What does Utah require about retainage and payment on a construction contract?
For nonresidential commercial or industrial construction, retention withheld from any payment may not exceed 5% of the payment (owner to original contractor, contractor to subcontractor, or between subcontractors) and total retention may not exceed 5% of the total construction price; where the owner-to-contractor percentage is below 5%, or is reduced below 5% before completion, the same lower percentage governs down the chain; retention withheld has to be placed in an interest-bearing account accounted for separately, the interest is for the benefit of the contractor and subcontractors and is paid after the project is completed and accepted, the contractor must distribute accrued interest to subcontractors pro rata, and the retention and accrued interest are considered to be in a constructive trust for those who earned them and are not subject to assignment, encumbrance, attachment, garnishment or execution levy for the holder's debts; retention and accrued interest must be released within 45 days from the later of listed events beginning with the owner's receipt of the contractor's billing statement, which must itself include documentation of lien releases or waivers, and on partial occupancy the retention is partially released within 45 days in direct proportion to the part occupied or used; a contractor or subcontractor receiving retention must pay each subcontractor its share within 10 days, except that a retention payment specifically designated for a particular subcontractor goes to that subcontractor; a party that knowingly and wrongfully withholds retention owes 2% per month on the amount in addition to other interest, payable to the party from whom it was withheld, and the successful party in an action to collect retention withheld in violation of the section is entitled to attorney fees and other allowable costs; and a party to a construction contract may not require any other party to waive any provision of the section (§ 13-8-5). On a Utah construction contract a party shall make all scheduled payments under its terms, and the existence of a contingent-payment provision (payment to a subcontractor contingent on the contractor being paid) is not a defense to a claim to enforce a construction lien (§ 13-8-4). A construction contract there is one to provide services, labor or materials for the design, construction, installation or repair of an improvement to real property located in Utah; if it is a contingent payment contract the subcontractor may request the project-financing information the contractor received about the financing and the paying party, and the contractor must provide it before the subcontractor signs; and the section applies to a contract executed on or after May 5, 1997.
The trap
Currency: the only version of § 13-8-5 available for this rule carries a history line recording an amendment by Chapter 42 of the 2026 General Session bearing the date 1/1/2027, which on its face is a version that takes effect January 1, 2027; we hold no effective dates and no other version, so the text above may not be the law in force before that date. § 13-8-5 is limited to nonresidential commercial or industrial projects (mixed projects pro rata by square footage) and does not apply to a construction lender. The 5% cap is stated notwithstanding § 58-55-209, which was not read here. The owner may withhold what is reasonably necessary to cure a contractor's default, and on substantial completion up to twice the value of uncompleted work, but must describe the withheld work in writing within 45 days. Those § 13-8-4 sentences do not apply to private construction work on residential property of four units or less.
17 authorities
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
As used in this section: "Construction contract" means a written agreement between the parties relative to the design, construction, alteration, repair, or maintenance of a building, structure, highway, appurtenance, appliance, or other improvements to real property, including moving, demolition, and excavating for nonresidential commercial or industrial construction projects.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
Notwithstanding Section 58-55-209 , the retention proceeds withheld and retained from any payment due under the terms of the construction contract may not exceed 5% of the payment: by the owner or public agency to the original contractor; by the original contractor to any subcontractor; or by a subcontractor. The total retention proceeds withheld may not exceed 5% of the total construction price.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
Except as provided in Subsection (9)(b) , an original contractor or subcontractor who receives retention proceeds shall pay each of its subcontractors from whom retention has been withheld each subcontractor's share of the retention received within 10 days from the day that all or any portion of the retention proceeds is received: by the original contractor from the owner or public agency; or by the subcontractor from: the original contractor; or a subcontractor.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
Any owner, public agency, original contractor, or subcontractor who knowingly and wrongfully withholds a retention shall be subject to a charge of 2% per month on the improperly withheld amount, in addition to any interest otherwise due. The charge described in Subsection (10)(b)(i) shall be paid to the contractor or subcontractor from whom the retention proceeds have been wrongfully withheld.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
A party to a construction contract may not require any other party to waive any provision of this section.
- statuteUtah Code § 13-8-4enactment date not established
The words that state the rule
A party to a construction contract shall make all scheduled payments under the terms of the construction contract. The existence of a contingent payment contract is not a defense to a claim to enforce a preconstruction or construction lien under Title 38, Chapter 1a, Preconstruction and Construction Liens
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
If the construction contract is for construction of a project that is part residential and part nonresidential, this section applies only to that portion of the construction project that is nonresidential as determined pro rata based on the percentage of the total square footage of the project that is nonresidential.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
This section is applicable to all construction contracts relating to construction work or improvements entered into on or after July 1, 1999, between: an owner or public agency and an original contractor; an original contractor and a subcontractor; and subcontractors under a contract described in Subsection (2)(a)(i) or (ii) . This section does not apply to a construction lender.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
Any retention proceeds retained or withheld pursuant to this section and any accrued interest shall be released pursuant to a billing statement from the contractor within 45 days from the later of: the date the owner or public agency receives the billing statement from the contractor; the date that a certificate of occupancy or final acceptance notice is issued to: the original contractor who obtained the building permit from the building inspector or public agency; the owner or architect; or the public agency; the date that a public agency or building inspector that has the authority to issue a certificate of occupancy does not issue the certificate but permits partial or complete occupancy or use of a construction project; or the date the contractor accepts the final pay quantities.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
Notwithstanding Subsection (3) : if a contractor or subcontractor is in default or breach of the terms and conditions of the construction contract documents, plans, or specifications governing construction of the project, the owner or public agency may withhold from payment for as long as reasonably necessary an amount necessary to cure the breach or default of the contractor or subcontractor; or if a project or a portion of the project has been substantially completed, the owner or public agency may retain until completion up to twice the fair market value of the work of the original contractor or of any subcontractor that has not been completed: in accordance with the construction contract documents, plans, and specifications; or in the absence of plans and specifications, to generally accepted craft standards. An owner or public agency that refuses payment under Subsection (8)(a) shall describe in writing within 45 days of withholding such amounts what portion of the work was not completed according to the standards specified in Subsection (8)(a) .
- statuteUtah Code § 13-8-4enactment date not established
The words that state the rule
Subsection (3) does not apply to contracts for private construction work for the building, improvement, repair, or remodeling of residential property consisting of four units or less.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
The percentage of the retention proceeds withheld and retained pursuant to a construction contract between the original contractor and a subcontractor or between subcontractors shall be the same retention percentage as between the owner and the original contractor if: the retention percentage in the original construction contract between an owner and the original contractor is less than 5%; or after the original construction contract is executed but before completion of the construction contract the retention percentage is reduced to less than 5%.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
If any payment on a contract with a private contractor, firm, or corporation to do work for an owner or public agency is retained or withheld by the owner or the public agency, as retention proceeds, it shall be placed in an interest-bearing account and accounted for separately from other amounts paid under the contract. The interest accrued under Subsection (4)(a) shall be: for the benefit of the contractor and subcontractors; and paid after the project is completed and accepted by the owner or the public agency. The contractor shall ensure that any interest accrued on the retainage is distributed by the contractor to subcontractors on a pro rata basis. Retention proceeds and accrued interest retained by an owner or public agency: are considered to be in a constructive trust for the benefit of the contractor and subcontractors who have earned the proceeds; and are not subject to assignment, encumbrance, attachment, garnishment, or execution levy for the debt of any person holding the retention proceeds and accrued interest.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
If only partial occupancy of a construction project is permitted, any retention proceeds withheld and retained pursuant to this section and any accrued interest shall be partially released within 45 days under the same conditions as provided in Subsection (5) in direct proportion to the value of the part of the construction project occupied or used. The billing statement from the contractor as provided in Subsection (5)(a) shall include documentation of lien releases or waivers.
- statuteUtah Code § 13-8-5enactment date not established
The words that state the rule
Notwithstanding Subsection (9)(a) , 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. In any action for the collection of the retained proceeds withheld and retained in violation of this section, the successful party is entitled to: attorney fees; and other allowable costs.
- statuteUtah Code § 13-8-4enactment date not established
The words that state the rule
For purposes of this section: "Construction contract" means a contract or agreement to provide services, labor, or materials for the design, construction, installation, or repair of an improvement to real property located in Utah. "Contingent payment contract" means a construction contract between a contractor and a subcontractor that makes a payment from the contractor to the subcontractor contingent on the contractor receiving a corresponding payment from any other public or private party, including a private owner. "Contractor" means a person who is or may be awarded a contract for the construction, alteration, or repair of any building, structure, or improvement to real property. "Subcontractor" means any person engaged by a contractor to provide services, labor, or materials for the design, construction, installation, or repair of an improvement to real property and includes a trade contractor or specialty contractor.
- statuteUtah Code § 13-8-4enactment date not established
The words that state the rule
If a construction contract is a contingent payment contract: the subcontractor may request from the contractor the financial information that the contractor has received from the public or private party regarding: the project financing; and the public or private party; and if information is requested by the subcontractor under Subsection (4)(a) , the contractor shall provide the information prior to the subcontractor signing the construction contract between the contractor and the subcontractor. This section applies to a contract executed on or after May 5, 1997.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.