Relationship between owner of real property and contractor: Duties of owner; withholding payment; notice of intent to withhold payment; notice of correction of condition.
1. Except as otherwise provided in subsections 2 and 4 and subsection 4 of NRS 624.622, if an owner of real property enters into a written or oral contract with a contractor for the performance of work by the contractor, the owner must:
(a) Pay that contractor on or before the date a payment is due pursuant to a schedule for payments established in a written contract; or
(b) If no such schedule is established or if the contract is oral, pay the contractor within 21 days after the date the contractor submits a request for payment.
2. If an owner has complied with subsection 3, the owner may:
(a) Withhold from any payment to be made to the contractor:
(1) A retention amount that the owner is authorized to withhold pursuant to the contract;
(2) An amount equal to the sum of the value of:
(I) Any work or labor that has not been performed or materials or equipment that has not been furnished for which payment is being sought; and
(II) Costs and expenses reasonably necessary to correct or repair any work which is the subject of the request for payment and which is not materially in compliance with the contract to the extent that such costs and expenses exceed 50 percent of the amount withheld pursuant to subparagraph (1); and
(3) The amount the owner has paid or is required to pay pursuant to an official notice from a state agency or employee benefit trust fund, for which the owner is or may reasonably be liable for the contractor or his subcontractors in accordance with chapter 608, 612, 616A to 616D, inclusive, or 617 of NRS; and
(b) Require as a condition precedent to the payment of any amount due, lien releases furnished by the contractor and his subcontractors and suppliers. For purposes of this paragraph:
(1) If the amount due is paid with a check or is not paid concurrently with the owner’s receipt of the lien releases, the lien releases must be conditioned upon the check clearing the bank upon which it is drawn and the receipt of payment and shall be deemed to become unconditional upon the receipt of payment; and
(2) The lien releases must be limited to the amount of the payment received.
3. If, pursuant to subparagraph (2) or (3) of paragraph (a) of subsection 2 or paragraph (b) of subsection 2, an owner intends to withhold any amount from a payment to be made to a contractor, the owner must give, on or before the date the payment is due, a written notice to the contractor of any amount that will be withheld. The written notice must:
(a) Identify the amount of the request for payment that will be withheld from the contractor;
(b) Give a reasonably detailed explanation of the reason the owner will withhold that amount, including, without limitation, a specific reference to the provision or section of the contract, and any documents relating thereto, and the applicable building code, law or regulation with which the contractor has failed to comply; and
(c) Be signed by an authorized agent of the owner.
4. A contractor who receives a notice pursuant to subsection 3 may provide written notice to the owner of the correction of a condition described in the notice received pursuant to subsection 3. The notice of correction must be sufficient to identify the scope and manner of the correction of the condition and be signed by an authorized representative of the contractor. If an owner receives a written notice from the contractor of the correction of a condition pursuant to this subsection, the owner must:
(a) Pay the amount withheld by the owner for that condition on or before the date the next payment is due the contractor; or
(b) Object to the scope and manner of the correction of the condition, on or before the date the next payment is due to the contractor, in a written statement which sets forth the reason for the objection and which complies with subsection 3. If the owner objects to the scope and manner of the correction of a condition, he shall nevertheless pay to the contractor, along with payment made pursuant to the contractor’s next payment request, the amount withheld for the correction of conditions to which the owner no longer objects.
Last modified: February 27, 2006