Who this applies to
The deciding word in Montana is "owner." Part 21 of Title 28, chapter 2, defines it to take in a governmental entity as well as a private one [2], so a single retainage section, § 28-2-2110, reaches both kinds of project [1].
- Private owners. Construction contracts subject to part 21 carry the 5% ceiling [1].
- Public owners. Because a governmental entity counts as an owner, the same 5% ceiling applies to state and local work under part 21 [1][2].
- Residential exception. Part 21 does not apply to residential projects, or improvements intended for residential purposes, that cost less than $400,000 [5].
- Subcontractors. The percentage the owner withholds also caps what a contractor may withhold from a subcontractor, as described below [1].
What the rule says
Montana uses one flat number with no step-down. The maximum retainage on a construction contract subject to part 21 may not exceed 5% [1]. Whatever percentage the owner actually withholds from the construction contractor then becomes the most that contractor may withhold from a subcontractor [1]. Release is tied to acceptance rather than to a date: retainage must be released upon the final acceptance of each portion of work for which the construction contract states a separate price [1].
How to comply
Three things in the contract decide how this plays out on a job.
The rate. A retainage clause above 5% goes past the part 21 ceiling [1]. On the subcontract side, compare the sub's retainage rate with the percentage the owner is holding from the prime, because the owner's figure is the limit [1].
The price breakdown. Because release follows final acceptance of each separately priced portion [1], the way the contract states its prices determines how many release points the job has. List the portions that carry a stated price of their own and note when each is finally accepted.
The payment clock. Section 28-2-2110 sets no day count for releasing retainage [1]. The general payment section of part 21, § 28-2-2103, puts payment 7 days after a payment request is approved [3], and it treats a request as approved 21 days after receipt unless it is disapproved in writing [3]. When a payment is delayed more than 30 days, § 28-2-2104 adds interest of 1 1/2% a month, or a pro rata fraction of it, on the unpaid balance, running from the day after the payment was due [4].
On a public job, read these sections together with the contract and any procurement statute the contract itself cites. On any job, the sections in the Sources below are the text to check before relying on this summary.
What changed recently
Section 28-2-2110 was enacted by Sec. 1, Ch. 364, L. 2001, and amended by Sec. 2, Ch. 244, L. 2005 [1].
Related
- Retainage calculator: retainage held and payment due, application by application.
- Retainage laws by state: where other states set their limits.