Jul. 18, 2019
COMMERCIAL LENDERS AND TRADE CREDITORS OF THE COMMERCIAL CONSTRUCTION INDUSTRY – A NEW COURT RULING THAT ALTERS THE RIGHTS TO RETAINAGES.
When a construction contractor defaults on a loan with its lender, and, at the same time, a surety bond issuer is required to pay on a claim for the construction project, there has been some legal uncertainty as to the entitlement to any retainages at the conclusion of the construction project when the general contractor has entered a bankruptcy proceeding. A bankruptcy judge has issued a very detailed legal opinion on the topic of priorities as to retainage which will likely be widely followed by bankruptcy courts throughout the country which is important and significant for all lenders, trade creditors and suppliers of those in the commercial construction industry and issuers of surety bonds.