Legislation about retainage has become common place as many states have adopted different limitations, requirements, and schemes. A recent case in Tennessee is a good reminder that you .
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On June 30, the Supreme Court of Tennessee issued an opinion interpreting the retainage provisions in Tennessee’s Prompt Pay Act (the Act). The opinion has significant implications for construction projects across Tennessee. Under the Act, a party withholding retainage from payments made to a contractor for construction work is required to deposit the withheld retainage into a separate, interest-bearing, escrow account with a third-party. Failing to follow this requirement is a Class A misdemeanor, subject to a $3,000 fine and, at the time the project in question began, a separate $300 civil “penalty,” for each day retainage is not properly held.
Tennessee Supreme Court Holds Contractor Potentially Liable For $300-Per-Day Penalty Wednesday, June 30, 2021
The Tennessee Supreme Court on Wednesday held that a general contractor may be required to pay a $300-per-day penalty under Tennessee law for its failure to pay a subcontractor for work completed on a Nashville construction project. Applying Tennessee’s Prompt Pay Act, the Court reversed the trial court’s decision that the subcontractor’s claim was filed too late; it held the general contractor could be liable for the penalty for the year before the subcontractor filed its lawsuit.
In 2013, general contractor Holladay Construction Group, LLC hired subcontractor Snake Steel, Inc.