Who this applies to
Whether the project is public or private makes no difference to the owner's duty in Tennessee. Section 66-34-103(b) is addressed to the owner "whether public or private" [1], which puts a public job and a private one on the same release schedule. The private and public sides of the rule carry identical terms: the same 90-day [1] release, the same 10-day [1] pass-down, the same 5% [1] ceiling below the prime and the same escrow requirement.
Tennessee's retainage rules come in three parts:
- Owner and prime contractor. The owner releases and pays retainage for completed work within 90 days [1].
- Prime contractor and remote contractors. The prime pays each remote contractor, to use the statute's term, the retainage due to it within 10 days [1] of receiving the owner's payment.
- The size of the holdback below the prime. Under § 66-34-303, as amended by Public Chapter 749 of 2020 [1], retainage between a prime contractor and a remote contractor may not exceed 5% of the contract amount [1].
What the rule says
Two events can start the owner's clock: completion of the work, and substantial completion of the project for the work completed. Whichever occurs first, the owner then has 90 days [1] to release and pay the prime all retainage for work completed under the contract. The prime's deadline is keyed to cash rather than to the job: its 10 days [1] begin when the owner's retainage payment is received, not at completion.
Tennessee also regulates where the money sits while it is held. Under § 66-34-104, retained funds must be deposited in a separate escrow account that bears interest and is held by a third party [1]. A failure to do so has a daily price, set out below.
How to comply
- Read the release clause in the prime contract against the 90-day [1] limit, and identify which triggering event, completion of the work or substantial completion of the project, will come first on your job.
- At the subcontract level, compare the stated retainage percentage with 5% [1] of the contract amount.
- For a remote contractor waiting on retainage, the date that matters is the day the prime receives the owner's payment; the prime's 10 days [1] run from there.
- Ask how retained funds are being held. A failure to deposit them in the required interest-bearing escrow account carries damages of $300 per day under § 66-34-104 [1]. Whether a public entity is exempt from those damages is for the statute's full text and a lawyer to answer.
The contract, the amended code sections and a lawyer familiar with them are the final word on how these deadlines apply to a particular job.
What changed recently
In 2020, the 111th General Assembly passed Public Chapter 749 [1], which amended sections 66-34-103, 66-34-104 and 66-34-303 of the Tennessee Code [1]. The 5% ceiling between prime and remote contractor is stated in § 66-34-303 as that act amended it, and the 90-day release and the escrow requirement sit in the other two sections it amended [1].
Related
- Retainage calculator: work out the dollar amount behind a retainage percentage on any contract.
- Retainage laws by state: Tennessee's single public-and-private rule alongside the other states.