Who this applies to
Private construction. Article 46 of title 38 covers a contract of at least $150,000 [1] between a property owner and a contractor, plus every subcontract and supply agreement under it, even one priced below $150,000 [1]. The cap binds property owners, contractors and subcontractors alike [4]. Two kinds of contract fall outside: a single contract to build one single-family dwelling, or one multifamily dwelling of no more than four units [1], and a contract with a public entity.
Public construction. Article 91 of title 24 governs contracts over $150,000 [3] to build, alter or repair a highway, public building, public work, public improvement, structure or system. Where federal or other funding-source retention requirements are inconsistent with it, article 91 does not apply [3].
What the rule says
Colorado uses one ceiling for both markets but regulates the calendar on only one of them. On a covered private contract, nobody in the chain may hold back more than 5% [4] of the price of work completed, and making a partial payment is not acceptance of the work or a waiver of defects. On a public contract, the entity pays at least 95% [3] of the calculated value of completed work in monthly partial payments while the contractor performs satisfactorily, may keep the balance until the contract is completed satisfactorily and finally accepted, and then has 60 days [3] to make final settlement.
How to comply
For a private contract:
- Compare the retainage clause in the prime contract, and in every subcontract or supply agreement beneath it, with the 5% [4] ceiling on the price of completed work.
- Look to the contract for the release date. Article 46 addresses only how much may be withheld; it leaves untouched the contract's terms on timing of payment, final payment included, on satisfactory performance, on backcharges and on pay-if-paid style conditions [4].
For a public contract:
- Monthly partial payments come to at least 95% [3] of the value of completed work while performance is satisfactory.
- Nothing steps the retainage down automatically. Where the entity finds satisfactory progress in a phase, it may, on the contractor's written request, authorize final payment from the withheld percentage to the contractor or to subcontractors who have finished their work acceptably, once it has found satisfactory and substantial reasons and has written approval from any surety [3].
- Final settlement, made under § 38-26-107, is due within 60 days [3] after the contract is completed satisfactorily and finally accepted.
- Article 91 also provides for withdrawing retained money on a deposit of securities, held under an escrow agreement (§§ 24-91-105 and 24-91-106) [3].
- Payments to subcontractors run on a separate clock that the statute keeps apart from retainage. A contractor pays each subcontractor within 7 calendar days [3] of being paid and, if late, owes interest at the contract rate or 15% a year [3], whichever is higher. That subsection states that it does not affect the retention provisions of any contract.
What changed recently
The private cap is the newer rule. House Bill 21-1167, chapter 146 of the 2021 session laws, added article 46 effective September 7, 2021, for contracts made on or after that date [4]. Article 91 is older: added in L. 79 and amended in L. 91 and L. 2004, it was changed again by HB 11-1115, effective August 10, 2011, and HB 14-1387 amended subsection (1)(a) effective June 6, 2014 [3].
Related
- Retainage calculator: run the monthly pay-application numbers on a Colorado contract.
- Retainage laws by state: where other states land on caps and release timing.