Construction
Retainage
A portion of the contract price withheld by the owner until the work is substantially complete, ensuring the contractor fulfills all obligations.
What is Retainage?
Retainage is a portion (typically 5–10%) of the contract price withheld by the owner from each pay application. It serves as leverage to ensure the contractor completes all work, corrects deficiencies, and fulfills closeout obligations.
How Retainage Works
- Contractor submits pay application
- Owner pays 90–95% of the certified amount
- The retainage is held in escrow
- Upon substantial completion, a portion is released
- Final retainage is released after all closeout items are complete
Retainage Release
- **Partial release** — upon substantial completion
- **Final release** — after punch list completion, final inspections, and submittal of closeout documents
State Laws
Many states have retainage laws that limit the amount and timing of retainage, especially on public projects.
Related Terms
- Pay Application
A formal request for payment submitted by the contractor to the owner, documenting work completed during a billing period.
- Punch List
A document listing work that does not conform to contract specifications, typically created near the end of a project.
- Construction Contract
A legally binding agreement between the owner and the contractor that defines the scope, schedule, price, and terms of a construction project.
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