Retainage

What is retainage?

Retainage (also called retention) is a percentage of each progress payment the owner or GC withholds until the project reaches a defined milestone, often substantial completion or final punch list sign-off.

Retainage protects the paying party against incomplete work, liens, and warranty callbacks. It also ties up your cash on long jobs.

Retainage vs statutory holdback

On some jobs you face both contractual retainage and statutory holdback under lien statutes. Track them separately in job costing.

Typical retainage rates

Commercial contracts often withhold 5–10% from each draw until:

• Substantial completion
• Final inspection
• Lien waivers and closeout documents are delivered

Public projects may cap retainage by statute. Read the payment terms before you bid.

Cash flow impact

Ten percent retainage on a six-month job means you finance that slice until release. When you use subcontractors, decide whether you pass retainage down or absorb it yourself.

Model retainage in your cash flow forecast before you accept the contract.

Releasing retainage

Release usually requires:

• Completed scope of work
• Signed lien waivers
• Warranty documents and as-builts if specified

Send closeout packages promptly. Owners rarely release retainage without paperwork.

On the job

Negotiate retainage rate and release triggers upfront.

Do not commingle retainage with operating cash.

Track retainage owed from owners and owed to subs on the same job.

Retainage is normal on commercial work. Price and schedule for it like any other cost of doing business.