Kentucky retainage

Who and what this applies to

Covered public and private construction under KRS 371.400–.425; residential construction is excluded. Section 371.425 excludes the specified USDA Rural Utilities Service borrower/funding projects and KRS chapter 278 facilities. The act generally applies to contracts entered after June 26, 2007; for contracts entered on or after June 27, 2025, conflicting KRS 367.620–.628 provisions control.

Thresholds and scope

10% before the midpoint; total retained balance capped at 5% after 51% completion.

The rules

• KRS 371.410 permits retention up to 10% of an undisputed payment until 50% completion. Once 51% is complete, total retainage may not exceed 5% of the total contract amount. Source
• Retainage is released within 30 days after substantial completion, less up to 200% of the reasonably estimated value of incomplete work. Substantial completion requires the statutory written certification, approvals and documents and readiness for intended beneficial use; partial occupancy alone does not necessarily establish it. Source
• Within 15 business days after the owner releases retainage to the contractor, the contractor releases the subcontractors’ proportional shares of that retainage. Source

Primary sources

• KRS 371.410
• KRS 371.425, effective June 27, 2025

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

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