(1) An owner, contractor, subcontractor, or supplier may withhold as retainage an amount equal to not more than five percent of the contract price of the work completed for private construction projects. Partial payment allowed under this subsection is not acceptance or approval of some of the work or a waiver of defects in the work.

(2) The owner, contractor, subcontractor, or supplier shall pay interest at the rate of one percent per month on the final payment due the contractor, subcontractor, or supplier. The interest shall commence 30 days after the contractor, subcontractor, or supplier has completed and the owner has accepted the work under the contract for construction for which the final payment is due. The interest shall run until the date when final payment is tendered to the contractor, subcontractor, or supplier.

(3) When the contractor, subcontractor, or supplier considers the work that the contractor, subcontractor, or supplier is contracted to perform to be complete, the contractor, subcontractor, or supplier shall notify the party to whom the contractor, subcontractor, or supplier is responsible for performing the construction work under the contract.

(4) The party shall, within 15 days after receiving the notice, either accept the work or notify the contractor, subcontractor, or supplier of work yet to be performed under the contract or subcontract. If the party does not accept the work or does not notify the contractor, subcontractor, or supplier of work yet to be performed within the time allowed, the interest required under this subsection shall commence 30 days after the end of the 15-day period. A contractor may provide notice under this subsection to an owner or upper-tier contractor for release of retainage due to a subcontractor or supplier whose work is complete. If an owner or upper-tier contractor does not accept the subcontractor's or supplier's work or does not notify the contractor of work yet to be performed by the subcontractor or supplier within 15 days after receiving the notice, the interest required under this section shall commence 30 days after the end of the 15-day period. A contractor's obligation to pay interest to a subcontractor or supplier under this section does not begin until the contractor has received payment for the subcontractor's or supplier's retainage provided that the contractor has submitted the subcontractor's or supplier's retainage request to the owner or upper-tier contractor within 30 days after receipt from the subcontractor or supplier.

(5) This section does not apply to single-family residential construction less than 12 units.