Ohio's Reform Effort (House Bill 208) Gathers Steam as It Passes Committee

Donald W. Gregory
Construction
Law chair

In a seven to one vote on December 9, 2003, the House Commerce and Labor Committee approved the Retainage Reform Bill (H.B. 208), that follows the lead of the Federal Government and the Ohio Department of Transportation, who have eliminated retainage. While the Bill does not eliminate retainage in its entirety, it radically reforms retainage practices in the State of Ohio on both public and private commercial work in the following respects:

1. Retainage would be capped at a maximum of 2%;

2. There would be line item release of retainage by trade when that trade's work is fully complete;

3. Owners would have to pay their bills within twenty days of approval of the draw request, granting of a certificate of occupancy, or expiration of a trade's lien rights, whichever occurs first, or would be liable for 18% interest and attorney's fees;

4. There could be no improper or excessive "hold backs" in the form of retainage or otherwise, such as excessive amounts withheld for operating manuals, warranties and the like; and

5. Interest would be paid on retainage at all levels of the "construction food chain."

Supporters of the Bill believe that it will speed up payment and reduce the impact of using contractors and subcontractors as "the bank," while at the same time not sacrificing quality or timeliness of work. Don Gregory and Dan Hilson were actively involved in the drafting and passage of the bill out of Committee on behalf of Ohio's subcontractors. Anyone with opinions on the merits of this Retainage Reform Bill (H.B. 208) should contact their State Representative or Senator to communicate their thoughts on the Bill as currently drafted.

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Kegler, Brown, Hill & Ritter's Construction Law Newsletter is prepared by Donald W. Gregory for the Construction Law practice group.

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