senate Bill S3180

Provides for a reasonable amount of construction contract sum to be deposited in a separate interest bearing escrow account with a third party escrow agent

download pdf

Sponsor

Co-Sponsors

Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
view actions

actions

  • 10 / Feb / 2011
    • REFERRED TO CONSUMER PROTECTION
  • 04 / Jan / 2012
    • REFERRED TO CONSUMER PROTECTION

Summary

Provides for a reasonable amount of construction contract sum to be deposited in a separate interest bearing escrow account with a third party escrow agent; provides further that the owner shall be subject to the payment of interest, in addition to the escrow interest, at the rate of one percent per month and the contractor or subcontractor shall be subject to payment of interest on the amount of retainage it holds at the rate of one percent per month.

do you support this bill?

Bill Details

See Assembly Version of this Bill:
A5023
Versions:
S3180
Legislative Cycle:
2011-2012
Current Committee:
Senate Consumer Protection
Law Section:
General Business Law
Laws Affected:
Amd ยง756-c, Gen Bus L
Versions Introduced in Previous Legislative Cycles:
2009-2010: S754, A2279
2007-2008: A9538

Sponsor Memo

BILL NUMBER:S3180

TITLE OF BILL:
An act
to amend the general business law, in relation to retention of
construction contracts

PURPOSE OR GENERAL IDEA OF BILL:
This bill would require retainage
held on private construction projects to be placed in an
interest-bearing escrow account for the benefit of the parties from
whom the retainage is being held.

SUMMARY OF SPECIFIC PROVISIONS:
This bill accomplishes a much needed
construction industry reform. Owners would continue to have added
security of holding retain age on progress payments. However, the
interest on the held money would be earned for the benefit of the
parties, from whom retainage is being held, thus taking some of the
sting out of having significant amounts of earned money held for
substantial periods of time.

JUSTIFICATION:
Retainage is the practice of withholding a portion of
the earned progress payment of a construction contractor,
subcontractor or supplier (hereinafter the "contractor") for work
performed, for release at a later time. Retainage is a long-standing
tradition in the building industry, and unique to the construction
process, as it withholds funds already earned by the contractor.

Retainage represents money which has been previously earned by
contractors. That is, retainage is already the subcontractor's money.
As such, it is the contractors from whom retainage is held who should
benefit from investment earnings on that money. Furthermore, by
having retainage placed in an escrow account, contractors will have
far more assurance that they will actually receive the money which
they have earned in the event an owner's financial status becomes
questionable later on.

PRIOR LEGISLATIVE HISTORY:
2001-02: A.9711 Judiciary
2003-04: A.4620 Codes
2005-06: A.2721 Passed Assembly
2007-08: A.9538 3rd Rdg. Cal. 817
2009-10: A.2279 Passed Assembly

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

    S. 3180                                                  A. 5023

                       2011-2012 Regular Sessions

                      S E N A T E - A S S E M B L Y

                            February 10, 2011
                               ___________

IN  SENATE  --  Introduced by Sens. DeFRANCISCO, JOHNSON, O'MARA -- read
  twice and ordered printed, and when printed to  be  committed  to  the
  Committee on Consumer Protection

IN ASSEMBLY -- Introduced by M. of A. CUSICK -- Multi-Sponsored by -- M.
  of A. GUNTHER, HOOPER, MAGEE, PHEFFER -- read once and referred to the
  Committee on Economic Development

AN  ACT  to  amend the general business law, in relation to retention of
  construction contracts

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Section  756-c  of  the general business law, as added by
chapter 127 of the laws of 2002, is amended to read as follows:
  S 756-c. Retention. By mutual agreement of  the  relevant  parties  an
owner  may retain a reasonable amount of the contract sum as retainage[.
A]  AND FOR ANY CONSTRUCTION CONTRACTS, EXCLUDING CONSTRUCTION CONTRACTS
FINANCED BY A PUBLIC BENEFIT CORPORATION, SUCH RETAINAGE SHALL BE DEPOS-
ITED IN A SEPARATE INTEREST BEARING ESCROW ACCOUNT WITH  A  THIRD  PARTY
ESCROW  AGENT.  AS  OF  THE  TIME  OF  THE DEPOSIT OF THE RETAINAGE, THE
RETAINED FUNDS SHALL BECOME  THE  SOLE  AND  SEPARATE  PROPERTY  OF  THE
CONTRACTOR.  INTEREST  ON THE RETAINED FUNDS SHALL ACCRUE AT AN INTEREST
RATE AT LEAST EQUAL TO THE PREVAILING INTEREST RATE PAID ON DEPOSITS  BY
THE  ESCROW AGENT. ALSO, A contractor or subcontractor may [also] retain
a reasonable amount for retainage so long as the amount does not  exceed
the  actual  percentage  [retained]  DEPOSITED  IN  ESCROW by the owner.
[Retainage] THE ESCROWED RETAINAGE shall  be  released  by  the  [owner]
OWNER'S  WRITTEN  DIRECTION  TO THE ESCROW AGENT TO DELIVER THE ESCROWED
RETAINAGE to the contractor no later than thirty days  after  the  final
approval of the work under a construction contract. In the event that an
owner  fails to release THE ESCROWED retainage as required by this arti-
cle, or the contractor or subcontractor fails to release a proportionate

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05175-01-1

S. 3180                             2                            A. 5023

amount of retainage to the  relevant  parties  WITHIN  FIVE  DAYS  after
receipt  of  THE  ESCROWED  retainage  from  the  owner, (I) the owner[,
contractor, or subcontractor, as the case may be, shall  be  subject  to
the payment of interest at the rate of one percent per month on the date
retention  was  due and owing] SHALL BE SUBJECT TO THE PAYMENT OF INTER-
EST, IN ADDITION TO THE ESCROW INTEREST, AT THE RATE OF ONE PERCENT  PER
MONTH  COMMENCING  ON THE DATE THE RETAINAGE WAS DUE TO BE RELEASED FROM
ESCROW; AND (II) THE CONTRACTOR OR SUBCONTRACTOR, AS THE  CASE  MAY  BE,
SHALL  BE  SUBJECT TO THE PAYMENT OF INTEREST ON THE AMOUNT OF RETAINAGE
IT HOLDS AT THE RATE OF ONE PERCENT PER MONTH COMMENCING ON THE DATE THE
RETAINAGE WAS DUE TO BE RELEASED BY SUCH CONTRACTOR OR SUBCONTRACTOR.
  S 2. This act shall take effect immediately and  shall  apply  to  all
contracts entered into on or after such effective date.

Comments

Open Legislation comments facilitate discussion of New York State legislation. All comments are subject to moderation. Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity or hate speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Comment moderation is generally performed Monday through Friday.

By contributing or voting you agree to the Terms of Participation and verify you are over 13.