What Is Retainage in Construction? How Much, How Long, How to Get It Back
A percentage of every progress payment, usually 5 to 10 percent, that the owner keeps back until the work is finished and accepted. It is money you have already earned and have not yet been handed.
Also called Retention, Retainage withheld, Retainage receivable.
Work out the retainage on your job Enter the contract value and the percentage. It gives you the held back amount, the per invoice deduction and the release total. Free, no signup.What it is
On a job with progress payments, the owner does not pay each invoice in full. A fixed percentage of every payment is held back and pooled, and that pool is released at the end when the work is complete and accepted. That held back pool is retainage. Outside the United States and on some American public work it is called retention, and they are the same thing.
It is not a discount, not a deposit and not a fee. It is your money, earned, sitting in someone else's account as security that you will come back and finish.
How much
Five to ten percent is the normal range. Ten percent is the traditional figure and is still common on private residential work. Five percent is increasingly the norm on larger and public jobs, and many contracts step down from ten to five once the job is half complete.
Many states cap retainage by statute, and a good number cap it lower on public projects than private ones. Some also require the owner to hold it in a separate or interest bearing account and to pay the interest to you. The cap is a state law question, not a negotiating question, and a contract clause above the cap does not survive it.
Why this is the most commonly lost money on a job
Retainage is the last money to move and by the time it is due everybody has moved on. The crew is on another site, the paperwork is in a different folder, and the release depends on two things nobody wrote down: a punch list that was agreed verbally and a completion date that was never formally declared.
Then the lien deadline runs. In most states the clock that protects you starts at last furnishing or at substantial completion, not at the day the retainage was supposed to be paid, so it is entirely possible to still be politely waiting for retainage after the only real leverage you had has expired.
- Put the retainage percentage, the release trigger and the release date in the contract, in writing, before the first invoice.
- Show retainage as its own line on every single invoice, so the running total is never a surprise.
- Get the punch list in writing the day it is walked, with a date beside each item.
- Diary your state's lien deadline from last furnishing, not from the promised release date.
Getting it released
The release almost always runs against paperwork rather than against a conversation. The owner or the general will ask for final lien waivers from you and from everyone below you, sometimes a consent of surety, sometimes a warranty letter, and will want the punch list signed off.
Assemble that package before you ask, not after. A retainage request that arrives complete gets paid on the next cycle. One that arrives short starts a round trip that costs a month each time.
If it stalls, most states have a prompt payment statute with a deadline and interest attached, and a notice of intent to lien is the normal next step before an actual filing.
What is actually being held
The percentage sounds small until it is added up across a year of progress billing.
| Contract value | At 5 percent | At 10 percent |
|---|---|---|
| $10,000 | $500 | $1,000 |
| $25,000 | $1,250 | $2,500 |
| $50,000 | $2,500 | $5,000 |
| $100,000 | $5,000 | $10,000 |
| $250,000 | $12,500 | $25,000 |
| $500,000 | $25,000 | $50,000 |
Run three jobs of that size at once and the held back total is a payroll.
Where you will see the word
Retainage shows up under different labels depending on whose form you are filling in.
- Retainage this period
- The amount held back out of this one invoice.
- Retainage to date, or retainage held
- The running total held back across every invoice so far.
- Less retainage
- The subtraction line on a progress invoice. The number under it is what you are actually being paid today.
- Retainage receivable
- The accounting name for the same pool once it is on your books as an asset. It is revenue you have recognized and cash you do not have.
- Release of retainage
- The final payment that empties the pool, usually tied to a final lien waiver.
La misma explicación, línea por línea, con las palabras en inglés que aparecen en el formulario. Retención y retainage, en español.
What to do with it
Questions people ask
Is retainage legal?
Yes, and it is standard practice on anything billed in progress payments. What is regulated is how much, how long and sometimes where it must be held, and those limits are set state by state.
How long can retainage be held?
Until the work is complete and accepted, which the contract should define precisely and usually does not. Many states attach a deadline once substantial completion or final acceptance occurs, commonly counted in days from that event. If your contract has no completion definition, that is the clause to fix on the next job.
Can I charge interest on retainage that is late?
Often yes. Most states have a prompt payment act covering public work and many cover private work too, with a statutory interest rate that runs automatically once the deadline passes. A contract late fee clause can also apply, but the statute does not need your contract to agree with it.
Do I hold retainage from my own subcontractors?
Most generals do, and many state statutes limit you to holding no more from a sub than is being held from you. Holding ten from a sub while the owner holds five from you is the version that gets challenged.