Last year was a busy year for lawmakers at the Minnesota Legislature in regard to the construction industry. Going forward, both prime (general) contractors as well as subcontractors need to be aware of the law changes in the statute, as they can affect everything from contracts and scheduling to accounting and project timelines. Effective August 1, 2016 a new retainage law went into effect under Section 337.10 of the Minnesota Statutes.

The following changes could affect any contracts your company has entered into after August 1, 2016:

Waiver of lien or claim.
Construction contracts that require a prime contractors, subcontractors or suppliers to waive their lien rights prior to receipt of payment are void and unenforceable.
Prompt payment to subcontractors and suppliers is required and defined.
The responsible party must remit payment to subcontractors and suppliers within 10 days of receipt of payment for undisputed services received.
Penalties for lack of prompt payment will be imposed.
Lack of timely payment, as defined above, will result in the responsible party owing monthly interest of 1.5% to the subcontractor or supplier to whom payment is owed. The interest penalty is subject to a minimum assessment of $10 monthly for amounts due in excess of $100.
Legal costs incurred may also be assessed.
A subcontractor or supplier that takes legal action against the party responsible for payment, and prevails, will also be awarded reimbursement for court costs and legal fees incurred.
Construction work could be suspended.
A prime contractor or subcontractor has the right to suspend work on the project until payment for their undisputed services has been received.
Retainage limits have been set.
Historically, retainage amounts varied but generally were withheld at either 5% or 10% of the contract value. A retainage of 5% of the contract value is now the maximum amount that can be withheld.  However, at the owner’s discretion, retainage can be assessed at lower amounts or not required at all.

Again, the above items apply to contracts your company has entered into on or after August 1, 2016.  DS+B is committed to the success of you and your company in the dynamic world of construction. Please let us know if you have any questions or if there is anything we can do to be of assistance.