On January 1, 2020, Oregon HB 2415 went into effect, which changes retention requirements under Oregon`s instant payment laws for contractors. Oregon law now requires the obligating party to deposit amounts withheld at source into an interest-bearing escrow account for each $500,000 construction contract. The law applies to both public and private construction projects. Deposits of amounts withheld in an interest-bearing escrow account are required regardless of which party retains the holdback – principal, owner, contractor or subcontractor. Does Oregon House of Representatives Bill 2415, which went into effect on January 1, 2020, still apply to PUBLIC works and not private works? When I look for OR retention information on Levelset, it says that there is no escrow requirement for private construction. One landlord we contract with states that it is for private. A contractor or subcontractor may perform and deliver to the owner, contractor or subcontractor prior to the commencement of construction, for which the contractor or subcontractor is responsible, in order to provide good and sufficient security equal to the contract price for the faithful performance of the contract. The term of the bond received under this paragraph shall extend to the period during which the liens or indications of other encumbrances arising from the construction carried out under the Contract may be claimed under the applicable law. The deposit must be approved by the owner, contractor or subcontractor who has the right to withhold. A bon`s performance guarantee issued pursuant to this Section shall include, inter alia, provisions stipulating: 1.

Payments are permitted and can be made in the case of construction and DIY contracts. An owner, contractor or subcontractor may withhold an amount equal to up to five per cent of the contract price of the work performed. A payment by instalments authorized under this paragraph does not constitute acceptance or approval of any part of the Work or a waiver of defects in the Work. Progress payment withholding is common for most Oregon contractors. Traditionally, there have been few laws on stockpiling; Almost all of the “rules” were set out in the parties` construction contract. From the year 2000, however, this changed. Now, public and private contractors need to take a fresh look at retention conditions for every project over $500,000. (a) The owner, contractor or subcontractor shall pay interest at the rate of one per cent per month on the balance owing to the contractor or subcontractor. Interest begins 30 days after the contractor or subcontractor has completed and the owner has accepted the work under the construction contract for which final payment is due. Interest shall accrue until the date on which final payment is offered to the contractor or subcontractor.

If the contractor or subcontractor considers that the work entrusted to him has been completed, he shall inform the party in respect of which he is responsible for carrying out the work provided for in the contract. Within 15 days of receiving the notice, the party must either accept the Work or inform the Contractor or subcontractor of the remaining Work under the Contract. If the party does not accept the Work or does not inform the Contractor or Subcontractor of the remaining Work within the prescribed period, the interest charged under this subsection begins 30 days after the expiry of the 15-day period. Tracy Allen has 20 years of experience in construction accounting and leads the construction industry in Oregon. It provides its clients with certified work and consulting services such as cash flow management, operational reviews, systems and process reviews, and succession planning. Tracy holds her CCIFP designation® in the construction industry. She is honored by. Continue reading Tracy Allen, CPA, CCIFP® (c) “Owner” means a person who owns or claims to be the owner or the lower domain on which construction is performed and who enters into an agreement with a contractor for construction. If you`re not following the Oregon legislature closely, you may have missed a new law that went into effect on January 1, 2020, and that affects the treatment of holdbacks on private and public construction projects over $500,000.

If your construction project contract exceeds the $500,000 threshold, you will need to contact your bank to begin the process of opening an interest-bearing account. We know the ever-changing legal landscape can be confusing, so contact your Aldrich advisor today to work with someone who understands the construction industry. If you have any questions about the effects of HB 2415, contact your Aldrich advisor or call us at 877-620-4489. This conclusion is supported by the legislative history of these laws (e.g. previous laws of the Public Procurement Act which provided that the contractor received “revenues” from an interest-bearing account) and the reasons for the concept of retention, as retention is related to certain work completed on the project. I have a subcontractor who keeps asking me if I`m being paid a franchise. Your part of the work is done, but we are not done yet. Do we have to pay their withholding before we receive ours? In the meantime, building lawyers have developed strategies to manage these risks and the consequences of non-compliance with new conservation laws.

These strategies require a fresh look at the construction contracts of owners and contractors, especially their holding and prepayment conditions. In most cases, negotiations between the parties are necessary to arrive at acceptable terms that minimize the risks associated with these laws. Landlords and contractors should have construction lawyers review contracts and prepare appropriate terms. The state of Oregon now joins only a handful of states that require that withheld amounts be held in a separate interest-bearing escrow account. By passing this requirement, the state legislature wants to provide additional protection for construction payments. ORS 279C. 555, 701.410, 701.420, and 701.430 do not apply if the owner is the United States or one of its agencies, or if the construction is paid for in whole or in part with federal funds. (b) “contractor” means a person who enters into a contract with an owner, under predetermined conditions, for the total or partial performance of a construction activity in accordance with defined specifications or plans, retaining control of the means, method and manner of achieving the desired result.

It is important to learn about prompt payment laws. A review of Oregon laws, rules, and regulations regarding the amount and timing of payments withheld is important to know your rights and obligations as a party to a construction project. Oregon-specific laws can be found in: OR. Rev. Stat. § 701.410 ff. for private projects and §279C.550 ff. for public projects; and are reproduced below. Updated from 2021.

(2) For the purposes of ORS 701.410, 701.420, 701.430, 701.435 and 701.440, “withholding” means the difference between the amount earned by a contractor or subcontractor under a construction contract and the amount paid by the owner to the contractor under the contract, the amount paid by the contractor to the subcontractor under the contract or the amount, that the subcontractor pays to another subcontractor under the contract. In many private contract projects, a lender does not distribute money held at source to the owner or a contractor, so in fact, no money can be deposited into the escrow account. These laws do not apply to lenders, so lenders would generally not agree to deposit the amounts withheld in segregated escrow accounts. The Statute simply does not provide for this usual scenario. Conservation serves two general purposes: (1) to induce the contractor or subcontractor to complete the project; and (2) provide the owner with some protection against problems such as liens, contractual defaults, delays, etc. Most states have laws that govern how parties use the concept of retention and protect some parties from misuse of the tool by others. Below are resources, legal information, and frequently asked questions about Oregon`s retention requirements.