SB437 Alabama 2011 Session

Summary

Primary Sponsor

Del Marsh

Republican

Co-Sponsors

Rodger SmithermanPriscilla Dunn

Session

Regular Session 2011

Title

Construction contracts, retainage requirements, defined, Sec. 8-29-3 am'd. (2011-21072)

Summary

SB437 defines retainage and sets rules for prompt payment and retainage in Alabama construction contracts, including limits on retainage, payment timing, and interest.

What This Bill Does

It amends Alabama's prompt pay law (Section 8-29-3) to define retainage and regulate its use in construction contracts. It sets a maximum 10% retainage and limits further withholding once 50% of work is complete, with interest if excess retainage is held. It requires owners to pay contractors on time and to pass through payments to subcontractors and sub-subcontractors with specific timing, and it imposes 1% monthly interest on late payments. It applies to contracts entered after the act’s effective date and does not apply to electric utility projects regulated by the PSC.

Who It Affects

• Owners and general contractors on Alabama construction projects who must follow the payment timelines, retainage limits, and release requirements.
• Subcontractors, sub-subcontractors, and material suppliers who are owed timely payments and interest if payments are delayed, and who receive pass-through retainage from contractors.

Key Provisions

• Defines retainage and its use in construction contracts, including payment for work properly performed or materials stored, conditioned on final completion and acceptance.
• Owners must pay contractors on time according to contract terms or, if not specified, within 30 days of a pay request or invoice.
• If payment terms are not agreed, contractors must pay subcontractors within seven days of receiving payment from the owner; similarly, sub-subcontractors must be paid within seven days after the contractor is paid.
• Retainage by the owner to the contractor may not exceed 10% of the estimated work and stored materials; no further retainage can be withheld after 50% completion, with interest due on any excess withheld.
• Retainage must flow down to subcontractors and lower tiers with the same 10% cap and 50% completion rule; excess retainage at any level accrues interest at 1% per month.
• Retainage must be released and paid within 60 days after project completion or substantial completion (whichever comes first), and the contractor must release retainage to subcontractors accordingly; occupancy certificates must be issued where required.
• Not apply to electric utilities regulated by the Public Service Commission; paying parties may require lien releases as a condition of payment.
• The act applies only to contracts entered into after the effective date; it repeals conflicting laws and establishes the effective date.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Contracts