HB 662 -- PRIVATE BUILDING CONTRACTS

CO-SPONSORS:  Green (73), St. Onge

COMMITTEE ACTION:  Voted "do pass" by the Committee on Labor by
a vote of 14 to 0.

This bill creates several requirements and restrictions
involving "retainage," the practice of withholding a percentage
of the payment for a construction project, pending satisfactory
completion of the project.  The bill limits retainage to 5% of
the contract.  The contractor may give the owner a substitute
security and demand payment of the retainage.  Subcontractors
may do the same with contractors.  The bill sets forth the types
of securities that will satisfy the requirement, including
bonds, certificates of deposit, and unconditional letters of
credit.  Contractors are entitled to any income earned from the
securities while deposited with the owner.  Contractors may not
withhold extra retainage from a subcontractor, unless the
subcontractor's performance is not in accordance with the terms
of the subcontract.  Contractors must pass along to any
subcontractors the retainage they are paid on a pro rata basis.
Construction contracts will be unenforceable to the extent that
they are inconsistent with the requirements of the bill.  Courts
may award 18% interest on improperly withheld retainage and may
award attorney's fees in actions to enforce the bill.  Contracts
for the construction of residential buildings with 4 or fewer
units are exempt from the bill.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that the bill will establish a
standardized system of retainage to prevent developers from
abusing their ability to withhold payment from contractors.
These withholdings result in contractors being unable to raise
capital for future projects, since too much of their capital is
being withheld on prior projects that they have completed.
Supporters also believe that a standard retainage amount of 5%
would both protect the owner and provide standards for
contractors of whom retainage is required.

Testifying for the bill were Representative St. Onge; and St.
Louis Area Contractors Association.

OPPONENTS:  Those who oppose the bill say that it would
interfere with accepted existing standards in private
construction contracts, and that the maximum retainage amount of
5% is both too small and well below the amount currently
retained in most cases.

Testifying against the bill was St. Louis Council of
Construction Consumers.

Greg Linhares, Legislative Analyst

Missouri House of Representatives
Last Updated November 26, 2001 at 11:45 am