C.R.S. 38-46-103. Private construction contracts - retainage - conditions precedent.

(1) A property owner, contractor, or subcontractor shall not withhold as retainage more than five percent of the price of the work completed under the contract or subcontract. Making a partial payment under this subsection (1) is not acceptance or approval of some of the work or of a waiver of defects in the work.

(2) This article 46 addresses only the amount of retainage that may be withheld by a property owner, contractor, or subcontractor and does not change, override, or invalidate any other provision in a contract, subcontract, or supply agreement. Such a provision includes, but is not limited to:

(a) A provision relating to timing of a payment, including final payment; 

(b) A provision requiring satisfactory performance of the work of the contract, subcontract, or supply agreement before payment is due;

(c) A provision allowing a property owner, contractor, or subcontractor to withhold payment or deduct from any payment otherwise due any backcharges or other amounts as authorized by the contract, subcontract, or supply agreement; or

(d) A provision relating to a condition precedent that must be satisfied before a payment is due to a contractor, subcontractor, sub-subcontractor, or supplier. A condition precedent includes a requirement that:

(I) A contractor must actually receive payment from the property owner to be obliged to make payment to a subcontractor or supplier; or

(II) A subcontractor must actually receive payment from the contractor to be obliged to make payment to a subsequent subcontractor or supplier.

C.R.S. 38-46-103 (emphasis added) (statute as of April 2023). Of note, this law exempts contracts between private owners and contractors for construction of projects that exceed a price of $150,000. Single-family dwellings or quad multi-family dwellings are exempt. C.R.S. 38-46-102. 

For More Information on retainage language in construction contracts, See our practice page on drafting construction contracts in Colorado.

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