Tennessee § 66-34-103 - Withholding of retainage — Violations — Penalties.

§ 66-34-103. Withholding of retainage — Violations — Penalties.

All construction contracts on any project in this state, both public and private, may provide for the withholding of retainage; provided, however, that the retainage amount may not exceed five percent (5%) of the amount of the contract. The owner, whether public or private, shall release and pay all retainages for work completed pursuant to the terms of any contract to the prime contractor within ninety (90) days after completion of the work or within ninety (90) days after substantial completion of the project for work completed, whichever occurs first. As used in this subsection (b), “work completed” means the completion of the scope of the work and all terms and conditions covered by the contract under which the retainage is being held. The prime contractor shall pay all retainages due any remote contractor within ten (10) days after receipt of the retainages from the owner. Any remote contractor receiving the retainage from the prime contractor shall pay to any lower-tier remote contractor all retainages due the lower-tier remote contractor within ten (10) days after receipt of the retainages. Any default in the making of the payments is subject to those remedies provided in this part. If an owner or prime contractor withholds retainage that is for the use and benefit of the prime contractor or its remote contractors pursuant to § 66-34-104(a) and (b), then neither the prime contractor nor any of its remote contractors are required to deposit additional retained funds into an escrow account in accordance with § 66-34-104(a) and (b). It is an offense for a person, firm, or corporation to fail to comply with subsection (a) or (b) or § 66-34-104(a). A violation of this subsection (e) is a Class A misdemeanor, subject to a fine only of three thousand dollars ($3,000). Each day a person, firm, or corporation fails to comply with subsection (a) or (b) or § 66-34-104(a) is a separate violation of this subsection (e). Until the violation of this subsection (e) is remediated by compliance, the punishment for each violation is consecutive to all other violations. In addition to the fine imposed pursuant to subdivisions (e)(2)(A) and (B), the court shall order restitution be made to the owner of the retained funds. In determining the appropriate amount of restitution, the formula stated in § 40-35-304 must be used. This subsection (e) does not apply to the state, any department, board, or agency thereof, including the University of Tennessee, all counties and municipalities, and all departments, boards, or agencies thereof, including all school and education boards, and any other subdivision of the state. Acts 2007, ch. 201, § 3; 2008, ch. 804, § 3; 2012, ch. 609, § 1; 2020, ch. 749, § 16. Compiler's Notes. Acts 2007, ch. 201, § 7 provided that the act, which enacted this section, shall apply to all construction contracts to which the act applies entered into on or after July 1, 2007. Acts 2008, ch. 804, § 4 provided that the act, which added (d) and (e), shall apply to all construction contracts to which the act applies entered into on or after July 1, 2008. Acts 2020, ch. 749, § 42 provided that the act, which amended this section, applies to actions occurring and contracts entered into, amended, or renewed on or after July 1, 2020. Amendments. The 2020 amendment, in (b), substituted “‘work completed’ means” for “work completed shall be construed to mean”, “remote contractor” for “subcontractor” twice, and “lower-tier remote contractor” for “subsubcontractor or material supplier” twice; substituted “is” for “shall be” in (c) and (e)(2)(C); in (d), substituted “If” for “In the event that”, substituted “remote contractors” for “subcontractors” twice, and inserted “then”; and added (e)(4). Effective Dates. Acts 2020, ch. 749, § 42. July 1, 2020. Cross-References. Penalty for Class A misdemeanor, § 40-35-111 . Attorney General Opinions. Preemption of T.C.A. § 66-34-103(a) by § 221(d)(4) of the National Housing Act, codified in 12 U.S.C. § 1715 l(d)(4), OAG 09-143, 2009 Tenn. AG LEXIS 179 (7/31/2009).