Private works of improvement: retention proceeds.

Existing law generally regulates the terms and conditions of contracts for private works of improvement. Existing law requires that, within 45 days after the date of completion, as defined, retention proceeds withheld from any payment by the owner to the original contractor, or by the original contractor to any subcontractor, be released, except as specified. Existing law provides that, if a bona fide dispute exists between an original contractor and a subcontractor, the original contractor may withhold from the retention payment up to 150% of the disputed amount. This bill, applicable to contracts entered into on or after January 1, 2010, would prohibit retention proceeds withheld from any payment made by the owner to the original contractor from exceeding 5% of the amount of the payment otherwise due under the contract. The bill would prohibit the percentage of the retention proceeds withheld from any payment made by the original contractor to any subcontractor, or by a subcontractor to another subcontractor, from exceeding 5% of the amount of the payment otherwise due under the contract, or the percentage of each payment that may be withheld under the contract between the owner and the original contractor, whichever is less. This bill would require that with respect to a contract between an owner and an original contractor, between an original contractor and a subcontractor, or between 2 subcontractors, any retention proceeds withheld shall be released within 45 days after the party seeking payment serves a fully executed conditional waiver and release, as provided. The bill would provide that it does not prohibit the withholding of funds pursuant to the above provisions of law governing amounts in dispute. This bill would also provide that these provisions shall not apply if the owner or original contractor provides written notice to the original contractor or subcontractor, prior to or at the time that the bid is requested, that performance and payment bonds may be required.