How retainage works
On each pay application, the owner withholds a percentage of the amount earned, and the general contractor withholds the same or less from each subcontractor. The money accumulates until the contract, or the statute, says it must be released: usually at substantial completion (often with a holdback for punch-list items) and the rest at final completion.
Retainage protects the owner if work is defective or unfinished. For the contractor it's often most of the profit on the job, and the hardest money to collect because it arrives last, after the crews have moved on.
| Pay app | Earned this period | Retainage held (10% example) | Paid |
|---|---|---|---|
| 1 | $100,000 | $10,000 | $90,000 |
| 2 | $150,000 | $15,000 | $135,000 |
| 3 | $150,000 | $15,000 | $135,000 |
| Held to date | $40,000 |
An illustrative example; your contract and your state set the actual rate.
Retainage caps by state
| State | Private projects | Public projects |
|---|---|---|
| Florida | No statutory percentage cap | 5% on local government and state contracts over $200,000 |
| Texas | No contract cap we could confirm; owners must also hold a statutory 10% for 30 days after completion | 10%, or 5% on contracts of $5 million or more |
| California | 5% for contracts entered into on or after Jan 1, 2026 (with exceptions) | 5%, unless the project is found substantially complex |
| Georgia | No more than the percentage withheld under the prime contract | 5% for contracts signed on or after July 1, 2022 (with exceptions) |
| Arizona | A "reasonable amount" | 10%, then 5% after 50% complete |
Checked against each state's statutes in November 2026. Each state page lists the sections and exceptions.
When retainage must be released
Statutes also put a clock on release and add interest when it's late. A few examples:
- California private projects: the owner pays retention within 45 days of completion, the direct contractor pays subcontractors within 10 days of receiving it, and late payment carries a penalty of 2% a month.
- Arizona private projects: a retention release billing is deemed approved 14 days after the owner receives it and paid within 7 days; late payments accrue 1.5% a month.
- Florida local government projects: final payment within 20 business days after the punch list is developed, less up to 150% of the cost of listed items, with 2% a month interest when late.
- Georgia public projects: within 30 days of the invoice at substantial completion; subcontractors within 10 days of the contractor's receipt.
Read your contract alongside the statute: the contract can be stricter than the law, but not looser where the law sets a cap or a deadline.
Flow-down to subcontractors
In Texas, California, Georgia and Arizona, the retainage a general contractor withholds from a subcontractor can't exceed what the owner withholds from the general contractor. When the owner releases retainage, deadlines to pass it down follow. That's why retainage has to be tracked per subcontract, not just as one number on the prime contract.
Getting retainage released
- Know the trigger. Find the exact release event in your contract (substantial completion, final completion, owner acceptance, a certificate of occupancy) and the statute that applies.
- Close the punch list fast. Most release fights are about incomplete punch-list items; document completion with photos and sign-offs.
- Bill it separately. Submit a retainage release billing as its own pay app, with the backup the contract requires.
- Swap waivers correctly. Give a conditional final waiver with the retainage billing and the unconditional final waiver only after the money clears. See the forms in your state's lien waiver rules.
- Use the statute. If the deadline passes, cite the release deadline and the interest or penalty provision in writing.
Tracking retainage
The common failure isn't the law; it's bookkeeping. Retainage held on dozens of subcontracts, partial releases at substantial completion and different rates by contract are easy to lose in spreadsheets, and the cost shows up as retainage nobody remembered to bill.
Construction accounting software tracks retainage receivable and payable. Agenbord Build for general contractors is designed to hold it per contract and per subcontract, flag release triggers and match final lien waivers to the retainage payment. It's in early access.
This guide is general information, not legal advice. Retainage rules vary by state, by public or private project and by contract; check the statute and your contract, and ask a construction attorney before withholding or demanding release.
Sources
- Florida Statutes 218.735 - Local government construction payments and retainage
- Florida Statutes 255.078 - Public construction retainage
- Texas Government Code 2252.032 - Public works retainage (statute text)
- California Civil Code 8811 - Private retention cap (statute text)
- California Public Contract Code 7201 - Public retention (statute text)
- O.C.G.A. 13-10-80 - Georgia public works retainage (statute text)
- A.R.S. 34-221 - Arizona public works retention
- A.R.S. 32-1182 - Arizona private construction payments
Prices, plans and laws change. We review this guide periodically; check the linked sources for the latest figures. Nothing here is legal or financial advice.
