What is retainage in construction?
Retainage (or retention) is a percentage of each progress payment that the owner withholds until the project is substantially or finally complete. It provides security that the contractor will finish the work and correct defects. Typical rates are 5–10%.
Is retainage capped by law?
In many states, yes. Numerous state prompt-payment and retainage statutes cap retainage (commonly at 5% or 10%) and require it to be reduced or released once the project reaches 50% completion or substantial completion. Public projects often have their own statutory retainage limits.
When is retainage released?
Retainage is generally released at substantial or final completion, once punch-list work is done and any required lien waivers are delivered. Some contracts release a portion at 50% completion. Wrongful withholding past the statutory deadline can trigger interest under prompt-payment laws.
Can I still lien for unpaid retainage?
Yes. Retainage is money you have earned but not yet been paid, so it is recoverable through a mechanic's lien or bond claim if it is not released when due, subject to your state's lien deadlines.