1. (a)

   1. (1) In this section the following words have the meanings indicated.
   2. (2) “Payment security” has the meaning stated in § 17-101 of this article.
   3. (3) “Performance security” has the meaning stated in § 17-101 of this article.

2. (b)

   1. (1) If a contractor has furnished 100% payment security and 100% performance security in accordance with Title 17, Subtitle 1 of this article under a State procurement contract for construction, the percentage specified in the contract for retainage may not exceed 5% of the total amount.
   2. (2) In addition to retainage, a primary procurement unit and the Maryland Transportation Authority may withhold from payments otherwise due a contractor any amount that the unit reasonably believes necessary to protect the State's interest.
   3. (3) Retainage withheld by a primary procurement unit and the Maryland Transportation Authority may be deposited in an interest-bearing escrow account in accordance with § 15-108 of this article.

3. (c)

   1. (1) A contractor may not retain a percentage of payments due a subcontractor that exceeds the percentage of payments retained by the primary procurement unit or the Maryland Transportation Authority.
   2. (2) Paragraph (1) of this subsection may not be construed to prohibit a contractor from withholding any amount in addition to retainage if the contractor determines that a subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount.

4. (d)

   1. (1) A subcontractor may not retain a percentage of payments due a lower tier subcontractor that exceeds the percentage of payments retained from the subcontractor.
   2. (2) Paragraph (1) of this subsection may not be construed to prohibit a subcontractor from withholding any amount in addition to retainage if the subcontractor determines that a lower tier subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount.
5. (e) If retainage has been placed in escrow under § 15-108 of this article, each payment of retainage shall include a pro rata portion of interest earned.
6. (f) This section may not be construed to limit the application of the provisions of Title 17, Subtitle 1 of this article.

Added by Acts 2000, c. 621, § 1, eff. Oct. 1, 2000. Amended by Acts 2001, c. 29, § 1, eff. April 10, 2001; Acts 2002, c. 204, § 1, eff. Oct. 1, 2002; Acts 2004, c. 173, § 1, eff. Oct. 1, 2004.