NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2212
SPONSOR: Braunstein (MS) TITLE OF BILL:
An act to amend the state finance law and the general municipal law, in
relation to requiring full payment for delivered and accepted materials
pertaining to public work projects; and to amend the general business
law, in relation to prohibiting the retention of any payment due and
owing a material supplier for a construction project
PURPOSE:
This bill amends the state finance and general municipal laws, in
relation to requiring full payment for delivered materials pertaining to
public works projects; and to amend the general business law, in
relation to prohibiting the retention of any payment due and owing a
material supplier for a construction project.
SUMMARY OF PROVISIONS:
Section 1: Amends the state finance law to clarify that materialmen are
not subject to retainage.
Section 2: Amends the general municipal law to clarify that materialmen
are not subject to retainage.
Section 3: Amends the current law to clarify that an owner, contractor,
or Subcontractor may not retain any portion of any payment due to a
material supplier, except as set forth in subsection one of the law.
Section 4: Sets the effective date.
JUSTIFICATION:
Currently, retainage is withheld on construction jobs to ensure that the
owner is happy with the finished product. Retainage is withheld by the
owner from the contractor, who, as a result of not receiving funds from
the owner, withholds payment from the subcontractors and materialmen.
Once a material supplier has delivered its goods and has been accepted
by the contractor or subcontractor, the supplier has completed its job
and should not be held liable for subsequent work performance. This
legislation would remove materialmen from inclusion under current
retainage laws.
LEGISLATIVE HISTORY:
2016: A.10275/S.7652 - Referred to Governmental Operations.
2017-2018: A.358/S.4467 - Ordered to Third Reading.
2019-2020: A.574/S.5498 - Ordered to Third Reading.
2021-2022: A.494/S.1387 - Referred to Governmental Operations.
2023-2024: A.1194A/S.6855A - Passed Assembly.
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall become
law and shall apply to materials deliver on or after such date.
STATE OF NEW YORK
________________________________________________________________________
2212
2025-2026 Regular Sessions
IN ASSEMBLY
January 15, 2025
___________
Introduced by M. of A. BRAUNSTEIN, WOERNER, STECK, PAULIN, BRABENEC,
STIRPE -- Multi-Sponsored by -- M. of A. TAGUE -- read once and
referred to the Committee on Governmental Operations
AN ACT to amend the state finance law and the general municipal law, in
relation to requiring full payment for delivered and accepted materi-
als pertaining to public work projects; and to amend the general busi-
ness law, in relation to prohibiting the retention of any payment due
and owing a material supplier for a construction project
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivisions 1 and 2 of section 139-f of the state finance
2 law, subdivision 1 as amended by chapter 128 of the laws of 2021 and
3 subdivision 2 as amended by section 16 of part MM of chapter 57 of the
4 laws of 2008, are amended to read as follows:
5 1. Payment by public owners to contractors. The contractor shall peri-
6 odically, in accordance with the terms of the contract, submit to the
7 public owner and/or [his] its agent a requisition for a progress payment
8 for the work performed and/or materials furnished to the date of the
9 requisition, less any amount previously paid to the contractor. The
10 public owner shall in accordance with the terms of the contract approve
11 and promptly pay the requisition for the progress payment less an amount
12 necessary to satisfy any claims, liens or judgments against the contrac-
13 tor which have not been suitably discharged and less any retained amount
14 as hereafter described. The public owner shall retain not more than five
15 per centum of each progress payment, not including any payment for mate-
16 rials pertinent to the project which have been delivered, accepted and
17 are covered by a manufacturer's warranty, and/or are graded to meet
18 industry standards, to the contractor except that the public owner may
19 retain in excess of five per centum but not more than ten per centum of
20 each progress payment, not including any payment for materials pertinent
21 to the project which have been delivered, accepted and are covered by a
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04003-01-5
A. 2212 2
1 manufacturer's warranty, and/or are graded to meet industry standards,
2 to the contractor provided that there are no requirements by the public
3 owner for the contractor to provide a performance bond and a labor and
4 material bond both in the full amount of the contract. The public owner
5 shall pay in full, upon requisition from the contractor, for all materi-
6 als pertinent to the project which have been delivered to the site or
7 off-site by the contractor and/or subcontractor and suitably stored and
8 secured as required by the public owner and the contractor [provided,
9 the public owner may limit such payment to materials in short and/or
10 critical supply and materials specially fabricated for the project each
11 as defined in the contract]. When the work or major portions thereof as
12 contemplated by the terms of the contract are substantially completed,
13 the contractor shall submit to the public owner and/or [his] its agent a
14 requisition for payment of the remaining amount of the contract balance.
15 Upon receipt of such requisition the public owner shall approve and
16 promptly pay the remaining amount of the contract balance less two times
17 the value of any remaining items to be completed and an amount necessary
18 to satisfy any claims, liens or judgments against the contractor which
19 have not been suitably discharged. As the remaining items of work are
20 satisfactorily completed or corrected, the public owner shall promptly
21 pay, upon receipt of a requisition, for these remaining items less an
22 amount necessary to satisfy any claims, liens or judgments against the
23 contractor which have not been suitably discharged. Any claims, liens
24 and judgments referred to in this section shall pertain to the project
25 and shall be filed in accordance with the terms of the applicable
26 contract and/or applicable laws.
27 2. Payment by contractors to subcontractors. Within seven calendar
28 days of the receipt of any payment from the public owner, the contractor
29 shall pay each of [his] its subcontractors and materialmen the proceeds
30 from the payment representing the value of the work performed and/or
31 materials furnished by the subcontractor and/or materialman and reflect-
32 ing the percentage of the subcontractor's work completed or the
33 materialman's material supplied in the requisition approved by the owner
34 and based upon the actual value of the subcontract or purchase order
35 less an amount necessary to satisfy any claims, liens or judgments
36 against the subcontractor or materialman which have not been suitably
37 discharged and, with regard to subcontractors, less any retained amount
38 as hereafter described. Failure by the contractor to pay any subcontrac-
39 tor or materialman within seven calendar days of the receipt of any
40 payment from the public owner shall result in the commencement and
41 accrual of interest on amounts due to such subcontractor or materialman
42 for the period beginning on the day immediately following the expiration
43 of such seven calendar day period and ending on the date on which
44 payment is made by the contractor to such subcontractor or materialman.
45 Such interest payment shall be the sole responsibility of the contrac-
46 tor, and shall be paid at the rate of interest in effect on the date
47 payment is made by the contractor. Notwithstanding any other provision
48 of law to the contrary, interest shall be computed at the rate estab-
49 lished in paragraph (b) of subdivision one of section seven hundred
50 fifty-six-b of the general business law. The contractor shall retain not
51 more than five per centum of each payment to the subcontractor [and/or
52 materialman] except that the contractor may retain in excess of five per
53 centum but not more than ten per centum of each payment to the subcon-
54 tractor provided that prior to entering into a subcontract with the
55 contractor, the subcontractor is unable or unwilling to provide a
56 performance bond and a labor and material bond, both in the full amount
A. 2212 3
1 of the subcontract, at the request of the contractor. The contractor
2 shall pay in full, upon payment by the public owner, for all materials
3 pertinent to the project which have been delivered to and accepted at
4 the site or off-site by a materialman and are covered by a manufactur-
5 er's warranty, and/or are graded to meet industry standards. However,
6 except in the case of a materialman who is also contracted to install a
7 product such materialman delivered, the contractor shall retain nothing
8 from those payments representing proceeds owed the subcontractor and/or
9 materialman from the public owner's payments to the contractor for the
10 remaining amounts of the contract balance as provided in subdivision one
11 of this section. If the contractor has failed to submit a requisition
12 for payment of the remaining amounts of the contract balance within
13 ninety days of substantial completion as provided in subdivision one of
14 this section, then any clause in the subcontract between the contractor
15 and the subcontractor or materialman which states that payment by the
16 contractor to such subcontractor or materialman is contingent upon
17 payment by the owner to the contractor shall be deemed invalid. Within
18 seven calendar days of the receipt of payment from the contractor, the
19 subcontractor and/or materialman shall pay each of [his] its subcontrac-
20 tors and materialmen in the same manner as the contractor has paid the
21 subcontractor, including interest as herein provided above. Nothing
22 provided herein shall create any obligation on the part of the public
23 owner to pay or to see to the payment of any moneys to any subcontractor
24 or materialman from any contractor nor shall anything provided herein
25 serve to create any relationship in contract or otherwise, implied or
26 expressed, between the subcontractor or materialman and the public
27 owner.
28 § 2. Paragraph (a) of subdivision 1 and subdivision 2 of section 106-b
29 of the general municipal law, paragraph (a) of subdivision 1 as amended
30 by chapter 128 of the laws of 2021 and subdivision 2 as amended by
31 section 15 of part MM of chapter 57 of the laws of 2008, are amended to
32 read as follows:
33 (a) The contractor shall periodically, in accordance with the terms of
34 the contract, submit to the public owner and/or [his] its agent a requi-
35 sition for a progress payment for the work performed and/or materials
36 furnished to the date of the requisition less any amount previously paid
37 to the contractor. The public owner shall in accordance with the terms
38 of the contract approve and promptly pay the requisition for the
39 progress payment less an amount necessary to satisfy any claims, liens
40 or judgments against the contractor which have not been suitably
41 discharged and less any retained amount as hereafter described. The
42 public owner shall retain not more than five per centum of each progress
43 payment, not including any payment for materials pertinent to the
44 project which have been delivered, accepted and are covered by a
45 manufacturer's warranty, and/or are graded to meet industry standards,
46 to the contractor except that the public owner may retain in excess of
47 five per centum but not more than ten per centum of each progress
48 payment, not including any payment for materials pertinent to the
49 project which have been delivered, accepted and are covered by a
50 manufacturer's warranty, and/or are graded to meet industry standards,
51 to the contractor provided that there are no requirements by the public
52 owner for the contractor to provide a performance bond and a labor and
53 material bond both in the full amount of the contract. The public owner
54 shall pay in full, upon requisition from the contractor, for all materi-
55 als pertinent to the project which have been delivered to the site or
56 off-site by the contractor and/or subcontractor and suitably stored and
A. 2212 4
1 secured as required by the public owner and the contractor [provided,
2 the public owner may limit such payment to materials in short and/or
3 critical supply and materials specially fabricated for the project each
4 as defined in the contract]. When the work or major portions thereof as
5 contemplated by the terms of the contract are substantially completed,
6 the contractor shall submit to the public owner and/or [his] its agent a
7 requisition for payment of the remaining amount of the contract balance.
8 Upon receipt of such requisition the public owner shall approve and
9 promptly pay the remaining amount of the contract balance less two times
10 the value of any remaining items to be completed and an amount necessary
11 to satisfy any claims, liens or judgments against the contractor which
12 have not been suitably discharged. As the remaining items of work are
13 satisfactorily completed or corrected, the public owner shall promptly
14 pay, upon receipt of a requisition, for these items less an amount
15 necessary to satisfy any claims, liens or judgments against the contrac-
16 tor which have not been suitably discharged. Any claims, liens and judg-
17 ments referred to in this section shall pertain to the project and shall
18 be filed in accordance with the terms of the applicable contract and/or
19 applicable laws. Where the public owner is other than the city of New
20 York, the term "promptly pay" shall mean payment within thirty days,
21 excluding legal holidays, of receipt of the requisition unless such
22 requisition is not approvable in accordance with the terms of the
23 contract. Notwithstanding the foregoing, where the public owner is other
24 than the city of New York and is a municipal corporation which requires
25 an elected official to approve progress payments, "promptly pay" shall
26 mean payment within forty-five days, excluding legal holidays, of
27 receipt of the requisition unless such requisition is not approvable in
28 accordance with the terms of the contract.
29 2. Payment by contractors to subcontractors. Within seven calendar
30 days of the receipt of any payment from the public owner, the contractor
31 shall pay each of [his] its subcontractors and materialmen the proceeds
32 from the payment representing the value of the work performed and/or
33 materials furnished by the subcontractor and/or materialman and reflect-
34 ing the percentage of the subcontractor's work completed or the
35 materialman's material supplied in the requisition approved by the owner
36 and based upon the actual value of the subcontract or purchase order
37 less an amount necessary to satisfy any claims, liens or judgments
38 against the subcontractor or materialman which have not been suitably
39 discharged and, with regard to subcontractors, less any retained amount
40 as hereafter described. Failure by the contractor to make any payment,
41 including any remaining amounts of the contract balance as hereinafter
42 described, to any subcontractor or materialman within seven calendar
43 days of the receipt of any payment from the public owner shall result in
44 the commencement and accrual of interest on amounts due to such subcon-
45 tractor or materialman for the period beginning on the day immediately
46 following the expiration of such seven calendar day period and ending on
47 the date on which payment is made by the contractor to such subcontrac-
48 tor or materialman. Such interest shall be the sole responsibility of
49 the contractor, and shall be paid at the rate of interest in effect on
50 the date payment is made by the contractor. Notwithstanding any other
51 provision of law to the contrary, interest shall be computed at the rate
52 established in paragraph (b) of subdivision one of section seven hundred
53 fifty-six-b of the general business law. The contractor shall retain not
54 more than five per centum of each payment to the subcontractor [and/or
55 materialman] except that the contractor may retain in excess of five per
56 centum but not more than ten per centum of each payment to the subcon-
A. 2212 5
1 tractor provided that prior to entering into a subcontract with the
2 contractor, the subcontractor is unable or unwilling to provide a
3 performance bond and a labor and material bond both in the full amount
4 of the subcontract at the request of the contractor. The contractor
5 shall pay in full, upon payment by the public owner, for all materials
6 pertinent to the project which have been delivered to and accepted at
7 the site or off-site by a materialman and are covered by a manufactur-
8 er's warranty, and/or are graded to meet industry standards. However,
9 except in the case of a materialman who is also contracted to install a
10 product such materialman delivered, the contractor shall retain nothing
11 from those payments representing proceeds owed the subcontractor and/or
12 materialman from the public owner's payments to the contractor for the
13 remaining amounts of the contract balance as provided in subdivision one
14 of this section. If the contractor has failed to submit a requisition
15 for payment of the remaining amounts of the contract balance within
16 ninety days of substantial completion as provided in subdivision one of
17 this section, then any clause in the subcontract between the contractor
18 and the subcontractor or materialman which states that payment by the
19 contractor to such subcontractor or materialman is contingent upon
20 payment by the owner to the contractor shall be deemed invalid. Within
21 seven calendar days of the receipt of payment from the contractor, the
22 subcontractor and/or materialman shall pay each of [his] its subcontrac-
23 tors and materialmen in the same manner as the contractor has paid the
24 subcontractor, including interest as herein provided above. Nothing
25 provided herein shall create any obligation on the part of the public
26 owner to pay or to see to the payment of any moneys to any subcontractor
27 or materialman from any contractor nor shall anything provided herein
28 serve to create any relationship in contract or otherwise, implied or
29 expressed, between the subcontractor or materialman and the public
30 owner.
31 § 3. Section 756-c of the general business law, as amended by chapter
32 657 of the laws of 2023, is amended to read as follows:
33 § 756-c. Retention. 1. By mutual agreement of the relevant parties an
34 owner may retain no more than five per centum of the contract sum as
35 retainage. A contractor or subcontractor may also retain no more than
36 five per centum for retainage and in no case shall retainage exceed the
37 actual percentage retained by the owner. Retainage shall be released by
38 the owner to the contractor no later than thirty days after the final
39 approval of the work under a construction contract. In the event that an
40 owner fails to release retainage as required by this article, or the
41 contractor or subcontractor fails to release a proportionate amount of
42 retainage to the relevant parties after receipt of retainage from the
43 owner, the owner, contractor, or subcontractor, as the case may be,
44 shall be subject to the payment of interest at the rate of one percent
45 per month on the date retention was due and owing.
46 2. Notwithstanding the provisions of subdivision one of this section,
47 no portion of any payment due and owing to a material supplier for mate-
48 rials which have been delivered, accepted and are covered by a manufac-
49 turer's warranty, and/or graded to meet industry standards shall be
50 retained by an owner, contractor or subcontractor.
51 § 4. This act shall take effect on the thirtieth day after it shall
52 have become a law and shall apply to materials delivered and accepted on
53 or after such effective date.
