Retainage, explained
Retainage is the 5% to 10% of each pay application an owner or GC holds back until the job reaches substantial completion. California caps public-works retainage at 5%, Texas allows up to 10% on private work, and Florida steps down from 10% to 5% after 50% completion. It releases once the punch list closes and lien waivers are signed.
What is retainage?
Retainage, also called retention, is the slice of every pay application the owner or general contractor holds back until the job is substantially complete. The rate is set by the contract and usually runs 5% to 10%. On a $500,000 contract at 10%, $50,000 stays with the owner until the punch list closes and the final lien waivers land.
The reason it exists is pressure. Retainage gives the paying party cash on hand to finish the job if a contractor walks off, skips warranty work, or leaves defects behind. The cost lands on the other end of the chain: a sub billing $100,000 on a 10% retainage job is banking $90,000 that month, not $100,000.
How much retainage is normal?
Five percent is the most common rate on commercial work. Ten percent shows up more on smaller jobs, or on subcontract tiers where the GC wants a bigger cushion. Public projects are usually capped by state statute rather than left to negotiation.
Three examples worth knowing: California holds 5% on most public works. Texas allows up to 10% on private commercial contracts and 5% on public projects. Florida caps retainage at 10% before a project hits 50% completion, then drops the cap to 5% for everything billed after. Read your contract first. The statute only fills the gap the contract leaves open.
When do you get retainage back?
On most jobs, retainage releases at substantial completion, once the punch list is closed, final lien waivers are signed, and any closeout paperwork the contract requires is turned in. Many state prompt-pay statutes then put a clock on the payer: often 30 to 45 days to release the held funds once those conditions are met.
Retainage can also come back early. A common contract clause lets the rate step down, say from 10% to 5%, once the project crosses a completion milestone (50% billed is typical). Some states require a partial release on long jobs even without a contract clause. Either way, someone has to ask for it in writing. It rarely happens on its own.
Is retainage the same as retention?
Yes. Retainage and retention name the same withheld money. U.S. commercial contracts and the AIA pay-application forms mostly use "retainage." UK and Commonwealth contracts, and a fair number of U.S. subcontractors, say "retention." The math underneath is identical: a percentage of each pay application held back until the release conditions in the contract (or the statute) are met.
How does retainage affect subcontractors?
Retainage flows down. Most GCs withhold the same rate from subs that the owner withholds from the GC, and in states like California the flow-down is required by statute: the GC can't hold more from a sub than the owner holds from the GC.
The practical effect for a sub is cash flow, not profit. The money isn't lost, but it isn't liquid either, and it sits on the books as a separate receivable until release conditions clear. The single most common bookkeeping mistake is treating retainage as collected once it's billed. It's income you have a right to, not cash in the account, until the check for it actually arrives.
Retainage caps: five states compared
Retainage rules are set state by state. These five give a sense of the range; check your own state's statute and your contract before assuming either one applies.
| State | Typical retainage cap |
|---|---|
| California | 5% on most public works; private contracts set their own rate. |
| Texas | Up to 10% on private commercial work; 5% on public projects. |
| Florida | 10% before 50% completion, 5% after, on most public projects. |
| New York | 5% on public works under State Finance Law § 139-f. |
| Arizona | Capped at 10% until 50% completion, then capped at 5% on the remainder. |
These are the same figures used in LienDone's retainage calculator, kept consistent here on purpose.
Do the math on your own project
Retainage FAQ
It's the percentage of each pay application, typically 5% to 10%, that an owner or GC withholds until the project reaches substantial completion. It exists to give the paying party a financial cushion if the work turns out incomplete or defective.
Retainage tracked. Waivers signed. One dashboard.
LienDone doesn't touch retainage math, that's what the calculator above is for. What it does: send the lien waiver, get it signed in two minutes, and keep every signed PDF where you can find it before the retainage check goes out.
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