Final Construction Retention Payment

Final Construction Retention Payment

In Nevada, private construction projects have a maximum retention amount of 5% that can be withheld from a contractor’s progress payment. This limitation is outlined in NRS 624.609(2)(a)(1) for agreements between the owner and prime contractor. NRS 624.624(2)(a)(1) for agreements between higher and lower-tiered contractors. A crucial question that arises is: When will the final construction retention payment, including all the previously withheld retention, be disbursed?

Final Construction Retention Payment Time Frame

Consider a private construction project scheduled to take over two years to reach project closure. You are the lower-tiered subcontractor, whose work on the project begins early and will be completed within 10 months. You have received all of your progress payments, minus the 5% retention. You only have left the final construction retention payment.

Typically, that final payment will be made in 14 months or longer depending on when the project’s closure occurs. The timing of this final payment will be in the contract between the prime and lower-tiered contractor. It will be reinforced in the agreement between the owner and prime contractor, which the lower-tiered subcontractor has also agreed to follow.

Understand your Contracted Payment Schedule

Cash flow is the life blood of all businesses, without it a company will fail. Contractors are not immune from that sentiment. Depending on the size of that final retention payment waiting for it could make or break a contractor. It is thus essential for all contractors, especially those completing their work before the project’s end, to fully understand their contracted payment schedule. Unless you have negotiated an earlier final payment, you may find yourself waiting several months or potentially longer for the final retention payment.

If you need help understanding your contracted payment schedule, contact us today!