Retainage (or retention) is the part of each progress payment the owner keeps until the end of the job, as security for completion, defects and unpaid lower tiers. It is earned money. At 10% on a $10 million contract, up to $1 million of it sits with the owner until the contract lets it go. This guide expands the payment section of our construction contract review checklist.
How retainage works
The owner withholds a percentage from each pay application, you withhold from your subcontractors, and the money comes back at substantial or final completion. Four terms decide what it costs you:
- The rate, and what it applies to.
- The step-down: whether the rate drops or stops once the job is half complete.
- The release trigger: the event that starts the clock on getting it back, and how long the owner then has.
- What rides on top: punch-list holdbacks, withholding for claims, warranty holds.
AIA's general conditions leave the rate to the rest of the contract (A201-2017 § 9.3.1). Once the Certificate of Substantial Completion is accepted and any surety consents, the owner pays the retainage for that work, adjusted for incomplete or nonconforming work (§ 9.8.5).
On federal work, the contracting officer may retain up to 10%, but only when progress is unsatisfactory, and must pay it promptly once the contract is complete (FAR 32.103).
Statutory limits in 11 states
Many states cap retainage or set deadlines for releasing it, and the rules often differ between public and private work. Some also bar contracting around them: California's public works rules and Pennsylvania's private-work statute (CASPA) both forbid waivers.
Current as of October 2026. Statutes change; confirm before relying on it.
| State and statutes | Public work | Private work |
|---|---|---|
| California Pub. Cont. Code § 7201, § 7107; Civ. Code § 8811, § 8812 |
5% of each payment and of the contract price, unless the agency finds before bidding that the project is "substantially complex." Release within 60 days after completion (90 days for some state-agency contracts); up to 150% of a disputed amount may be held. | Contracts entered on or after Jan. 1, 2026: 5% of each payment and of the contract price. Excludes residential projects that aren't mixed-use and are four stories or less. Release within 45 days after completion. |
| Texas Gov't Code § 2252.032; Prop. Code § 53.101 |
Contracts of $400,000 to under $5 million: 10%. $5 million or more: 5% (dams and some water projects excepted). Contracts under $400,000 and TxDOT highway contracts fall outside the statute. No retainage after the work is complete, including during the warranty period. The contract must say when the project is substantially complete and when retainage is released. | The lien statute requires the owner to reserve 10% of the contract price during the work and for 30 days after completion, as a fund for lien claimants. |
| Florida Fla. Stat. § 255.078, § 255.077, § 218.735, § 715.12 |
State (except FDOT) and local contracts over $200,000: 5% of each progress payment. Within 20 business days after the punch list is developed, the owner pays the balance, including retainage, less 150% of the cost to complete the list. | No percentage cap in § 715.12. Retainage is due within 14 days after the punch list is substantially complete, following certified substantial completion, a certificate of occupancy or the owner's possession; late amounts bear interest. |
| New York State Fin. Law § 139-f; Gen. Mun. Law § 106-b; Gen. Bus. Law § 756-c |
5% of each progress payment, or up to 10% if the owner doesn't require full performance and payment bonds (up to 20% on small state contracts where bonds are waived). At substantial completion, the owner pays the balance less twice the value of the remaining items. | Contracts entered on or after Nov. 17, 2023, for projects of $150,000 or more (most smaller residential work excluded): 5% of the contract sum. Release within 30 days after final approval of the work; 1% a month interest if late. |
| Illinois 30 ILCS 550/1 (as amended by P.A. 104-0168); 815 ILCS 603/20 |
Local governments, where the contractor furnishes the required bond: 10% of each payment until 50% complete, then reduced so no more than 5% is held (since Jan. 1, 2024). Contractors' retainage on subs is capped the same way. From June 1, 2027, the cap also covers the State (except IDOT), and state agencies other than the Tollway may retain on contracts entered from that date only when progress is unsatisfactory. | 10% of each payment until 50% complete, then reduced so no more than 5% is held. Excludes single-family homes and residential buildings of 12 or fewer units. |
| Pennsylvania 62 Pa.C.S. § 3921, § 3941; 73 P.S. § 509 |
Contracts over $50,000 (PennDOT excluded): 10% until 50% complete; then half is returned and later withholding is capped at 5% of completed work (DGS: 6%, then 3%). Final payment within 45 days of the substantial-completion certificate, less 1.5 times the cost of remaining minor items. | CASPA sets no percentage cap. Retainage must be paid within 30 days after final acceptance. A contractor or sub that substantially completes its scope can post a 120% maintenance bond to release its retainage early. |
| New Jersey N.J.S.A. 40A:11-16.3; 18A:18A-40.3; 2A:30A-2 |
Local-government contracts over $100,000: 2% of each partial payment if the contractor chooses withholding over depositing bonds; release within 45 days of final acceptance. School boards: 5% without a performance bond; with one, 2% while the balance exceeds $500,000, then 5%. State agencies follow separate statutes. | No percentage cap in the Prompt Payment Act. An approved billing for retainage is due within 30 days of the billing date. |
| North Carolina G.S. 143-134.1; G.S. 22C-4 |
None on projects under $150,000. Above that, 5%; at 50% complete, with the surety's consent, no further retainage if performance is satisfactory, though the owner may keep 2.5% total through completion. Release within 60 days after substantial completion or beneficial occupancy. | No owner-level cap in Chapter 22C. A GC's retainage on a sub can't exceed the owner's initial percentage. |
| Ohio R.C. 153.12, 153.13; 4113.61 |
Labor is paid at no less than 96% of approved estimates, so no more than 4% of labor is held, with no step-down at 50% (amended Sept. 30, 2025, from 8% until the job was half complete and nothing after; H.B. 96 has no transition rule, so check which rule governs a contract signed before then). ODOT highway work is excluded. Release within 30 days after the major portion is substantially complete and in use, less what final completion needs; the rest within 30 days after final completion. | No owner-level cap in R.C. 4113.61. Final retainage must reach subs within 10 days of receipt, or it bears 18% annual interest. |
| Washington RCW 60.28.011; RCW 60.30 |
5% of moneys earned, held in trust for claims and state taxes; the contractor may post a bond instead. Release 60 days after completion of all contract work, subject to the prevailing-wage, lien and tax provisions. | 5% of the contract price of work completed. Owners and GCs must accept a qualifying retainage bond; 1% a month interest starts 30 days after the work is complete and accepted. Excludes single-family residential under 12 units. |
| Arizona A.R.S. § 41-2576, § 34-221, § 32-1182 |
State and local: 10% until 50% complete; then half is released on request if progress is satisfactory, and no more than 5% of later payments is held. Release within 60 days after completion and acceptance; substitute securities allowed. | "A reasonable amount for retention," with no percentage cap. At substantial completion a release billing is deemed approved after 14 days without a written objection; the owner may hold up to 150% of the cost of unfinished work. |
The table covers the main statewide statutes. Agency rules, funding conditions and local requirements can add more, and some states yield to conflicting federal grant requirements on federally funded work (Florida and North Carolina, for example).
What to check before you sign
- The rate against the project state's cap. A 10% clause on a California private job contracted on or after January 1, 2026 is over the 5% cap, and the statute awards attorney's fees to whoever prevails in an action to enforce it.
- No step-down. The statutes in Arizona, Illinois, North Carolina and Pennsylvania reduce or stop retainage at 50% completion for the work they cover. If the contract holds the full rate to the end, ask for the same.
- A release trigger you don't control. Release on final completion of the whole project, the owner's "final acceptance" in its sole discretion, the lender's sign-off, tenant move-in, or every trade's closeout documents can push your money months past substantial completion of your own work.
- Holdbacks stacked on retainage. A clause withholding 200% of the cost to complete punch-list items ties up cash at double the value of the work. Compare the statutes: 150% in California (disputed amounts), Florida public work and Arizona private work; 1.5 times in Pennsylvania public work; twice the value of the remaining items in New York public work; up to 2.5 times in North Carolina public work.
- Retainage on money that isn't at risk. Fee, general conditions, and bond and insurance premiums. Florida bars state and local public owners and their contractors from holding retainage to secure premiums under a consolidated insurance program.
- Warranty holds. Texas public owners can't hold retainage after the work is complete, including during the warranty period, and on Florida public work, warranty items can't hold up final retainage. If the owner wants warranty security, offer a warranty or maintenance bond.
- A mismatch with your subcontracts. California, Texas public work and North Carolina cap what you hold from a sub at the owner's percentage. Statutes also give you days, not weeks, to pass retainage down once you receive it: 7 on California public work, 10 on California private work and in Ohio and New Jersey, 14 under CASPA.
What to negotiate
In rough priority order:
- A rate of 5% or the statutory cap, whichever is lower.
- No further retainage after 50% completion if you aren't in default.
- Release within a fixed number of days after substantial completion of your work, or of each building or phase, not final completion of the project.
- Early release for trades that finish early. North Carolina's public-work statute requires line-item release for early-finishing trades such as structural steel, piling, caisson and demolition.
- Any punch-list holdback capped at 150% of the reasonable cost to complete, in place of retainage, not on top of it.
- The right to substitute a retainage bond or escrow, with interest to you.
- Interest on retainage paid late, and subcontract terms that mirror the prime.
Illustrative language (our drafting; have counsel adapt it to your state):
Owner may retain five percent (5%) of each progress payment until the Work is fifty percent (50%) complete; thereafter, if Contractor is not in default, Owner shall withhold no further retainage. Within thirty (30) days after Substantial Completion of the Work, or of any separately priced portion of it, Owner shall pay all retainage for that Work, less one hundred fifty percent (150%) of the reasonable cost to complete the punch-list items, which amount is withheld in place of, and not in addition to, retainage. No retainage shall be withheld on bond or insurance premiums. Contractor may substitute a retainage bond from an admitted surety. Retainage not paid when due bears interest at [rate] per month.
How RivetData flags this
Payment and termination is one of the seven review areas RivetData sweeps on every contract. The sample review on our homepage flags one of the red flags above: 200% of the cost to complete withheld at substantial completion.
Advisory output that a person confirms, not legal advice. See how the review works →
FAQ
What is a typical retainage percentage?
There is no national standard; the contract sets it, within any statutory limit. The caps in our table cluster at 5% and 10%. California, Florida public work, New York private work and Washington cap retainage at 5%; Texas caps public contracts between $400,000 and $5 million at 10%; Arizona, Illinois and Pennsylvania allow 10% until the job is half complete, then less.
When does the owner have to release retainage?
When the contract says, within any statutory deadline. California owners generally have 60 days after completion on public work and 45 days on private work. New York private owners have 30 days after final approval, and Pennsylvania private owners 30 days after final acceptance. AIA A201-2017 ties release to acceptance of the Certificate of Substantial Completion.
Can the owner keep retainage through the warranty period?
Not on Texas public work, where retainage can't be held after the work is complete, including during the warranty period, and on Florida public work, warranty items can't hold up final retainage. Elsewhere it depends on the contract and on any statutory deadline for releasing retainage after completion. If the owner wants warranty security, offer a warranty or maintenance bond instead.
Can I hold more retainage from a subcontractor than the owner holds from me?
Often not. California, Texas public work and North Carolina cap a GC's retainage on subs at the owner's percentage, and Washington caps it at 5%. Check the project state's rule before you set subcontract terms.
Related guides
- Construction contract review checklist for general contractors
- Pay-if-paid vs. pay-when-paid clauses
- Liquidated damages in construction contracts
- No-damages-for-delay clauses
Sources
- California: Pub. Cont. Code § 7201; Pub. Cont. Code § 7107; Civ. Code § 8811 (added by SB 61, 2025); Civ. Code § 8812; Civ. Code § 8814.
- Texas: Gov't Code §§ 2252.031–.033 (as amended by H.B. 692, 2021); Prop. Code § 53.101.
- Florida: Fla. Stat. § 255.072, § 255.077, § 255.078, § 218.735, § 715.12.
- New York: State Fin. Law § 139-f; Gen. Mun. Law § 106-b; Gen. Bus. Law § 756, § 756-c (as amended by L. 2023, ch. 657).
- Illinois: 30 ILCS 550/1 (local-government cap added by Public Act 103-0570, effective Jan. 1, 2024); Public Act 104-0168 (HB 1224, effective June 1, 2027, amending 30 ILCS 550/1); 815 ILCS 603/5, 603/20.
- Pennsylvania: 62 Pa.C.S. § 3902, § 3921, § 3941; Contractor and Subcontractor Payment Act, 73 P.S. §§ 503, 509.
- New Jersey: N.J.S.A. 40A:11-16.1, 40A:11-16.3; 18A:18A-40.3; 2A:30A-2.
- North Carolina: G.S. 143-134.1; G.S. 22C-4.
- Ohio: R.C. 153.12 (prior version: Oct. 3, 2023), 153.13, 153.14; R.C. 4113.61.
- Washington: RCW 60.28.011, 60.28.021; RCW 60.30.010–.030.
- Arizona: A.R.S. § 41-2576; § 34-101, § 34-221; § 32-1182.
- Federal: FAR 32.103, Progress payments under construction contracts.
- AIA Document A201-2017, §§ 9.3.1, 9.8.5 (paraphrased).
This guide is general information, not legal advice. Retainage law varies by state and project type and changes over time. Have a construction attorney licensed in your project's state review your contract before you rely on it.