On May 11, 2011 Governor Brewer signed into law SB1375 which provides contractors and subcontractors with improved terms for the release of payments withheld by owners to guarantee performance and known in the construction industry as RETENTION.  A trade-off was reached to set the default statutory release of all retention when the owner is able to use the work for its intended purpose.  Retention reform has been a primary subcontractor initiative for decades.  Owners retain opt-out rights but must fully disclose prior to requesting bids. 

This new law provides that payment entitlement rights for innocent performing subcontractors will be protected and those innocent subs will continue to be paid even when the owner objects to billings and withholds payments for defective work or materials not remedied.  Protection of payment entitlement rights is a fundamental objective of AZ subcontractors.

Contractors and subcontractors also benefit from considerable additional transparency and clarification of process throughout the progressive payment cycle by requiring early disclosure of payment and billing objections and provides for progressive punch-list billings.

This payment legislation is a great achievement for the construction industry.