Who this applies to
This page covers two New Jersey statutes that touch retainage, and a local public job can fall under both.
- Private work. The Prompt Payment Act, N.J.S.A. 2A:30A-2, controls when retainage is paid and sets no cap on the percentage retained on a private project [3]. Its payment chain runs from the owner to the prime contractor and on to subcontractors [3].
- Local public work. The Local Public Contracts Law, N.J.S.A. 40A:11-16.3, sets the withholding on jobs for local contracting units [1]. It covers contracts over $100,000 for the construction, reconstruction, alteration, repair or maintenance of a building, structure, facility or other improvement [1].
The Prompt Payment Act defines "owner" to include any public or governmental entity, so its interest on late retainage reaches public owners too [3].
What the rule says
New Jersey answers the two retainage questions separately. On private work, the Act puts no ceiling on the percentage and regulates timing: once the prime contractor has performed under the contract and the billing is approved and certified, the owner pays retainage monies no more than 30 calendar days after the billing date [3]. On a local public contract where the contractor has agreed to have payments withheld, the contracting unit keeps 2% of the amount due on each partial payment until completion, with no step-down [1], and releases all of it within 45 days of the final acceptance date agreed with the contractor, provided the contract has been completed as indicated [1].
How to comply
On a private job
- The percentage comes from the contract, since the Act sets no cap [3].
- A request for release of retainage counts as a billing [3], and the 30 calendar days run from the billing date, which for a periodic billing is the date the contract specifies [3].
- A billing is deemed approved and certified 20 days after the owner receives it, unless the owner gives a written statement of the amount withheld and the reason [3].
- Paying late makes the delinquent party liable for the amount owed plus interest at the prime rate plus 1%, from the day after the required payment date to the day the payment check is drawn [3]. In a collection action, the prevailing party recovers reasonable costs and attorney fees [3].
- Subcontractors must be paid their share within 10 days [3]; the full section is linked under Sources.
On a local public job
- Instead of having payments withheld, the contractor may deposit state or municipal bonds or notes; cash that is withheld goes into an interest-bearing account [1].
- The 45 days run from the final acceptance date the contractor and the contracting unit agree on, and the release is in full, without further withholding of any amount for any purpose [1].
- Section 40A:11-16.3 sets no penalty of its own [1]; interest at prime plus 1% on late retainage monies comes from the Prompt Payment Act [3].
Both clocks start from dates the parties control: the billing date, which the contract sets for periodic billings, and the final acceptance date agreed with the contracting unit.
What changed recently
Section 2A:30A-2 was amended by P.L.2006, c.96, approved September 1, 2006, which amended the original Act, P.L.1991, c.133 [3]. The public withholding rule in N.J.S.A. 40A:11-16.3 traces to L.1979, c. 464, s. 2, with amendments in 1991 (c. 434, s. 2) and 1999 (c. 440, s. 26) [1].
Related
- Retainage calculator: the amount held and the payment due on each billing.
- Retainage laws by state: caps and payment deadlines elsewhere in the country.