Put a Cap on It: The Impact of 2023 Washington Retainage Law for Private Projects

This year, the Washington State Legislature approved a cap on retainage for private projects. The stated purpose of that bill is to accelerate payments due to subcontractors and contractors. 60.30 RCW goes into effect on July 23, 2023, and contains following changes to current law. 

• Caps the amount that an owner, contractor, or subcontractor can withhold for retainage at 5% of the contract sum. This now mirrors the retainage cap for public projects in Washington state.
• Requires an owner, contractor, or subcontractor to, within 15 days of notice of completion of work, either accept work or notify the performing party of additional work required for completion.
• Requires that an owner, contractor, or subcontractor pay interest of 1% per month on any amounts not paid 30 days after 1) completion and 2) owner’s acceptance of work. Such interest will continue to accrue until final payment (including retainage) is made.
• Permits a contractor or subcontractor to provide a retainage bond, which an owner or contractor must accept, in an amount no greater than 5% of the monies earned and release funds retained within 30 days of accepting the bond.

The bill does not:

• apply to single-family residential construction of fewer than 12 units;
• prohibit waiver of this retainage cap; or
• state whether these changes apply retroactively (based on other case law, it is likely not retroactive).

Owners, contractors, and subcontractors should consult counsel familiar with construction contracts to determine how this affects your contracts.