Retainage
Retainage is a percentage of each payment to a contractor that the owner holds back until the work, or a stage of it, is complete.
Retainage is a percentage of each payment to a contractor that the owner holds back until the work, or a stage of it, is complete.
Definition
Under many construction contracts, the owner pays progress payments less an agreed holdback. That retained amount is released later, often at completion, once conditions in the contract are met.
A plain example
Illustrative example: a contract allows a held-back percentage on each monthly payment. If a payment is due and the holdback is 10 percent, 10 percent is kept and the remainder is paid. The figure here is only for illustration and is not a standard.
Why it matters
It gives the owner some security that the work will be finished and defects fixed, and it affects the contractor's cash flow.
Common confusion
Retainage is not a deposit and not a penalty. It is the contractor's own earned money, held until conditions are met. Some places regulate how much may be held and for how long.
On a project
Read the contract on the percentage, when it is reduced or released, and what local law says.
Quick answers
- Is retainage the same as a deposit? No. It is withheld from payments for work already done.
- When is it released? As the contract and local law say, often after completion or at set milestones.
- Is there a legal limit? Some places set limits. Check local rules.
Related terms
Always check the project drawings and specification, and confirm requirements with the engineer of record and the local authority.
Questions people ask
Is retainage the same as a deposit?
No. It is withheld from payments for work already done.
When is it released?
As the contract and local law say, often after completion or at set milestones.
Is there a legal limit?
Some places set limits. Check local rules.
Sources and further reading
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