NY State Senate Bill 2021-S26

Senate Bill S26

2021-2022 Legislative Session

Provides for a reasonable amount of construction contract sum to be deposited in a separate interest bearing escrow account with a third party escrow agent

download bill text pdf

Archive: Last Bill Status - In Senate Committee Consumer Protection Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 05, 2022	referred to consumer protection
Jan 06, 2021	referred to consumer protection

2021-S26 (ACTIVE) - Details

See Assembly Version of this Bill:: A771
Current Committee:: Senate Consumer Protection
Law Section:: General Business Law
Laws Affected:: Amd §756-c, Gen Bus L
Versions Introduced in Other Legislative Sessions:: 2009-2010: S754, A2279
2011-2012: S3180, A5023
2013-2014: S1217, A529
2015-2016: S37, A10276
2017-2018: S5871, A1294
2019-2020: S7352, A488

2021-S26 (ACTIVE) - Summary

Provides for a reasonable amount of construction contract sum to be deposited in a separate interest bearing escrow account with a third party escrow agent; provides further that the owner shall be subject to the payment of interest, in addition to the escrow interest, at the rate of one percent per month and the contractor or subcontractor shall be subject to payment of interest on the amount of retainage it holds at the rate of one percent per month.

2021-S26 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S26

SPONSOR: KAPLAN
 
TITLE OF BILL:

An act to amend the general business law, in relation to retention of
construction contracts

 
PURPOSE OF THE BILL:

This bill would require retainage held on private construction projects
to be placed in an interest-bearing escrow account for the benefit of
the parties from whom the retainage is being held.

 
SUMMARY OF SPECIFIC PROVISIONS:

This bill accomplishes a much needed construction industry reform.
Owners would continue to have added security of holding retain age on
progress payments. However, the interest on the held money would be
earned for the benefit of the parties, from whom retainage is being
held, thus taking some of the sting out of having significant amounts of

earned money held for substantial periods of time.

 
JUSTIFICATION:

Retainage is the practice of withholding a portion of the earned
progress payment of a construction contractor, subcontractor or supplier
(hereinafter the "contractor") for work performed, for release at a
later time. Retainage is a long-standing tradition in the building
industry, and unique to the construction process, as it withholds funds
already earned by the contractor.  Retainage represents money which has
been previously earned by contractors.-That is, retainage is already the
subcontractor's money.  As such, it is the contractors from whom retain-
age is held who should benefit from investment earnings on that money.
Furthermore, by having retainage placed in an escrow account, contrac-
tors will have far more assurance that they will actually receive the
money which they have earned in the event an owner's financial status
becomes questionable later on.

 
PRIOR LEGISLATIVE HISTORY:

2001-2002: A.6817/A.9711/S.3708-A - Referred to Rules.

2003-2004: A.4620-C/S.1089-B - Referred to Codes.

2005-2006: A.2721/S.2547 - Passed Assembly in 2005 & 2006.

2007-2008: A.9538/S.1660 - 3rd Reading. Ca1.817.

2009-2010: A.2279/S.754 - Passed Assembly in 2010.

2011-2012: A.5023/S.3180 - Referred to Codes.

2013-2014: A.529/S.1717 - 3rd Reading, Ca1.184.

2015-2016: A.10276/S.37 - Referred to Economic Development.

2017-2018: A.1294/S.5871 - Referred to Economic Development.

2019-2020: A. 488/S. 7352- Referred to Senate Consumer Protection
Committee

 
FISCAL IMPLICATIONS:

None.

2021-S26 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    26
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                                (PREFILED)
 
                              January 6, 2021
                                ___________
 
 Introduced  by  Sen.  KAPLAN -- read twice and ordered printed, and when
   printed to be committed to the Committee on Consumer Protection
 
 AN ACT to amend the general business law, in relation  to  retention  of
   construction contracts

   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Section 756-c of the general  business  law,  as  added  by
 chapter 127 of the laws of 2002, is amended to read as follows:
   §  756-c.  Retention.  By  mutual agreement of the relevant parties an
 owner may retain a reasonable amount of the contract sum as  retainage[.
 A]  AND FOR ANY CONSTRUCTION CONTRACTS, EXCLUDING CONSTRUCTION CONTRACTS
 FINANCED BY A PUBLIC BENEFIT CORPORATION, SUCH RETAINAGE SHALL BE DEPOS-
 ITED  IN  A  SEPARATE INTEREST BEARING ESCROW ACCOUNT WITH A THIRD PARTY
 ESCROW AGENT. AS OF THE TIME  OF  THE  DEPOSIT  OF  THE  RETAINAGE,  THE
 RETAINED  FUNDS  SHALL  BECOME  THE  SOLE  AND  SEPARATE PROPERTY OF THE
 CONTRACTOR. INTEREST ON THE RETAINED FUNDS SHALL ACCRUE AT  AN  INTEREST
 RATE  AT LEAST EQUAL TO THE PREVAILING INTEREST RATE PAID ON DEPOSITS BY
 THE ESCROW AGENT. ALSO, A contractor or subcontractor may [also]  retain
 a  reasonable amount for retainage so long as the amount does not exceed
 the actual percentage [retained]  DEPOSITED  IN  ESCROW  by  the  owner.
 [Retainage]  THE  ESCROWED  RETAINAGE  shall  be released by the [owner]
 OWNER'S WRITTEN DIRECTION TO THE ESCROW AGENT TO  DELIVER  THE  ESCROWED
 RETAINAGE  to  the  contractor no later than thirty days after the final
 approval of the work under a construction contract. In the event that an
 owner fails to release THE ESCROWED retainage as required by this  arti-
 cle, or the contractor or subcontractor fails to release a proportionate
 amount  of  retainage  to  the  relevant  parties WITHIN FIVE DAYS after
 receipt of THE ESCROWED  retainage  from  the  owner,  (I)  the  owner[,
 contractor,  or  subcontractor,  as the case may be, shall be subject to
 the payment of interest at the rate of one percent per month on the date

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets

                       [ ] is old law to be omitted.
                                                            LBD01963-01-1

 S. 26                               2

 retention was due and owing] SHALL BE SUBJECT TO THE PAYMENT  OF  INTER-
 EST,  IN ADDITION TO THE ESCROW INTEREST, AT THE RATE OF ONE PERCENT PER
 MONTH COMMENCING ON THE DATE THE RETAINAGE WAS DUE TO BE  RELEASED  FROM
 ESCROW;  AND  (II)  THE CONTRACTOR OR SUBCONTRACTOR, AS THE CASE MAY BE,
 SHALL BE SUBJECT TO THE PAYMENT OF INTEREST ON THE AMOUNT  OF  RETAINAGE
 IT HOLDS AT THE RATE OF ONE PERCENT PER MONTH COMMENCING ON THE DATE THE
 RETAINAGE WAS DUE TO BE RELEASED BY SUCH CONTRACTOR OR SUBCONTRACTOR.
   §  2.  This  act  shall take effect immediately and shall apply to all
 contracts entered into on or after such effective date.

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