Litigation Law Newsletter Volume 1, Number 1: What is a Construction Holdback and How Does it Affect Homeowners?
Click “Subscribe Now” to get attorney insights on the latest developments in a range of services and industries.
January Focus:
What is a Construction Holdback and How Does it Affect Homeowners?
Most homeowners are unaware of this concept and, as a result, can lose significant sums of money when renovating their homes.
How it Works:
Suppose your contractor bills you $100,000 for constructing parts of the residence. If you are unaware of what a ‘holdback’ is, you would probably pay the contractor that amount in full. That would be wrong.
If you pay that amount, and for some reason the contractor fails to pay his subcontractor the amount the subcontractor is owed for his labour and materials (which happens more than you think), the subcontractor can sue you personally for up to 10% of the amount you paid. In this example, you would be required to pay the subcontractor an additional $10,000, thus bringing your total to $110,000, even though you already paid the contractor for the subcontractor’s work.
Construction projects are expensive, and this simple mistake can repeat itself over and over. If the entire project is worth $1 million, and you paid your contractor that amount in full without holding back 10%, you could be personally liable to pay the subcontractor an additional $100,000.
How to avoid this mistake:
Be sure to hold back 10% of all amounts you pay your contractor until the residence is completed and approved.
Recent Insights
- July 25, 2024 In the News Anita Rocha Joins Dickinson Wright Phoenix Office
- July 25, 2024 Podcasts DW FastTrack Episode 10: "Generative AI: Look Before You Jump" with Lance Anderson and Lael Andara
- July 24, 2024 Media Mentions Peggy Kozal recently quoted in the Fierce Healthcare article, “Supreme Court overrules Chevron deference, dealing blow to federal healthcare agencies."
- July 23, 2024 In the News Business Facilities recently published Jeremy Schirra's article, "The Last Word: A Look At Incentives."
- July 19, 2024 In the News Don’t miss out on Suzanne Sukkar and Najah Allaham’s article, “H-2B Visas as Quality Solution for Hospitality: Improve Customer Service With a Fully Staffed Team,” which was published by Hotel Online.
- July 18, 2024 In the News Nicholas Hall Joins Dickinson Wright Lexington Office
- July 18, 2024 In the News Dickinson Wright Receives Top Rankings in Chambers 2024 High Net Worth Guide
- July 18, 2024 In the News Michael Vogt's article, "Michigan’s New Clean Energy Siting Law Surges Ahead," was published by the State Bar of Michigan Real Property Law Section eNewsletter.
- July 16, 2024 Industry Alerts AI in Political Advertising