Retainer

What is a Retainer?

A retainer is an advance payment made by a client to secure a contractor's services for a construction project. It demonstrates the client's commitment and provides the contractor with funds to cover initial costs like materials, permits, and mobilization.

Retainers protect contractors from clients who might cancel projects after work has begun and help maintain positive cash flow.

Common Retainer Amounts

Small Projects: 25-50% of total project cost.

Large Projects: 10-25% of total project cost.

Service Work: Often a flat fee based on expected scope.

Emergency Work: May require 100% payment upfront.

Types of Retainers

Deposit Retainer

A refundable amount held until project completion, then applied to final payment.

Non-Refundable Retainer

Payment that secures services but isn't refunded if client cancels.

Materials Retainer

Specific amount to cover material costs before delivery.

Mobilization Fee

Payment to cover setup costs, equipment delivery, and site preparation.

Legal Considerations

State Laws: Some states limit retainer amounts for home improvement projects.

License Requirements: Contractors must be properly licensed to collect retainers.

Escrow Accounts: Large retainers may need to be held in separate accounts.

Written Agreements: Always document retainer terms in writing.

Best Practices

Be Transparent: Clearly explain what the retainer covers and when it's applied.

Use Contracts: Always document retainer terms in the project contract.

Provide Receipts: Give clients written confirmation of retainer payments.

Apply Fairly: Use retainer funds only for the specified project.

Return Unused Funds: Refund any unused portion if project is cancelled.

Common Mistakes

• Asking for retainers that are too large for the project size
• Not explaining how the retainer will be applied to final costs
• Mixing retainer funds with other business money
• Failing to document retainer terms in writing