KRS 371.410: Retainage that may be withheld -- Release of retainage -- Substantial

completion.

(1) Notwithstanding any provision of the Kentucky Revised Statutes to the contrary,

until fifty percent (50%) of the construction project has been completed in

accordance with the contract, a contracting entity, contractor, or subcontractor may

withhold no more than ten percent (10%) retainage from the amount of any

undisputed payment due, and retainage held after fifty -one percent (51%) of the

construction project has been completed shall not be more than five percent (5%) of

the total contract amount.

(2) Within thirty (30) days after substantial completion of a construction project, the

contracting entity or contractor shall release the retainage less an amount equal to

two hundred percent (200%) of the contracting entity's reasonably estimated cost of

the balance of any contractor's or subcontractor's contractually obligated, yet

uncompleted, work remaining. The contracting entity's agent shall determine the

reasonably estimated cost due under this subsection. The contracting entity,

contractor, and any subcontractor with work yet to be completed shall mutually

agree with the schedule for completion of the work necessary for release of final

payment. Within fifteen (15) business days after the retainage has been released by

the contracting entity to the contractor, the contractor shall release to the

subcontractors their proportional shares of the retainage. For purposes of this

subsection, "substantial completion" is the point at which, as certified in writing by

the contracting entity, a project is at the level of completion, in strict compliance

with the contract, where:

(a) Necessary approval by public regulatory authorities has been given;

(b) The owner has received all required warranties and documentation; and

(c) The owner may enjoy beneficial use or occupancy and may use, operate, and

maintain the project in all respects, for its intended purpose.

Partial use or occupancy shall not necessarily result in the projec t being deemed

substantially complete and shall not be evidence of substantial completion.

(3) If a contracting entity, contractor, or subcontractor fails to pay retainage, if any,

pursuant to the terms of a contract or as required in this section, the con tracting

entity, contractor, or subcontractor shall pay interest to the contractor or

subcontractor to whom payment was due, beginning on the first business day after

the payment was due, at the rate of twelve percent (12%) per annum.