Alabama retainage

Who and what this applies to

Private construction within Alabama Code chapter 8-29. Section 8-29-7 excludes residential homebuilders, residential improvements of 16 or fewer units, contracts/subcontracts/sub-subcontracts of $10,000 or less, and state or local government contracts. The retention provisions in §8-29-3(h)–(l) also exclude projects for or by PSC-regulated electric utilities.

Thresholds and scope

10% cap until 50% completion, subject to the stated scope.

The rules

• Under §8-29-3(i)–(k), retainage is capped at 10% of properly performed work and eligible stored materials, with no further retainage after 50% completion. Downstream percentages also cannot exceed the applicable upstream percentage under (f)–(g). Source
• Under §8-29-3(l), the owner releases retainage no later than the earlier of 60 days after completion of the contractor’s defined work or 60 days after substantial completion, with all necessary certificates of occupancy issued in either case. Substantial completion has the definition in (l)(2). Source
• The cap does not eliminate contractual or statutory withholding for unperformed or unearned work. Excess retention under the cited provisions bears 1% monthly interest. Source

Primary sources

• Ala. Code §8-29-3(f)–(n)
• Ala. Code §8-29-7

Sources reviewed 2026-09-30. This guide covers the projects and rules stated above.

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