Oregon State Bar: Construction Law Newsletter


Recent amendments to ORS 279C.570 and ORS 701.420 create new requirements for retainage withheld on public and private construction contracts. Effective January 1, 2020, if the contract price exceeds $500,000, the contracting agency, private owner, contractor, or subcontractor must place amounts deducted as retainage into an interest-bearing escrow account. Interest on the retainage amount accrues from the date the payment request is approved until the date the retainage is paid to the contractor to which it is due.

The amendments provide no guidance on a number of issues, however, likely leaving clarification to the courts or further legislation.

A contracting agency, owner, contractor, or subcontractor is required to pay interest on the final payment due the contractor or subcontractor. However, interest was not required to be paid on amounts withheld as retainage. Under the amendments, those retainage amounts must be placed into an interest-bearing escrow account rather than remaining in the other contracting party’s general operating account.

No guidance has yet been provided regarding how the escrow account should be established, how it should be managed, the extent of control an owner has over the funds while construction is in progress, or whether the funds can be used to cure a contractual default.

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