Subcontractors and suppliers in Connecticut have long struggled to receive prompt payment for their work on privately owned construction projects. Undisputed sums are often bogged down due to the presence of “pay when paid clauses” in contracts with general contractors, and many owners refuse to release retainage until months after a project is complete.
Now, thanks to recent legislative changes sponsored by the Connecticut Subcontractors Association and assisted by Michelson, Kane, Royster & Barger, P.C., subcontractors and suppliers have the authority to demand that specific, overdue sums be placed into escrow by the project owner and may also recover attorney’s fees and interest in certain circumstances. In addition, all retainage must be paid within 30 days after the project owner provides written acceptance of the work or a certificate of final completion. These welcome amendments to existing Connecticut statutes directly addresses the prevalence of unethical or negligent payment practices in private commercial, industrial, and institutional projects (excluding residential projects with four units or less).
Amendment to Connecticut General Statute §42-158j Explained
This statute was amended in 2004 to provide a sensible and simple procedure to guarantee prompt payment to the subcontractors and vendors who provide nearly all of the labor and materials on private construction projects. Prior to 2004, payment problems with undisputed sums got bogged down in “pay when paid clauses” with general contractors, who had no obligation to pay a subcontractor if the owner had not paid the general contractor for the sub’s work. By providing for claims by the sub directly against the owner and a direct right of action by an unpaid sub against the non-paying owner, the 2004 statute enabled subs to directly address the source of the problem when an owner wrongfully failed to pay for the work performed by the sub. This helped to eliminate lawsuits by the subcontractor against the innocent general contractor who had not been paid by the owner and therefore could not pay the sub.
The statute has now been strengthened so that subs have the following remedies:
- Demanding that the project owner place unpaid funds in escrow. If the money is being withheld even though work and materials have been provided in accordance with the terms of the contract, the subcontractor or supplier may demand that the project owner place the funds into escrow.
- Recovery of attorney’s fees and interest. If the owner refuses to place funds in escrow and the subcontractor successfully sues the owner and demonstrates that the owner “unreasonably withheld payment,” the subcontractor may recover its attorney’s fees and interest.
Amendment to Connecticut General Statute §42-158k Explained
In many instances, money is retained for several months after the completion of the project, which serves no justifiable purpose and can impose serious economic hardships on the professionals who have both completed and paid for the work and materials.
Connecticut General Statute §42-158k now requires the full release of retainage within 30 days after the issuance of a certificate of final completion by the project owner or the project owner’s representative, or equivalent written acceptance of the work by the owner. This amendment prevents owners from holding onto retainage for as long as they can.
Mechanic’s liens have traditionally been used to deal with issues of withheld payments, but liens can be expensive and time-consuming. Thanks to these legislative changes, Connecticut subcontractors and suppliers now have more expeditious means of claiming the money they are due.
If you have questions or require assistance with a retainage issue, contact Michelson, Kane, Royster & Barger P.C. Based on of our decades of dedication to Connecticut construction law and our instrumental role in the passage of this legislation, we have a solid understanding of your options and can help you successfully apply them to get the money rightfully due to you.
Michelson, Kane, P.C.
