Owners typically withhold five to ten percent of each payment as security for completion and correction of defects. Statutes in many states cap the percentage and require release on substantial completion.
Retainage flows down to subcontractors.
Alternative Names:
Retention|Contract Retainage
Why it Matters?
Statutory caps and release requirements limit what owners may withhold and when, and several states require reduction at fifty percent completion or release of the subcontractor's portion once its scope is finished regardless of overall project status. Withholding beyond statutory limits exposes the owner or general contractor to prompt payment penalties and attorney fees. Early-finishing trades are frequently owed retainage for months after their work concluded.
Frequently Confused with
Related terms
Frequently asked questions
Are there statutory limits on retainage?
What is the exposure for over-withholding?
