Tag Archives: construction law

Strang, Scott honored in 2016 Edition of Super Lawyers

By on October 20, 2016

Strang Scott is honored to announce the selection of Christopher Strang as a 2016 Super Lawyer and Jordan Scott as a 2016 Rising Star by the Massachusetts edition of Super Lawyers. Mr. Strang has been recognized for his outstanding work in construction litigation for the eighth consecutive year, first as a Rising Star and then as a Super Lawyer, while Mr. Scott has earned his second consecutive recognition for his employment practice. The Super Lawyers selection team chooses only 5% of eligible attorneys as Super Lawyers, and only 2.5% of eligible attorneys as Rising Stars. Both lists are the result of a process that includes a statewide lawyer survey, independent research, and peer reviews.

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Strang Scott Prevails on Summary Judgment in Case Involving Falsified Payroll Reports on Federal Construction Project

By on October 13, 2016

     In the case of United States for the Use and Benefit of Metric Electric, Inc. v. CCB, Inc. and the Hanover Insurance Company, Civil Action No. 15-11934, in the United States District Court in Massachusetts, the court ruled in favor of Strang Scott’s motion for summary judgment, dismissing all of the plaintiff’s claims.

     The case arose over construction work in the John F. Kennedy Federal Building in Boston. The electrical subcontractor submitted periodic certifications that it paid its employees for work performed on the project. These statements turned out to be false. Six of the subcontractor’s employees brought suit against it for failure to pay wages over several months.

     The general contractor terminated the subcontract shortly thereafter. The electrical subcontractor brought suit against the general contractor and its payment bond surety, claiming an unpaid subcontract balance was due. The claims were brought under the Miller Act, as well as for breach of contract, quantum meruit, and violations of M.G.L. c. 93A (the Massachusetts law governing unfair or deceptive business practices).

     Attorney Christopher Strang argued that intentionally submitting false certified payroll documents constitutes a material breach of contract, justifying termination and also extinguishing any right to further payment. The judge agreed, finding “[i]ts failure to pay its employees in a timely fashion as required by state and federal law (as well as by the terms of the Subcontract), compounded by Sampson’s filing of perjured certifications of payment, bars Metric from entering any chamber of equity.”

     Contractors should use caution when submitting certifications on public, or any, construction projects. Making false statements on these documents can preclude any future recovery of contract payments. Concerned contractors should contact an experienced Massachusetts construction attorney.

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Strang Scott Selected to Join Construction Lawyers Alliance

By on June 15, 2016

 

Strang, Scott, Giroux & Young, LLP, was recently selected to join the Construction Lawyers Alliance, a group devoted to providing a comprehensive collection of construction law resources prepared by a select group of construction lawyers nationally.  Strang Scott is proud to join the Alliance and will continue to offer timely advice and updates on construction trends, laws and matters of interest to the construction industry.  Strang Scott looks forward to participating in the national dialogue regarding matters of interest to the construction industry along with its colleagues in the Construction Lawyers Alliance.

 

 

Considerations for the Effective Use of Email in Connection with Construction Projects

By on June 7, 2016

Email is an indispensable tool for contractors that can streamline communication regarding the many facets of a construction project that aren’t strictly found in a project’s plans and specifications, or in the relevant contract documents.  When used well, email can be invaluable to document the course of a project.  When it’s disregarded or treated haphazardly, email can fail for its essential purpose – meaningful communication – or worse still it can be used to turn your own words against you.  The following are several considerations when using email to communicate regarding your construction project.

Who is my audience? 

This isn’t a trick question, but it is more nuanced than it might initially seem.  In the first, instance, the obvious audience for each email is its addressees.  Those addressees, however, may be only the first audience for your email.  If a dispute arises regarding your project, you should anticipate that the audience for your email might grow exponentially to include corporate principals, engineers, architects, attorneys, arbitrators, judges or juries.  As a result email correspondence regarding your project should be limited to professional matters, focused on the subject matter to be addressed and as clear as possible regarding the subject matter being addressed.  When developing your email practices, it’s important to remember that your audience could extend beyond the initial addressees.  This should help you to focus your message on the relevant considerations for your communication and help you avoid sending emails that you’ll later need to explain.

Why am I sending this email?          

If you can answer this question succinctly, you’re off to a good start in drafting an effective project email.  The “high-level” answer to this question generally should be reflected in the subject line of your email.  The details that follow in the email should be limited to addressing the matter(s) in the subject line.  Discussion of matters unrelated to the expressed subject should be avoided and saved for another email, letter or conversation.  Consider writing a new email, with a new subject line, when your message no longer addresses matters in the subject line, rather than continuing a chain of email that has gone off point.  If you follow this practice, you’ll help the recipient to quickly identify the reason for your email, prioritize your email among the many received on a given day and help both you and your recipient to refer back to the email, or chain of emails, later regarding the particular issue(s) addressed.  As a side benefit, you’ll appear focused, organized and professional in your communication regarding the project.

Conversely, if you can’t answer this question, whatever you intend to write is probably best left unsaid, or at least, unrecorded.  Among the reasons you should avoid sending a project email are anger, annoyance, personal reasons, sarcasm or humor.  Nobody like a humorless person, but email is tone-deaf or worse – susceptible to multiple tones.  Like a diamond, email is forever.  Once you’ve pressed “send,” it’s safe to assume that your email will be part of the project record forever.  And like a diamond, it’s for “better or worse.”

When is an email (or letter) absolutely necessary?

There are instances when it’s critical to communicate to another party with email or a letter.

Deviations from plans, specifications or the contract:  Each time you’re asked or told to do something beyond the scope of work or that differs from the plans, specifications or your contract, you should confirm what you’re asked or told to do in writing.  An email confirming your prior communication(s), your understanding of what’s been requested and your intended resolution of that matter is critical to documenting your project accurately and favorably.  An email or letter addressing these matters achieves at least three important objectives; it provides a contemporaneous record of the event, it provides the requesting party notice of your intentions and it provides the party receiving your correspondence the opportunity to respond, to object or to further clarify the information you’ve provided. 

Particularly with respect to change directives from an owner or general contractor, often it will not be enough to correspond with the opposing party regarding the change, and other steps will need to be taken.  It is important, however, to use the email as a means to establish the circumstances of the change request, your understanding of what has been requested and how and when you intend to address the request.  These matters can significantly affect the likelihood that you’ll be compensated for change requests later if a dispute regarding your performance arises.      

Disputes:  Because your project communication is a significant piece of the overall record of a project, it’s critical to fill in details regarding matters of dispute with your communications.  For the reasons previously noted, your email communications can be used to reflect and confirm oral communications between parties whose positions and recollections may differ and change over time.  An email confirming the contents of a recent discussion, particularly regarding matters in dispute, can prove invaluable to establishing the circumstances, your actions and your position if a dispute ripens into arbitration or litigation.  Your contemporaneous email correspondence can serve as a powerful and credible tool to establish your version of the events regarding any dispute.

Setting the Record Straight:  For the same reasons that the record of events created in your email can be used to support your version of events, it is vital to respond to inaccurate recitations of conversations or events from another party.  In the long hindsight of a project, inaccuracies that go unchallenged by simple omission become more difficult to discredit.  This is not to say that you must respond vigilantly to each and every minor inaccuracy.  Rather, it is important that you do not let another party’s version of events control the written narrative of the course of the project.  Long before any matter becomes contentious, you’re well served by addressing, in writing, significant inaccuracies in another party’s written narrative of events that are important to explain your actions or address historical inaccuracies.  Sometimes it will be important to make sure the record is accurate as to whether something was done on a Monday or Tuesday, but more often than not, it’s more important to know in what sequence a particular task was performed or whether a certain discussion took place before or after certain work was performed. 

It’s not essential that you resolve whose version of events are correct:  generally, you’ll be able to verify what happened by other means as well.  It is crucial, however, that your version of events exists in the written record so as to avoid the scenario where only your testimony is left to challenge the other party’s testimony and their unchallenged written version of events that you failed to address contemporaneously.  Under those circumstances, it is significantly more difficult to establish your version of the events or challenge the credibility of another party whose testimony is corroborated by a written record of the events.       

Developing consistent email practices can be a powerful, if underappreciated tool in the contractor’s toolbox.  In addition to developing clear and credible records of your projects, you’ll be prepared to address questions regarding the performance of your work in a consistent and compelling way.  Better still, you may limit or avoid disputes through consistent application of your good email practices.  And for those disputes that can’t be avoided, when you sit down with your construction attorney to discuss the matter and review your records of the project, it’s likely that you will have a better prepared project file than your opposing party.

Federal Subcontractors – Understanding the Basics of Your Rights Under the Miller Act.

By on May 31, 2016

By Jennifer Lynn

     Subcontractors commonly inquire as to what they can do to ensure they receive payment on a project. For federally-owned construction projects, subcontractors can look to the Miller Act as a source of security. The Miller Act, codified as 40 U.S.C. §§ 3131-3134, requires general contractors on federal projects to provide performance bonds and payment bonds to the awarding authority where the prime contract exceeds $100,000. The general contractor’s payment bond must list a “satisfactory” surety and cover the total amount of prime contract. 40 U.S.C. § 3131(b)(2).

     The primary purpose behind the Miller Act is to provide security to subcontractors. Because federal projects are immune from lien claims, the Miller Act provides an alternative to a traditional lien, which instead calls for subcontractors to file claims against the general contractor and its surety under the payment bond. See U.S. ex rel. Metric Electric, Inc. v. Enviroserve, Inc., 301 F.Supp.2d 56, 66 (D.Mass. 2003). As with any claim for payment, the subcontractor must establish that it is owed payment in order to establish an enforceable claim under the bond.  In addition to establishing a basic right to payment, subcontractors must meet other specific requirements to secure the benefits of the Act.

Who is Protected Under Miller Act Payment Bonds?

     The Miller Act requires payment bonds to secure the claims of “all persons supplying labor and material in carrying out the work provided for in the contract.” 40 U.S.C. § 3131(b)(2). “All persons,” for purposes of the Miller Act, applies to (1) first-tier subcontractors, which are contractors who directly contract with the general contractor; (2) second-tier subcontractors, those contractors with a subcontract with a first-tier subcontractor; (3) first-tier suppliers, which are suppliers who contract with the general contractor; and (4) second-tier suppliers that have a contract with a first-tier subcontractor but not a first-tier supplier. See U.S. ex rel. Water Works Supply Corp. v. George Hyman Constr. Co., 131 F.3d 28, 31 (1st Cir. 1997).

     Third-tier and more remote subcontractors and suppliers cannot recover under the Miller Act. Subcontractors and suppliers too remote to file a claim under the Miller Act can file ordinary claims for nonpayment for breach of contract or quasi-contract.  The Miller Act does not alter contractors’ rights in connection with claims for nonpayment, but rather provides security for payment to the “persons” covered by the Act.

What Must a Subcontractor Do to Obtain Security Under the Miller Act?

     Much like comparable statutes for state-owned construction projects, subcontractors must wait the requisite time to file a Miller Act bond claim and may need to provide initial notice to the general contractor. All subcontractors must wait 90 days after they last furnished labor or material to the project[1] before they may file a claim under a Miller Act payment bond. 40 U.S.C. § 3113(b)(2). The wait period serves the purpose of setting aside a reasonable amount of time for the subcontractor to receive payment for completed work. Bond claims filed before expiration of the notice period will be considered premature.

     Second-tier contractors must comply with the 90 day wait period and must also provide written notice of its claim to the general contractor. The notice must be in writing; it must be received by the general contractor within the first 90 days after the second-tier subcontractor last furnished labor or material on the project; it must state “with substantial accuracy” the amount claimed unpaid and due and the name of the party to whom the material or labor was supplied or performed (i.e. the first-tier subcontractor); and it must be delivered by a method that provides verification of delivery (i.e. certified or registered mail) or served by a U.S. marshal. 40 U.S.C. § 3133(b)(2).  The required notice must specifically demand payment from the general contractor.  See U.S. ex rel. John D. Ahern Co., Inc. v. J.F. White Contracting Co., 649 F.2d 29, 31-32 (1st Cir. 1981). The notice requirement is strictly construed, and failure to fully comply will bar the subcontractor from raising a recoverable bond claim.

     Subcontractors must file their claim on the bond within 1 year after the day of last furnishing labor or material on the project, 40 U.S.C. § 3133(b)(4), in the federal court in the district in which the project is located. 40 U.S.C. § 3133(b)(3)(B). Failure to file within the 1 year period will result in an absolute bar against the subcontractor’s bond claim. While a claim will be filed “in the name of the United States for the use of the person bringing the action,” 40 U.S.C. § 3133(b)(3)(A), the claim is a private one brought by the subcontractor and the federal government is explicitly exempt from liability to the subcontractor.

     The above summary covers the general parameters for subcontractors to file a bond claim on federally-owned public construction projects. Because each project presents a different set of facts, the process and outcome to recover for nonpayment and filing under the Miller Act will vary. If you are uncertain regarding your company’s ability to recover payment for its work on a federal construction project, or if your company has complied with the regulations or process governing Miller Act claims, you should contact a Massachusetts construction attorney to achieve the best possible outcome.

[1] For more information about “last date of work” and how it is calculated, read Payment Bonds on Federal Construction Projects – Last Date of Work.

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Contractors: Do You Know Your Rights Under the New Hampshire Residential Construction Defect Dispute Resolution Statute?

By on April 12, 2016

New Hampshire has enacted a dispute resolution statute for residential construction defect claims made by homeowners that, among other things, provides contractors notice and opportunity to resolve alleged construction defects prior to a disgruntled owner instituting litigation against them.  Despite its obvious benefits to residential contractors, many contractors fail to preserve the right to rely on the statute in contracts with homeowners.

The residential construction dispute resolution law’s stated purpose is “to encourage the out-of-court resolution of disputes between homeowners and contractors relative to residential construction defects.”  NH RSA 359-G encourages the resolution of residential construction defect claims by mandating a procedure that homeowners must follow prior to instituting litigation against a contractor, provided that the contractor preserves its right to rely on the statute in its written contract with the owner.

Assuming the right to rely on RSA 359-G has been preserved, the homeowner must provide notice of any claim of an alleged defect to the contractor no later than sixty days prior to filing an action against the contractor in court.  The homeowner’s notice to the contractor must contain a description of the alleged defect(s) “in detail sufficient to explain the nature of the alleged construction defect and the result of the defect … [and] provide to the contractor any evidence in possession of the homeowner that depicts the nature and cause of the construction defect.”  In other words, the homeowner’s notice must contain more than a simple notification to the contractor that there is a problem.  In so doing, the statute requires homeowners to provide contractors with adequate notice of the actual issue(s) for which the homeowner claims a defect and not simply a notice that there are alleged defects in the work.

Provided that the contractor receives adequate notice from the homeowner, the contractor must, within 30 days, respond in writing to the homeowner disclosing any information the contractor has regarding the specific alleged defects and:

  1. Offer to settle the claim made by making repairs, paying money to the homeowner or both, without performing any inspection of the claim;
  2. Offer to inspect the claim; or
  3. Reject the claim.

Generally speaking, if a contractor offers to inspect the claim, the contractor will have 15 days to do so and then another 15 days to provide written notice to the homeowner of the contractor’s findings from the inspection.  In the written notice the contractor must:

  1. Make a written offer to fully or partially remedy the construction defect at no cost to the homeowner, and provide the anticipated schedule to complete repairs;
  2. Make a written offer to settle the claim by payment;
  3. Make a written offer to resolve the issue by payment and repair; or
  4. Issue a written statement that the contractor will not remedy the defect.

After the homeowner elects to accept or reject the offer made by the contractor, the matter may proceed with payment, repairs or to the courts if the contractor rejects the claim and the homeowner disagrees.

Importantly, if the homeowner accepts the contractor’s offer to remedy the alleged defects and the contractor does so, the homeowner is barred from later bringing suit against the contractor for issues related to the defect.  Similarly, provided that the contractor has preserved its right to assert 359-G, this dispute resolution mechanism provides the exclusive remedy for homeowners to utilize in the first instance.  Actions filed in court prior to exhausting the remedies in 359-G shall be stayed until such time as the homeowner has complied with the statute. 

RSA 359-G provides contractors and homeowners with a great tool to resolve disputes before they ripen into time-consuming and costly litigation.  The statute provides a common sense framework for the parties to a residential construction contract to address perceived deficiencies in the work in a prompt and orderly fashion without initial resort to a legal process that is ill-equipped to deal with residential construction defect issues efficiently.  Savvy contractors and homeowners do well by insisting that RSA 359-G be incorporated into their contracts. 

It is important to note that RSA 359-G contains many other meaningful timing, notice and additional requirements that are beyond the basic operation of the statute addressed here.  In order to gain a full understanding of the statute, how to preserve your rights under the statute, and how the statute operates in any particular situation, homeowners and contractors would be wise to consult with a New Hampshire construction attorney regarding the particulars of the situation. 

StrangScott Partners Selected as recipients of 2015 Super Lawyer Awards

By on October 29, 2015
 

 

We are proud to announce the selection of Christopher Strang as a 2015 Super Lawyer and Jordan Scott as a 2015 Rising Star by the New England edition of Super Lawyers. Mr. Strang is being recognized for his outstanding work in construction litigation for the seventh year in a row, while Mr. Scott earned his first recognition for employment and labor work. 

Both the Super Lawyer list and Rising Star lists are the result of an intensive, multi-step selection process involving nominations, peer review, and independent research. Only 5% of eligible attorneys are selected as Super Lawyers, while only 2.5% of eligible attorneys are selected as Rising Stars.

Do You Have a Contract You Can Lien On?

By on July 21, 2015

To file a mechanic’s lien in Massachusetts, a contractor must have a written contract with the property owner (or owner’s authorized agent).  Subcontractors and material suppliers must show that written contracts exist for their labor and materials as well.  Although this may seem like a rather simple requirement, in some instances whether a written contract exists is not entirely clear.

In 1996, the legislature amended Mass. Gen. Laws c. 254 (the mechanic’s lien statute) to define “written contract” as “any written contract enforceable under the commonwealth.” This means courts can rely on standard contract law to determine whether a written contract is sufficient for a mechanic’s lien.  Taking into account the new amendment, the appellate court in Harris v. Moynihan Lumber of Beverly, Inc., concluded that a memorandum or writing sufficient to satisfy the Massachusetts statute of frauds should also meet the requirement of a written contract for purposes of the statute. The statute of frauds requires a writing “signed by the party to be charged,” in the event that a contract cannot be performed in less than one year’s time. The requirements of the statute of frauds are less stringent than the pre-1996 standard of “an entire and continuing arrangement in writing.”

On many occasions since 1996, Massachusetts courts addressed the question of what constitutes a written contract for purposes of establishing a valid mechanic’s lien.  While the cases have led to disparate results, several rules have emerged.  First, in order for a contract to be enforceable, the terms need not all appear on the same document.  Taken together, however, the series of writings must contain the essential terms of a contract, such as price, quantity, time of performance, and type of material or services.  Noreastco Door & Millwork, Inc. v. Vahradahatu of Massachusetts, Inc. (finding that a one-page cover sheet “original proposal” and a one-page reply memorandum did not constitute a contract for the purposes of the mechanic’s lien statute).  The purpose of this requirement is to ensure project owners have adequate notice of contract terms, so they may make informed choices to protect their interests.  Second, at least one of the documents being used as evidence of a contract must be signed by the party against whom the contract is being enforced (note that e-mail acceptance may be sufficient for a signature).  Third, the connection between the papers may be established by oral evidence, which, taken together with the content of the documents, shows the intent of the parties was to form a contract.  In Moynihan Lumber, Inc., the court found that a series of documents including a sales contract, credit application, and price quotations taken together constituted a contract for mechanic’s lien purposes.  In contrast, that same year the court in Nat’l Lumber Co. v. Fort Realty Corp., found no sufficient written contract because the documents lacked information on the price and quantity of the supplies, which is necessary information for owners to possess in order to protect their interests.  In Scituate Ray Precast Concrete Corp. v. Intoccia Const. Co. Inc., however, a series of signed delivery tickets and their corresponding invoices satisfied the statute of frauds and met the requirements of the mechanic’s lien statute, provided that the person signing for the deliveries was authorized to do so.

The best case scenario is for all parties to sign a single document with clear terms. The realities of the construction industry frequently do not allow that luxury.  When a fully signed contract with containing all the necessary terms hasn’t been executed, it is important to consult with a Massachusetts construction attorney to determine whether the documents you have are sufficient to support your mechanic’s lien.

Proposed Changes to The Retainage Law for Massachusetts Private Construction Projects

By on June 30, 2015

*with contributions from Christopher D. Strang

In November 2014, the Massachusetts Legislature passed Mass. Gen. Law c. 149, § 29F, entitled “Payment of Retainage in Private Construction Projects” (“The Retainage Law”).  The Retainage Law reduced the amount of retainage that can be withheld on many large private construction projects. It also provides deadlines for paying retainage amounts and methods for determining the date of substantial completion.  The Massachusetts Senate recently held hearings on proposed Bill Number 1006, which seeks to amend the statutory language of this law.

Under the changes proposed in Bill 1006, The Retainage Law would be limited in its application and would only control the amount of retainage withheld on certain private construction projects. Below is an explanation of the standards The Retainage Law currently sets forth, followed by an explanation of the changes Bill 1006 proposes.

Projects Covered by The Retainage Law

The Retainage Law applies to all private construction contracts entered into after November 6, 2014 valued over $3 million dollars, with the exception of residential projects for four or fewer units.

Limitations on Retainage

Retainage is specifically limited to 5% of each periodic payment. Contracts that either waive, limit or subvert the 5% retainage cap may be void and unenforceable under the statute.

Notices of Substantial Completion

Under The Retainage Law, general contractors must submit a “Notice of Substantial Completion” to the owner within 14 days of determining that it has achieved substantial completion. The statute defines “substantial completion” as the stage in the project where the project work is sufficiently complete as to permit the owner to occupy or utilize the premises for its intended use. Substantial completion may be applied to the project as a whole or to a phase of the entire project where the contract permits substantial completion for project phases.

The owner then has 14 days to notify the general contractor whether it accepts or rejects the Notice of Substantial Completion. To reject it, an owner must notify the contractor in writing and include “the factual and contractual basis for rejection,” along with a certification that the rejection was made in good faith. Rejection of the Notice of Substantial Completion permits the contractor to utilize the dispute resolution procedures provided for in the contract, which must begin within 7 days after the rejection (unless the contractor later resubmits a Notice of Substantial Completion). If the owner fails to deliver notice of its rejection within 14 days, or fails to comply with the requirements of Section 29F(d), the date indicated by the contractor in the Notice of Substantial Completion will be deemed accepted by the owner.

The owner has 14 days from the date the Notice of Substantial Completion is accepted to submit a written punchlist to the contractor. The punchlist must describe all incomplete or defective work items and deliverables required of the contractor, and include a certification that it is made in good faith. A “Deliverable” is defined by Section 29F(a) as “a project close-out document that shall be submitted by the [contractor] seeking payment of retainage under the [contractor’s contract] for construction; provided, however, that a lien waiver or release, which is a deliverable, shall comply with chapter 254; and provided further, that ‘deliverable’ shall not include any document affirming, certifying or confirming completion or correction of labor, materials or other items furnished or incomplete or defective work.” The contractor must then pass on a written punchlist to each subcontractor it is holding retainage against within an additional 7 days (or 21 days after the date the Notice of Substantial Completion is accepted), detailing all incomplete or defective work items and deliverables. The punchlist to the contractor’s subcontractors may include items beyond those on the owner’s punchlist and must also include a certification that it is made in good faith. Both the general contractor and subcontractors are permitted under The Retainage Law to dispute the items listed on punchlists.

Applications for Payment of Retainage

General contractors and subcontractors must submit a written application for payment of retainage within 60 days after the date of substantial completion for a final and binding resolution regarding a disputed date. This application must include a written list of all punchlist items that were completed, repaired, and delivered, and must be certified by the submitting party that it was made in good faith.

The owner then has 30 days to provide payment of retainage to the contractor. When providing payment of retainage, owners are permitted to withhold portions of the retainage to cover incomplete or defective work, limited by the following:

  • for incomplete, incorrect or missing deliverables, either (a) the value of the deliverable, as mutually agreed upon in writing between the owner and contractor or (b) if no value has been agreed upon, the reasonable value of the deliverables, not to exceed 2.5% of the total adjusted contract price;
  • 150% of the reasonable cost to complete or correct incomplete or defective work items; and
  • the reasonable value of claims and any costs, expenses and attorney’s fees incurred if the claim is allowed under the contract.

Portions of retainage may only be withheld where the contractor seeking payment received a detailed punchlist from the owner prior to the date payment is due. The time period for payment under an application for payment is extended by a period of 7 days for the contractor at each tier of contract below the general subcontractor. Contractors may submit further applications for payment of retainage as work is completed on the project. The Retainage Law specifically prevents owners from withholding retainage payments otherwise due to subcontractors where the general contractor is not in default. General contractors have 7 days to forward retainage payments to subcontractors.

At a minimum, The Retainage Law requires applications for payment of retainage to be submitted at least once a month. Rejection of an application is also subject to dispute resolution procedures, which may be initiated 30 days after the rejection of an application for payment of retainage.

Bill No. 1006 – Proposed Changes to The Retainage Law

Bill 1006, if passed, will dramatically change the scope and effect of The Retainage Law. It would add exemptions for construction projects which are financed or supported, in whole or in part, by state or federal mortgage assistance, special taxing arrangements, tax credits, grants, issuance of bonds, loans, loan guarantees, debt, or equity assistance.

It also proposes removing the sections relating to notices of substantial completion and applications for payment of retainage entirely. Bill 1006 would reduce The Retainage Law to the following content: (1) retainage is limited to 5% of the contract price and (2) contracts which require or permit retainage in excess of 5% of the contract price will be void and unenforceable insofar as any such excess is concerned.

Impact of The Retainage Law and Bill No. 1006

Citing practical issues with meeting the deadlines set forth in The Retainage Law, some project developers and owners have articulated a desire to remove large portions of it. In particular, they cite the 14-day limitation to accept or reject the date of substantial completion as impractical and unachievable. Some general contractors criticize the additional 7 days for paying subcontractors, and for completing and forwarding punchlists. Some also claim the law does not adequately consider the complexity of communication between multiple parties on large projects.

Bill 1006 alters the language that retainage may not exceed 5% of “any progress payment” to state that retainage may not exceed 5% “of the contract price.” While the amount would equal out at the end of the project, the proposed changes would arguably allow an owner or higher tiered contractor to withhold more than 5% from any single payment, so long as the amount equals 5% of the total contract price. Such a change could negate the benefit contractors receive through larger progress payments throughout a project, but would have no impact on the amount of retainage outstanding at the end of the project.

Whether Bill 1006 will be enacted and what additional changes, if any, are to be made to the Retainage Law will be determined over the next several months. It is clear that there is significant interest in creating consistency in retainage guidelines for the construction industry.

The foregoing information is a general summary regarding proposed changes to retainage in private construction projects in Massachusetts. If you are uncertain about anything regarding the amount of retainage withheld on a project or the process of obtaining payment for retainage amounts, contact your construction attorney to ensure the necessary steps are taken to achieve the best possible outcome.