When the public entity owner stopped deducting retention amounts midway through a project but did not pay the prime contractor retention amounts already withheld, prime contractor was not required to pay subcontractors retention amounts it had previously withheld. Under Pub. Contract Code 7107, a prime contractor must pay to subcontractors retention amounts kept by the prime contractor within seven days after the public entity owner of the construction project pays retention amounts it has kept from the prime contractor. Failure to meet this deadline makes the prime contractor liable for 2% per month penalty interest to the subcontractors. In this case, the public entity owner withheld retention sums from the progress payments it made to the prime contractor during the first half of the project, but during the second half of the project, while still keeping the retention amounts from the first half of the project, the public entity owner paid the prime contractor full progress payments without taking any retention. This decision holds that the prime contractor was not obliged to pay subcontractors retention amounts it had withheld from them during the first half of the project. As to that part of the project, the public entity had not yet paid retentions to the prime contractor and so section 7107 was not triggered.
California Court of Appeal, Second District, Division 1 (Rothschild, P.J.); March 23, 2016; 2016 WL 1158293