due plus the interest accrued in accordance with this section. If the court finds in the civil action that the party contractually obligated for the payment of the amount claimed has not made payment in compliance with this section, the court shall award the interest specified in this section in addition to the amount due. In any such civil action, the party in whose favor a judgement is rendered shall be entitled to recover payment of reasonable attorneys' fees, court costs and reasonable expenses from the other party. For purposes of this subsection (6), "the party contractually obligated for the payment" shall mean the party in direct contractual privity with the party asserting that payment is due to it and, accordingly, shall not include any financial institution or other lender that is the source of the funds at issue.
(7) This section does not apply to the following:
(a) Residential homebuilding.
(b) Improvements to real property intended for residential purposes which consist of sixteen (16) or fewer residential units.
(c) Contracts, subcontracts or sub-subcontracts in the amount of Ten Thousand Dollars ($10,000.00) or less.
(d) Contracts awarded by the State of Mississippi, or any agency, unit or department of the State of Mississippi, or by any political subdivision thereof.
(8) This section does not amend or modify existing laws relating to mechanics and materialmen liens provided in Article 21, Title 85, Chapter 7, Mississippi Code of 1972.
(9) The rights and obligations created in this section cannot be modified or waived by any oral or written contract or agreement.
(10) The provisions of this section shall become effective for and apply to all contracts, as described in this section, entered into on or after July 1, 2024.
SECTION 2. Section 31-5-15, Mississippi Code of 1972, is amended as follows:
31-5-15. Under any public contract heretofore or hereafter made or awarded by the State of Mississippi, or any agency or department of the State of Mississippi, or by any political subdivision thereof, the contractor may, with the written consent of his or its surety, from time to time, withdraw the whole or any portion of the amount retained from payments due the contractor pursuant to the terms of the contract by depositing with the State Treasurer of the State of Mississippi, or the treasurer or secretary of the political subdivision of the State of Mississippi holding funds belonging to the contractor, the following security, or any combination thereof in an amount equal to or in excess of the amount so withdrawn, said securities to be accepted at the time of deposit at market value but not in excess of par value, to wit:
( * * *a) U.S. Treasury Bonds, U.S. Treasury
Notes, U.S. Treasury Certificates of Indebtedness, or U.S. Treasury Bills, or
( * * *b) Bonds or notes of the State of Mississippi,
or
( * * *c) Bonds of any political subdivision
of the State of Mississippi, or
( * * *d) Certificates of deposit issued by
commercial banks located in the State of Mississippi, provided that such certificate
is negotiable or is accompanied by a power of attorney executed by the owner of
the certificate in favor of the Treasurer of the State of Mississippi or of the
treasurer or the secretary of the political subdivision involved, or
( * * *e) Certificates of deposit issued by
savings and loan associations located in the State of Mississippi, the accounts
of which are insured by the Federal * * * Deposit
Insurance Corporation, or whose accounts are insured by a company approved
by the State Board of Savings and Loan Associations, provided that such
certificate is made payable with accrued interest on demand and is accompanied
by a power of attorney executed by the owner of the certificate in favor of the
Treasurer of the State of Mississippi or the treasurer or secretary of the political
subdivision involved, and provided that any such certificate from any of the savings
and loan associations referred to in this subparagraph shall not be for an
amount in excess of the maximum dollar amount of coverage of the Federal
Savings and Loan Insurance Corporation.
The agency or department of the state shall notify the State Treasurer of the amount of deposit required and shall also notify the State Treasurer when to release the deposit. The political subdivision of the state shall notify its treasurer or secretary of the amount of deposit required and shall also notify him when to release the deposit.
The State Treasurer, or the secretary or treasurer of the political subdivision holding said security, shall, from time to time, collect all interest or income on the security so deposited and shall, by and with the written consent of contractor's surety, pay the same when and as collected to the contractor or contractors who deposited said obligations. If the deposit be in the form of coupon bonds, the coupons as they respectively become due shall be delivered to the contractor.
If in the event of an overpayment to a contractor the contracting authority is unable to obtain reimbursement for such overpayments from the contractor, the chief administrative officer of the contracting authority shall notify the contractor, its surety and the State Treasurer or other holder of the security, of the nature of the overpayment and of the failure to obtain reimbursement. Upon such notification, the security holder shall retain the income on the deposited security until an amount equal to the overpayment is accumulated and paid to the contracting authority.
In the event the contractor shall default in the performance of the contract or any portion thereof, the securities deposited by him in lieu of retainage and all interest and coupons and income accruing on said securities after said default may be sold by the state or any agency or department thereof, or any political subdivision, and the proceeds of said sale used as if such proceeds represented the retainage provided for under the contract. For the purposes of this section, the term "retainage" means money, or other security as agreed to by the parties to a construction contract, earned by the contractor, subcontractor or lower-tier sub-subcontractor or supplier, as the case may be, for work properly performed or materials suitably stored if payment for stored materials is provided for in the contract, which has been retained by the owner conditioned on final completion, to include, but not be limited to, deliverable and nondeliverable requirements such as completion of contractual closeout, provision of equipment manuals, provision of warranty documents, completion of punch list and acceptance of all work in connection with a project by the contractor, subcontractor or lower-tier sub-subcontractor or supplier.
SECTION 3. Section 31-5-33, Mississippi Code of 1972, is amended as follows:
31-5-33. (1) In any contract for the construction, repair, alteration or demolition of any building, structure or facility awarded by the State of Mississippi, or any agency, unit or department of the State of Mississippi, or by any political subdivision thereof, which contract provides for progress payments in installments based upon an estimated percentage of completion with a percentage of the contract proceeds to be retained by the state agency, unit or department, or by the political subdivision or contractor pending completion of the contract, such retainage shall be five percent (5%), and the amount retained by the prime contractor from each payment due the subcontractor shall not exceed the percentage withheld by the state, or any agency, unit or department of the state, or by any political subdivision thereof, from the prime contractor. For the purposes of this section and Section 31-5-15, the term "retainage" means that money, or other security as agreed to by the parties to a construction contract, earned by the contractor, subcontractor or lower-tier sub-subcontractor or supplier, as the case may be, for work properly performed or materials suitably stored if payment for stored materials is provided for in the contract, which has been retained by the owner conditioned on final completion and acceptance of all work in connection with a project or projects by the contractor, subcontractor or lower-tier sub-subcontractor or supplier.
On any contract as described herein, of which the total amount is Two Hundred Fifty Thousand Dollars ($250,000.00) or greater, or on any contract with a subcontractor, regardless of amount, five percent (5%) shall be retained until the work is at least fifty percent (50%) complete, on schedule and satisfactory in the architect's and/or engineer's opinion, at which time fifty percent (50%) of the retainage held to date shall be returned to the prime contractor for distribution to the appropriate subcontractors and suppliers. Provided, however, that future retainage shall be withheld at the rate of two and one-half percent (2-1/2%).
(2) The provisions of this section shall not apply to contracts let by the Mississippi Transportation Commission for the construction, improvement or maintenance of roads and bridges.
SECTION 4. This act shall take effect and be in force from and after July 1, 2024.
