What Is the Construction Retention Law in Missouri?

Jan 18 2024      On Behalf of  David M. Duree & Associates, P.C.      Construction

In construction, retention laws allow project owners to hold back a portion of the payment due to contractors and subcontractors until they complete the project satisfactorily. This withheld amount (which can differ dramatically throughout the nation as construction laws vary by state) is usually a small percentage of the total contract value and acts as security to guarantee work quality and completion.

Once the work meets all contract requirements, the owner releases these retainage funds. This practice protects the project owner’s interests by ensuring contractors and subcontractors fulfill their obligations fully and satisfactorily before receiving full payment. 

However, retention can sometimes lead to problems, leaving contractors or subcontractors unpaid. This can happen when project owners delay or refuse to release the retained funds, even after contractors have completed their work satisfactorily.

Additionally, if a project owner experiences financial issues or goes bankrupt, the retained amount might become difficult to recover. These situations can put contractors and subcontractors in a tough spot, especially smaller businesses that rely heavily on these payments for cash flow and operational expenses. 

What Do Missouri’s Construction Retention Laws Say?

In Missouri, specific statutes govern the retention or retainage in construction contracts. Here’s a summary of the key points:

Maximum Retainage on Private Construction Projects: 

Missouri law sets the maximum retainage that project owners can withhold from progress payments at 10 percent. However, if a contractor’s performance does not meet the contract terms, the owner may retain additional sums to protect their interests.

Release of Retainage: 

Retainage must be released, less an amount equal to 150 percent of the cost to complete any remaining or incomplete contract items, within 30 days of substantial completion of construction.

Subcontractors and Early Completion: 

If a subcontractor’s work is satisfactorily completed early in a project, a contractor can request an adjustment in retainage from the owner to enable full payment to a subcontractor.

Penalties for Withholding Retainage: 

If an owner wrongfully withholds retainage or withholds too much, the court may award interest payments to contractors. Interest rates are set at 1.5 percent monthly on the withheld amounts plus reasonable attorney’s fees.

Application to Subcontractors: 

The law explicitly states that the retainage statutes apply to subcontractors as well as contractors. Subcontractors are bound by the same obligations to their sub-subcontractors and suppliers as contractors are to their subcontractors.

Retainage Laws on Public Works Contracts: 

State law caps the amount of retainage at five percent for public works contracts. The only exception is for contracts of $50,000 or less where surety bonds are not required, for which owners can withhold up to 10 percent. The law also requires the owner to pay out 98 percent of the retainage to the general contractor upon substantial completion, who must pay it to the subcontractors and suppliers. For any incomplete work, owners can withhold up to 150 percent of each remaining item’s value.

Contact a Missouri Construction Retention Lawyer Today

Don’t let unpaid work disrupt your construction business. If you’re struggling with nonpayment for construction work and need legal guidance, contact David M. Duree and Associates, P.C., for a free consultation. Our experienced team is dedicated to helping contractors and subcontractors like you understand Missouri retention laws and secure the payments you rightfully deserve.