C.R.S. § 38-46-103: Private construction contracts - retainage - conditions precedent.

(1) (a) A property owner, contractor, or subcontractor shall not withhold as retainage more than five percent of the price of the work completed under the contract or subcontract. Making a partial payment under this subsection (1) is not acceptance or approval of some of the work or a waiver of defects in the work.

(b) (I) In lieu of retainage, a subcontractor or contractor may tender a retainage bond in an amount not to exceed five percent of the money earned by the subcontractor or contractor. If the contractor or subcontractor tenders a retainage bond meeting the requirements of subsections (1)(b)(II) and (1)(b)(III) of this section, the property owner, contractor, or subcontractor shall accept the retainage bond and release the retainage covered by the retainage bond.

(II) To comply with subsection (1)(b)(I) of this section, the contractor or subcontractor must provide a retainage bond meeting the requirements of subsection (1)(b)(III) of this section and must:

(A) Faithfully perform all the provisions of the contract or subcontract; and

(B) Pay all laborers, suppliers, and subcontractors amounts owed under the contract or subcontract.

(III) The property owner or contractor may require that the authorized surety have a minimum A.M. Best, or a successor institution, financial strength rating, so long as the required minimum rating does not exceed "A-". The contractor may withhold the subcontractor's portion of the bond premium, to the extent the contractor provides a retainage bond to obtain a release of the subcontractor's retainage.

(IV) The contractor or property owner must accept a bond meeting the requirements of subsection (1)(b)(III) of this section. The subcontractor's or contractor's bond and the proceeds from the bond are subject to a claim and lien in the same manner and priority as set forth in article 22 of this title 38.

(V) When a property owner accepts a bond in lieu of retainage from a contractor, the contractor must accept a like bond from any subcontractor that submits a bond in lieu of retainage under this subsection (1)(b).

(VI) This subsection (1)(b) does not apply to a contract or subcontract that concerns property owned by a public entity. The exemption described in this subsection (1)(b)(VI) includes a contract or subcontract that results from a public-private partnership.

(2) This article 46 addresses only the amount of retainage that may be withheld by a property owner, contractor, or subcontractor and does not change, override, or invalidate any other provision in a contract, subcontract, or supply agreement. Such a provision includes, but is not limited to:

(a) A provision relating to timing of a payment, including final payment;

(b) A provision requiring satisfactory performance of the work of the contract, subcontract, or supply agreement before payment is due;

(c) A provision allowing a property owner, contractor, or subcontractor to withhold payment or deduct from any payment otherwise due any backcharges or other amounts as authorized by the contract, subcontract, or supply agreement; or

(d) A provision relating to a condition precedent that must be satisfied before a payment is due to a contractor, subcontractor, sub-subcontractor, or supplier. A condition precedent includes a requirement that:

(I) A contractor must actually receive payment from the property owner to be obliged to make payment to a subcontractor or supplier; or

(II) A subcontractor must actually receive payment from the contractor to be obliged to make payment to a subsequent subcontractor or supplier.