Authorization and Procedure for Creation and Maintenance of Escrow Accounts by State or Political Subdivisions

  1. Law
  2. Georgia Code
  3. Contracts
  4. Contracts for Public Works
  5. Retention of Contractual Payments and Creation of Escrow Accounts on Contracts for Installation, Improvement, Maintenance, or Repair of Water or Sewer Facilities
  6. Authorization and Procedure for Creation and Maintenance of Escrow Accounts by State or Political Subdivisions

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  1. In lieu of the retained amounts provided for in Code Section 13-10-81, any department, agency, or instrumentality of the state or any political subdivision of the state is authorized to insert a clause in the specifications of all contracts provided for in Code Section 13-10-81, providing for an alternate procedure for the maintenance of an escrow account in an amount at least equal to the amount authorized to be retained by the contract.
  2. Any such escrow agreement entered into pursuant to this Code section must contain as a minimum the following provisions:
    1. Only state or national banks chartered within the State of Georgia may serve as an escrow agent;
    2. The escrow agent must limit the investment of funds of the contractor held in escrow in lieu of retained amounts provided for in Code Section 13-10-81 to negotiable certificates of deposits issued by any state or national bank in the State of Georgia (including, but not limited to, certificates of deposit issued by the bank acting as escrow agent) registered in the name of the escrow agent as such under escrow agreement with the contractor;
    3. As interest on certificates of deposit held in escrow becomes due, it shall be collected by the escrow agent and paid to the contractor;
    4. The escrow agent shall promptly acknowledge to the appropriate fiscal officer the amount and value of the escrow account held by the escrow agent, and any additions to the escrow account shall be reported immediately. Withdrawals from the escrow account shall only be made subject to the written approval of the fiscal officer of the department, agency, or instrumentality of the state or any political subdivision entering into the contract;
    5. Upon default or overpayment of any contract subject to the procedure provided for in this Code section and upon the written demand of the fiscal officer provided for in paragraph (4) of this subsection, the escrow agent shall within ten days deliver a certified check to the appropriate fiscal officer in the amount of the escrow account balance relating to the contract in default;
    6. The escrow account may be terminated upon completion and acceptance of the contract as provided for in Code Section 13-10-81;
    7. All fees and expenses of the escrow agent shall be paid by the contractor to the escrow agent and, if not paid, shall constitute a lien on the interest accruing to the escrow account and shall be paid therefrom;
    8. The escrow account shall constitute a specific pledge to the state or any political subdivision and the contractor shall not, except to his or her surety, otherwise assign, pledge, discount, sell, or transfer his or her interest in said escrow account, the funds of which shall not be subject to levy, garnishment, attachment, or any other process whatsoever; and
    9. The form of the escrow agreement and provisions thereof in compliance with this Code section, as well as such other provisions as the appropriate fiscal officer shall from time to time prescribe, shall be subject to written approval of the fiscal officer. The approval of the escrow agreement by the appropriate fiscal officer shall authorize the escrow agent to accept appointment in such capacity.
  3. The department, agency, or instrumentality of the state or political subdivision of this state shall not be liable to the contractor or his or her surety for the failure of the escrow agent to perform under the escrow agreement or for the failure of any bank to honor certificates of deposit issued by it which are held in the escrow account.

(Ga. L. 1975, p. 1045, §§ 2, 3; Code 1981, §13-10-21; Code 1981, §13-10-82, as redesignated by Ga. L. 2001, p. 820, § 1.)

OPINIONS OF THE ATTORNEY GENERAL

Discretion conferred by statute.

- O.C.G.A. §§ 13-10-20 and13-10-21 (see now O.C.G.A. §§ 13-10-80 and13-10-81) confer upon appropriate administrator of contracting agency discretion to determine if retainage is to be used and amount of such retainage. The administrator has further discretion to specify method of retainage to be utilized. 1981 Op. Att'y Gen. No. 81-58.

Agency must be party to contract in order to require use of retainage method.

- When director of Environmental Protection Division (EPD) is involved in administration of construction grants for certain projects, but EPD is not a party to the contracts, the director would be unable to require use of escrow account or any other method of retainage. 1981 Op. Att'y Gen. No. 81-58.


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