Section 9-304 - Retention proceeds. - Maryland Statutes

§ 9-304. Retention proceeds.
 

(a)  "Retention proceeds" defined.- In this section, "retention proceeds" means moneys earned but retained under the terms of a contract or subcontract: 

(1) By an owner to guarantee performance of the contract by a contractor; 

(2) By a contractor to guarantee performance of a subcontract by a subcontractor; or 

(3) By a subcontractor to guarantee performance of a subcontract by another subcontractor. 

(b)  Applicability of section.- This section does not apply to: 

(1) A contract in an amount less than $250,000; or 

(2) A contract or subcontract for a project funded wholly or in part by or through the Department of Housing and Community Development. 

(c)  Limit of proceeds.- Except as provided in this section: 

(1) If a contractor has furnished 100% security to guarantee the performance of a contract and 100% security to guarantee payment for labor and materials, including leased equipment: 

(i) The retention proceeds under the terms of a contract may not exceed 5% of the contract price; and 

(ii) The retention proceeds of any payment due under the terms of a contract from an owner to a contractor may not exceed 5% of the payment; 

(2) The retention proceeds of any payment due under the terms of a contract from a contractor to a subcontractor may not exceed the percentage of retention proceeds from the owner to the contractor; and 

(3) The retention proceeds of any payment due under the terms of a contract from a subcontractor to another subcontractor may not exceed the percentage of retention proceeds from the contractor to the subcontractor. 

(d)  Withholding of additional amount.- This section may not be construed to prohibit the withholding of any amount due: 

(1) From the owner to the contractor if the owner reasonably determines that the contractor's performance under the contract provides reasonable grounds for withholding the additional amount; 

(2) From the contractor to any subcontractor if the contractor reasonably determines that the subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount; or 

(3) From a subcontractor to another subcontractor if the subcontractor determines that the other subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount. 
 

[2008, ch. 390, § 2.]