Establishes provisions relating to construction contracts

Additionally, this act provides that an owner shall make progress payments to the contractor and any engineer, architect, landscape architect, or land surveyor on a monthly basis as described in the act, milestone basis, or lump sum basis.

If in the discretion of the owner and when applicable under the contract, the project architect or engineer, and the contractor, it is determined that a subcontractor's performance has been completed and the subcontractor can be released prior to substantial completion, as defined in the act, of the contract without risk to the owner, the contractor shall request such adjustment in retainage from the owner as necessary to enable the contractor to pay the subcontractor in full. The owner may reduce or eliminate retainage on any payment if the work is proceeding satisfactorily in the owner's opinion. Until the contractor has received retainage, the contractor does not have an obligation to release retainage to a subcontractor. If retainage is released and remaining minor items are still to be completed, an amount equal to 150% of the value of each item as determined by the owner's authorized representatives shall be withheld until the item is completed.

Furthermore, this act provides that upon substantial completion, the owner shall pay at least 98% of the retainage, less any offsets or deductions authorized in the contract or by law, and the contractor shall pay the subcontractor or supplier within 30 days after acceptance by the owner's authorized representative. If the work is determined not to be substantially completed and accepted, the owner or the owner's representative shall provide a written explanation within 14 calendar days to the contractor, who shall then provide such notice to the subcontractor or suppliers responsible for such work.

Additionally, this act provides that there shall be no retainage if the contractor and each subcontractor at any tier are bonded for both payment and performance.

All estimates or invoices for purchased, approved, and processed supplies and services or final payments shall be paid promptly and shall be subject to late payment charges as described in the act. Any person who has not been paid may bring an action for damages, which may be awarded with interest as described in the act along with reasonable attorney's fees.

Within two business days after payment from the owner to the contractor for one or more subcontractors' work, the owner shall notify each subcontractor. The contractor shall pay each subcontractor and material supplier in proportion to the work completed by each subcontractor and material supplier their application less any retainage. If the contractor receives less than the full payment due under the contract, the contractor shall be obligated to disburse on a pro rata basis. If the owner does not release the full payment due because there are specific areas of work or materials being rejected or are determined not suitable for payment in a written explanation, those specific subcontractors or suppliers involved shall not be paid but all other subcontractors and suppliers shall be paid in full.

If the contractor, without reasonable cause, fails to make a payment to his or her subcontractors or material suppliers within 15 days after receipt of payment, the contractor shall be subject to interest on the payment as provided in the act. Any payments made by subcontractors and material suppliers to their subcontractors and material suppliers shall also be subject to interest for payments made after 15 days of receipt.

The owner shall make final payment of all moneys owed to the contractor, including any retainage less any offsets or deductions authorized in the contract or by law, within 30 days of the earliest of the following events: (1) Completion of the project and filing with the owner of all required documentation and certifications; or (2) The project reaches substantial completion.

Nothing in this act shall prevent the contractor or subcontractor, at the time of application or certification to the owner or contractor, from withholding such applications or certifications from the owner or contractor for payment, including for reasons described in the act. Additionally, nothing in this act shall prevent the owner from withholding payment or final payment from the contractor, a subcontractor, or a material supplier, including for reasons described in the act.

If the contractor determines after payment has been received that payment is needed to be withheld from a specific subcontractor or material supplier, such payment shall be specifically identified in writing and deducted from the next application or certification made to the owner or from the next estimate of payment due to the contractor until a resolution of the matter has been achieved.

For contracts that provide for payments based upon the owner's estimate of materials in place and work performed, the owner shall pay the amount due less a retainage to the contractor within 30 days following the date upon which the estimate is required by contract to be completed by the owner. The owner shall be subject to interest, as described in the act, for any payments made after 30 days.

Additionally, the owner shall pay any engineer, architect, landscape architect, or land surveyor within thirty days following the receipt of an invoice prepared and submitted in accordance with the contract terms and shall pay interest, as described in the act, for any payments made after the 30 days.

Furthermore, this act provides that subcontractors specifically grant the contractor the right to hold future payments until lien waivers are provided and until the contractor receives confirmation of account status from any of the parties. If the contractor is required to issue a payment in the form of a joint check, a processing fee, not exceeding $250 and withheld from future payments, shall be charged to the subcontractor.

For any frivolous and bad faith civil actions brought under this act, the court shall require the frivolous and bad faith party to pay the amount of the costs and reasonable expenses incurred by such non-offending party, including reasonable attorney's fees.

This act shall not apply to contracts for construction or design work on residential real property, as defined in the act.

This act is substantially similar to HCS/HB 1915 (2026) and provisions in SS/HB 3205 (2026). KATIE O'BRIEN