SB 76 revises Kentucky law governing construction and real-estate improvement contracts, with a particular focus on retainage, payment timing, and enforceability of contract terms. For contracts involving the improvement of real estate in the amount of $2 million or more, the bill requires any retained funds to be placed in a separate escrow account at a Kentucky-authorized bank or trust company. Once deposited, those retained funds become the contractor’s separate property, and the escrow agent must invest them and release the principal and interest promptly upon written completion approval from the owner. If the owner refuses to sign the release, the contractor may sue to recover the funds.
The bill also strengthens payment protections across construction contracts. It declares void and unenforceable any contract provision that waives court access, lien rights under KRS Chapter 376, the escrow requirements created by the bill, or a contractor’s/subcontractor’s right to recover delay-related costs, time, damages, or equitable adjustments when delays are within the contracting entity’s control. It preserves arbitration, nonbinding dispute resolution, notice requirements, liquidated damages, and other reasonable contract terms. In addition, it sets payment deadlines and interest penalties: owners generally must pay undisputed amounts within 30 business days, or 45 business days for postsecondary institutions and boards of education, with 12% annual interest accruing on late payments. Contractors must then pay subcontractors within 15 business days after receiving payment, with the same interest penalty for late payment, and these rules extend down the subcontracting chain.
The bill’s impact on state law is to expand statutory protections for contractors and subcontractors on large private construction projects while leaving public contracts and projects for state and local governmental entities, school boards, and similar public bodies outside the escrow requirement. It amends KRS 371.160 and KRS 371.405 to create a more detailed framework for retainage escrow, prompt payment, and anti-waiver provisions in construction contracting. The practical effect is to limit owners’ ability to hold retainage without segregation, to speed payment flow through the contracting chain, and to provide a statutory remedy and interest penalty for nonpayment.
The general sentiment reflected in the voting history appears strongly favorable and largely uncontested: the Senate passed the bill 37-0 and the House passed it 100-0. No committee transcript excerpts were provided, and there is no recorded opposition in the materials supplied. The unanimous votes suggest broad bipartisan support for improving payment certainty and protecting contractors and subcontractors from delayed retainage and payment practices.
No specific points of contention are documented in the provided record, but the bill’s substantive changes indicate the likely policy tension: balancing owner control over retainage and contract terms against contractor and subcontractor protections for timely payment and access to escrowed funds. The bill also distinguishes between private projects and public entities, which may reflect concern about applying the escrow rule to governmental contracting systems.
SB 76 amends Kentucky’s construction and retainage statutes to require escrow of retainage on private real-estate improvement contracts of $2 million or more, to void contract clauses that waive the bill’s protections, and to impose prompt-payment deadlines and 12% interest penalties for late payments to contractors and subcontractors. It leaves public contracts and school/public-entity projects outside the new escrow requirement while preserving existing payment rules for those entities.
The bill appears to have enjoyed broad, bipartisan support and little to no visible opposition in the available record. It passed the Senate 37-0 and the House 100-0, indicating a strong consensus in favor of the bill’s payment-protection and retainage-escrow provisions.
No explicit controversy is recorded in the provided transcripts or votes. The main policy issue implicit in the bill is the shift of leverage away from owners and toward contractors/subcontractors by requiring escrow of retainage, limiting waiver clauses, and creating statutory interest penalties for late payment. Another likely point of distinction is the bill’s exclusion of public entities and school boards from the escrow requirement, while still applying prompt-payment rules to some public contracting contexts.