ARIZONA STATE SENATE
Phoenix, Arizona
Eliminates
the ability of an owner to hold a reasonable amount of an unpaid balance of a
construction contract for retention.
Background
Current
law stipulates that any billing or estimate of construction work performed and
the materials supplied are deemed approved and certified 14 days after the
owner receives the billing or estimate unless, during that 14 days, the owner
issues a written statement detailing those items not approved or
certified. In the event that there are
problems that can be documented, an owner may withhold an amount that is
sufficient to pay for the direct expenses the owner reasonably expects to incur
to correct any of the nonapproved items.
An owner can withhold payments for defective construction work or
materials, disputed work or materials, failure to comply with other provisions
of the contract, third party claims filed or reasonable evidence that the
contract cannot be completed for the unpaid balance of the contract. In addition to these reasons, an owner can
withhold a percentage of the total contract amount for retainage without
specifying reasons for withholding the amount or the period for which it will
be held.
Contractors
and subcontractors have expressed concern that owners often use retained funds
to finance other jobs at the contractor's or subcontractor's expense when the
contract has been completed satisfactorily.
H.B. 2500 eliminates an owner's ability to hold funds for a retention.
There
is no anticipated fiscal impact to the state general fund associated with this
measure.
1. Eliminates an owner's ability to withhold from
payment a reasonable amount for retention.
2. Makes technical and conforming changes.
3. Provides for a general effective date.
House Action
RGO 3/26/02 DP 8-0-0-2
3rd Read
4/9/02 26-29-5-0
3rd Read #2 4/10/02 31-24-5-0
(On
reconsideration)
Prepared by Senate Staff
April 15, 2002