California Court of Appeal Clarifies Definition of Retention Payments Under Civil Code § 3260
Yassin v. Solis, 184 Cal. App. 4th 524 (Cal. Ct. App. 2010)
By: Carlo L. Rodes and Brett D. Bissett, K&L Gates, Los Angeles
In this case, the court of appeal set forth a definition for retention that applies whenever a contractor seeks an award of penalties for improperly withheld retention under a California prompt payment statute.
The plaintiff-contractor, Diaa Yassin was hired by the defendants-owners, (collectively “Solises”), to improve the Solises’ home. Under the contract, Yassin was to receive a series of payments throughout various stages of construction and the last payment was to be made upon completion of the work and before occupancy. Yassin ultimately sued the Solises for money allegedly owed under the contract. Although the court addressed other matters, a principal issue was the status of the final two payments of $15,000 and whether those amounts qualified as retention payments under California Civil Code § 3260. Under section 3260, if an owner fails to make retention payments within the time prescribed by that section, a contractor may recover a penalty in the amount of 2 percent per month on the improperly withheld amount plus attorney fees.