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How General Contractors Can Take Advantage of New Retainage Laws in Louisiana

Written by: Scott G Wolfe JR

Reputation Level 11

Construction Real Estate

Posted over 1 year ago. Applies to Louisiana, 3 helpful votes, 0 comments

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Determine If Your Project Applies

The retainage requirement does not apply to every construction project. The project must be in Louisiana, it must be private (not a state or federal job), it must be over $50,000, and it must not be a single or double family residence. There are some other specific industry projects exempt, and consultation of the law's full text (linked below) is suggested. However, it's fairly safe to assume that the project qualifies if it meets the other criteria and you are doing ordinary private construction work.

Communicate The Requirement to the Property Owner

The law requires property owners to place retainage in an independent escrow account, but doesn't provide stiff penalties if the law is violated. It's up to you - as the general contractor protected by the law - to communicate the legal requirement to the property owner. At the start of construction, notify the property owner of the requirement (La. R.S. 9:4815), and start to work with the owner on Step 3...selecting your escrowing institution.

Agree on an Escrowing Company and Agent

The law provides that the owner and general contractor must agree on a qualifying escrowing company and agent. Therefore, do your homework and find an escrowing company and an escrowing agent that both you and the property owner can agree on. This shouldn't be too hard - as escrowing companies are strictly regulated to protect the funds they hold, and can be held liable if negligent or fraudulent.

Claim Money At Conclusion of Project

When the funds are due (at the conclusion of construction, upon substantial completion, etc.), the escrow agent should be instructed to disburse the funds. If there is no dispute between the general and owner, each must sign a "written release," and the funds must be disbursed within 3 days. If there is a dispute, the undisputed amount must be disbursed within 3 days of a written release from the owner and general contractor, and the disputed amount released upon order of the court or an arbitration panel.