Bill Introduced to Cap Retainage on Construction Contracts
House Bill 14-1165 (“HB 1165”) was introduced yesterday in the Colorado House of Representatives by Representative Randy Fischer (D-Larimer County). The bill would cap the retainage permitted in construction contracts to 5% and would render unenforceable provisions in these contracts with higher a retainage. This bill would impact construction contracts for all HOAs with more than 4 units. In other words, almost every HOA in Colorado could be impacted by this bill.
A retainage in a construction contract is the money held back from payment to the contractor until the construction project reaches substantial completion and the work is accepted by the HOA. In order to ensure the work is completed in an acceptable manner, a 10% retainage is pretty standard in construction contracts. An acceptable retainage is also motivational to contractors to complete their work in a reasonable timeframe.
The amount of a retainage is routinely negotiated in construction contracts between HOAs and the contractors they hire to carry out work. Creating a statutory cap on the permitted amount of a retainage is unusual, since it interferes with the right of parties to negotiate the retainage and address the unique nature of various construction projects.
CAI’s Colorado Legislative Action Committee (“CLAC”) will review this bill at our upcoming meeting to determine whether CLAC will oppose this legislation. Stay tuned for more updates as they become available.
Molly Foley-Healy is Chair of CAI's Colorado Legislative Action Committee.