Retainage Explained: What Can Be Withheld and When It Is Released

2026-09-30

Retainage is the portion of each progress payment that an owner or contractor withholds until the work is finished, as security that the job gets done and corrected. It is one of the most common points of friction in construction payment.

How it typically works

• A percentage (commonly 5% or 10%) is held back from each payment.
• Many states cap that percentage by statute, often differently for public and private work.
• Many states also set a deadline to release retainage after completion or acceptance.

Why the release deadline matters

On a private California project, Civil Code § 8812(a) requires an owner who withholds retention from a direct contractor to pay it within 45 days after completion of the work of improvement (a release deadline, not a cap). The state page for California links the statute, with the review date, so you can confirm the current text.

Withholding too much, or for too long, can itself violate a state's retainage or prompt payment law. Confirm the cap and the release rule for your project type.