When must we be paid on a Kansas private construction job, and how much can be retained?
Thirty days from the owner, seven business days down the chain, and interest at 18% after that. The baseline is the contract itself: subject to the rest of the section and to K.S.A. 16-1804 and 16-1805, all persons who enter into a contract for private construction after the act took effect "shall make all payments pursuant to the terms of the contract" (K.S.A. 16-1803(a)). All contracts for private construction shall provide that payment of amounts due a contractor from an owner, except retainage, be made within 30 days after the owner receives a timely, properly completed, undisputed request for payment (K.S.A. 16-1803(d)); if the owner fails to pay within those 30 days, the owner shall pay interest to the contractor beginning on the thirty-first day, computed at 18% per annum on the undisputed amount (subsection (e)). A contractor shall pay its subcontractors any amounts due within seven business days of receipt of payment from the owner, including retainage if the owner has released it, where the subcontractor has provided a timely, properly completed and undisputed request for payment (subsection (f)), with interest at 18% per annum from the eighth business day if it does not (subsection (g)); subsections (f) and (g) apply to payments from subcontractors to their subcontractors (subsection (h)). Retainage shall not exceed 5% of the value of the contract or subcontract unless the owner or contractor determines a higher rate is required to ensure performance, and in no case more than 10% (K.S.A. 16-1804(a)), and an owner shall release all remaining retainage on any undisputed payment due to a contractor within 30 days after substantial completion (subsection (c)). Two more numbers sit either side of that: if the contractor or subcontractor has failed to meet the terms of the contract, is not performing according to schedule or there is a problem with workmanship or other issues, the owner may increase retainage up to 10% (subsection (b)); and a failure to pay retainage when the contract or the act requires it carries interest at 18% per annum from the first business day after payment was due (subsection (j)).
The trap
None of this can be drafted around, the rights and duties prescribed by the act are not waivable or varied under the terms of a contract, and any contract term waiving them is unenforceable (K.S.A. 16-1801(b)). What does limit the act is its scope: it does not apply to single family residential housing or multifamily residential housing of four units or less, does not apply to public works projects, and does not apply to contracts entered into before the act's effective date (K.S.A. 16-1807). Two further details. A pay-if-paid clause is not void, but it "is no defense to a claim to enforce a mechanic's lien or bond" under article 11 of chapter 60 (K.S.A. 16-1803(c)). And withholding for incomplete work is capped: an owner may withhold not more than 150% of the value of incomplete work due to the fault of a contractor, a contractor the same for a subcontractor's fault, and a subcontractor the same for work that is "the responsibility of another subcontractor" and due to that other subcontractor's fault; each of the three subsections then requires that "Any amounts retained for incomplete work shall be paid within 45 days after completion of the work" as part of the regular payment cycle (K.S.A. 16-1804(d)-(f)). Retainage is not locked until substantial completion, and a subcontract drafted as though it were gives away a right the Act supplies: § 16-1804(k) provides “Nothing in this section shall prevent early release of retainage if it is determined by the owner, the contractor and the project architect or engineer, that a subcontractor has completed performance satisfactorily and that the subcontractor can be released prior to substantial completion of the entire project without risk or additional cost to the owner or contractor. Once so determined, the contractor shall request such early release of retainage from the owner as necessary to enable the contractor to pay the subcontractor in full.” The determination is joint (owner, contractor and project architect or engineer), and once made the owner must release in the next contractual payment cycle.
18 authorities
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
All contracts for private construction shall provide that payment of amounts due a contractor from an owner, except retainage, shall be made within 30 days after the owner receives a timely, properly completed, undisputed request for payment.
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
If the owner fails to pay a contractor within 30 days following receipt of a timely, properly completed, undisputed request for payment, the owner shall pay interest to the contractor beginning on the thirty-first day after receipt of the request for payment, computed at the rate of 18% per annum on the undisputed amount.
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
A contractor shall pay its subcontractors any amounts due within seven business days of receipt of payment from the owner, including payment of retainage, if retainage is released by the owner, if the subcontractor has provided a timely, properly completed and undisputed request for payment to the contractor.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
Retainage shall not exceed 5% of the value of the contract or subcontract unless the owner or contractor determines that a higher rate of retainage is required to ensure performance of the contract. Retainage, however, shall not exceed 10% of the value of the contract or subcontract.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
An owner shall release all remaining retainage on any undisputed payment due to a contractor on a construction project within 30 days after substantial completion of the project; however, if any contractor or subcontractor is still performing work on the project, an owner may withhold that portion of the retainage attributable to such work until 30 days after such work is completed.
- statuteK.S.A. 16-1801enactment date not established
The words that state the rule
The rights and duties prescribed by this act shall not be waivable or varied under the terms of a contract. The terms of any contract waiving the rights and duties prescribed by this act shall be unenforceable.
- statuteK.S.A. 16-1807enactment date not established
The words that state the rule
The provisions of this act shall not apply to single family residential housing and multifamily residential housing of four units or less. The provisions of this act shall not apply to public works projects. The provisions of this act shall not apply to contracts entered into prior to the effective date of this act.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
Nothing in this section shall prevent early release of retainage if it is determined by the owner, the contractor and the project architect or engineer, that a subcontractor has completed performance satisfactorily and that the subcontractor can be released prior to substantial completion of the entire project without risk or additional cost to the owner or contractor. Once so determined, the contractor shall request such early release of retainage from the owner as necessary to enable the contractor to pay the subcontractor in full. The owner shall, as part of the next contractual payment cycle, release the subcontractor's retainage to the contractor, who shall, as part of the next contractual payment cycle, release such retainage as is due to the subcontractor.
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
If the contractor fails to pay a subcontractor within seven business days, the contractor shall pay interest to the subcontractor beginning on the eighth business day after receipt of payment by the contractor, computed at the rate of 18% per annum on the undisputed amount.
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
(h) The provisions of subsections (f) and (g) shall apply to all payments from subcontractors to their subcontractors.
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
(c) Any provision in a contract for private construction providing that a payment from a contractor or subcontractor to a subcontractor is contingent or conditioned upon receipt of a payment from any other private party, including a private owner, is no defense to a claim to enforce a mechanic's lien or bond to secure payment of claims pursuant to the provisions of article 11 of chapter 60 of the Kansas Statutes Annotated, and amendments thereto.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
(d) An owner may withhold not more than 150% of the value of incomplete work, provided that the incomplete work is due to the fault of a contractor. Any amounts retained for incomplete work shall be paid within 45 days after completion of the work as a part of the regular payment cycle.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
(e) A contractor may withhold not more than 150% of the value of incomplete work, provided that the incomplete work is due to the fault of a subcontractor. Any amounts retained for incomplete work shall be paid within 45 days after completion of the work as part of the regular payment cycle.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
(f) A subcontractor may withhold not more than 150% of the value of incomplete work that is the responsibility of another subcontractor, provided that the incomplete work is due to the fault of such other subcontractor. Any amounts retained for incomplete work shall be paid within 45 days after completion of the work as a part of the regular payment cycle.
- statuteK.S.A. 16-1802enactment date not established
The words that state the rule
"Substantial completion" means the stage of a construction project where the project, or a designated portion thereof, is sufficiently complete in accordance with the contract, so that portion thereof can be used for its intended purpose.
- statuteK.S.A. 16-1803enactment date not established
The words that state the rule
(a) Subject to the provisions of subsections (b), (c), (d), (e), (f), (g) and (h) and K.S.A. 16-1804 and 16-1805, and amendments thereto, all persons who enter into a contract for private construction after the effective date of this act, shall make all payments pursuant to the terms of the contract.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
(b) If the contractor or subcontractor has failed to meet the terms of the contract, is not performing according to schedule or there is a problem with workmanship or other issues, the owner may increase retainage up to 10%.
- statuteK.S.A. 16-1804enactment date not established
The words that state the rule
(j) If an owner, contractor or subcontractor fails to pay retainage, if any, pursuant to the terms of a contract for private construction or as required by this act, the owner, contractor or subcontractor shall pay interest to the contractor or subcontractor to whom payment was due, beginning on the first business day after the payment was due, at a rate of 18% per annum.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.