Legal Question in Construction Law in California

If you have already signed your contract with the customer and with your subcontractors and suppliers, you have a problem. If not, the answer is simple. If you have not yet signed the contracts and the customer wants to hold 10% retention, then you put a 10% retention clause in all your subcontracts. Suppliers tend to balk at retentions, because they have delivered 100% on their obligation. So if possible you should negotiate with the owner for full progress payments on the supplies portion of your progress billings. If you have a long term job and some trades will be done long before the poject is complete, you should also try to negotiate for partial retention releases as the job progresses, so that the early trades can be paid off and final releases obtained from them. If you have already signed your contracts and the contract with the customer calls for retentions and your contracts with your subcontractors do not, you have a problem. All you really legally have the power to do is try to stand behind the statutory provisions that only require you to pass on payments received from the owner for the subs, and give your subs a heads up to expect you will not be able to pay them in full until the retention is released. That will get you around the penalties for failure to make prompt payments, but from a legal standpoint you will still be in breach of your contract. It is up to the subs what they do about that. Going forward it is essential that you coordinate your contracts so that your subs rights and obligations to you correspond with your rights and obligations to the customer. Another place where this can be a problem is "no damages for delay" clauses. Make very sure that your subcontracts don't excuse subcontractor delays while you are on the hook for delays to the owner.