Does Idaho law cap the retainage our private construction contract can withhold, and can the contract require disputes to be resolved outside Idaho?
Yes to both questions, for a private work of improvement contracted on or after July 1, 1990. Idaho Code § 29-115(2) caps retainage at 5%: "the retention proceeds withheld by the owner from the original contractor or by the original contractor from any subcontractor from any payment shall not exceed five percent (5%) of the payment and in no event shall the total retention withheld exceed five percent (5%) of the contract price" (subject to a bonding exception and a carve-out for one-to-four-unit owner-occupied residential work). § 29-115(3) requires retention to step down to the lesser of 150% of the estimated value of remaining work or the 5% cap within 35 days of substantial completion, and to be released within 35 days of final completion (subject to a dispute holdback). § 29-115(6) locks the whole contract to Idaho law and forum: "Any contract relating to the construction of any private work of improvement in Idaho... shall be subject to the laws of Idaho. Such contract shall not require litigation, arbitration, or another dispute resolution process to occur in another state or country." Retention does not stop with the owner: § 29-115(4) gives the original contractor ten days from receiving retention proceeds to pay each subcontractor "from whom retention has been withheld" its share, and a retention payment designated for a particular subcontractor must go to that subcontractor. And § 29-115(7) makes all of this non-waivable: "It shall be against public policy for any party to require any other party to waive any provision of this statute."
The trap
The 5% cap and the whole-of-the-statute Idaho-law/Idaho-forum requirement are BOTH declared non-waivable by § 29-115(7): a clause purporting to waive the retainage cap, the step-down schedule, or the Idaho-forum requirement is itself against public policy, regardless of how the contract otherwise characterizes the parties' bargain. Note the bonding exception carefully: the 5% cap does not apply "if the original contractor or the subcontractor fails to provide a performance bond issued by a surety acceptable to the owner or original contractor if requested to do so": a party that declines a requested bond loses the statutory cap's protection. And § 29-115(1) limits the whole section to contracts "entered into on or after July 1, 1990" between OWNERS and ORIGINAL CONTRACTORS for PRIVATE work: a public-works contract, or an earlier contract, is outside this section's text. The flow-down has an exception of its own, and it belongs to the contractor: under § 29-115(5) the original contractor need not pay a subcontractor's retention "if a bona fide dispute exists between the subcontractor and the original contractor", and may hold back up to 150 percent of the estimated value of the work yet to be completed or the issue in dispute. No Idaho appellate decision construes § 29-115 at all, so every answer here is read off the statute.
8 authorities
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
This section is applicable with respect to all contracts entered into on or after July 1, 1990, between owners and original contractors relating to the construction of any private work of improvement.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
In any contract relating to the construction of any private work of improvement, the retention proceeds withheld by the owner from the original contractor or by the original contractor from any subcontractor from any payment shall not exceed five percent (5%) of the payment and in no event shall the total retention withheld exceed five percent (5%) of the contract price.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
However, the five percent (5%) maximum that may be withheld does not apply if the original contractor or the subcontractor fails to provide a performance bond issued by a surety acceptable to the owner or original contractor if requested to do so by the owner or original contractor respectively. The five percent (5%) maximum shall not apply to any contract for the performance of a private work of improvement to residential real property consisting of one (1) to four (4) units occupied or to be occupied by the owner.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
Within thirty-five (35) days from the date on which the work of improvement is substantially complete, as mutually agreed to by the parties to the contract, the retention withheld by the owner shall be reduced to the lesser of one hundred fifty percent (150%) of the estimated value of work yet to be completed in accordance with the contract or the retention then withheld by the owner, not to exceed five percent (5%) of the contract price. Within thirty-five (35) days from the date of final completion of the work of improvement, the retention withheld by the owner shall be released, except in the event of a dispute between the owner and the original contractor, the owner may withhold from the final retention payment an amount not to exceed one hundred fifty percent (150%) of the estimated value of the issue in dispute. The owner may condition the final release of the retention upon receipt of satisfactory lien waivers from all persons with actual or potential lien claims on the work of improvement.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
(4) Subject to subsection (5) of this section, within ten (10) days from the time that all or any portion of the retention proceeds are received by the original contractor, the original contractor shall pay each of its subcontractors from whom retention has been withheld, each subcontractor’s share of the retention received. However, if a retention payment received by the original contractor is specifically designated for a particular subcontractor, payment of the retention shall be made to the designated subcontractor.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
(5) The original contractor shall not be required to pay the retention to a subcontractor if a bona fide dispute exists between the subcontractor and the original contractor. The amount withheld from the retention payment shall not exceed one hundred fifty percent (150%) of the estimated value of the work yet to be completed or issue in dispute.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
Any contract relating to the construction of any private work of improvement in Idaho, including contracts entered into by the original contractor, any subcontractor, and anyone furnishing materials, equipment, or services in construction of such improvement, shall be subject to the laws of Idaho. Such contract shall not require litigation, arbitration, or another dispute resolution process to occur in another state or country.
- statuteIdaho Code § 29-115enactment date not established
The words that state the rule
It shall be against public policy for any party to require any other party to waive any provision of this statute.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.