By Adam Hicks, CooperBuild AI · November 3, 2026

What is retainage in construction? Retainage is the part of each progress payment that the owner holds back from the general contractor, and that the GC holds back from its subs, until the work is complete and accepted. It usually runs 5% to 10% of each payment, and it's released at substantial or final completion once punch list, closeout documents and final lien waivers are done.

For a small or mid-size GC, retainage in construction is both money you're owed and money you owe. The owner holds yours, you hold your subs', and the two rarely line up on rate or timing. Below is how retainage works, what the law says in a few key states, how to bill and track it on every pay application, and how to get it released without months of chasing.

#How does retainage work on a construction project?

Each billing period, you bill the value of work completed (plus stored materials, if your contract allows it). The owner withholds the retainage percentage from that amount and pays the rest. You do the same on each subcontractor's pay application.

A quick example: you bill $100,000 of completed work this month under a 5% retainage contract. The owner withholds $5,000 and pays $95,000. If your subcontract on that scope also carries 5%, you withhold 5% of the sub's billing for the same work. Over a job, those withheld amounts add up to a single retainage balance per contract that is paid out at the end.

Many contracts also reduce retainage partway through, for example holding 10% until the job is 50% complete and then holding nothing more on later payments. Read the retainage clause in both your prime contract and your subcontracts before the first billing, because that clause, not habit, decides the math.

#What is the typical retainage percentage?

There is no single national number. Levelset's retainage overview (opens in a new tab) says retainage "typically ranges from 5-10% of each progress payment," and Breva's 50-state survey (opens in a new tab) found that most states cap public-project retainage at 5%, with some still allowing 10% until the job is half done.

On federal work, the payment clause lets the contracting officer keep up to 10% of a progress payment only until satisfactory progress is achieved (FAR 52.232-5 (opens in a new tab)). On private work, the rate is usually whatever the contract says, unless your state sets a cap.

#Which states cap retainage on private projects?

More states are capping retainage on private jobs, and two big markets changed recently:

• New York. General Business Law 756-c (opens in a new tab) limits retainage to 5% of the contract sum on private construction contracts of $150,000 or more, requires release within 30 days after final approval of the work, and charges 1% interest per month on late releases. A December 2025 amendment made contract terms that exceed the cap void, according to Troutman Pepper Locke (opens in a new tab).
• California. For private contracts entered on or after January 1, 2026, Civil Code 8811 (opens in a new tab) caps retention at 5% of each payment and 5% of the contract price, and a GC can't withhold a higher rate from subs than the owner withholds from the GC. There are exceptions, including some residential projects of four stories or fewer.

Rules on public jobs differ again, and they change often. Check your state's current statute, or ask a construction attorney, before you set rates in your subcontracts.

#Can a GC hold more retainage from subs than the owner holds from the GC?

Sometimes, but less often than it used to be. Plenty of subcontracts still carry 10% while the prime contract carries 5%. Several states now forbid that gap. California and New York both cap the sub's rate at the owner's rate, and Georgia's private-project rule says the GC's retainage "shall not exceed the percentage retained from the contractor by the owner" on that sub's work, per Levelset's Georgia guide (opens in a new tab).

Even where it's legal, holding more than you're held is worth thinking twice about. Subs price that cash drag into their bids.

#How should a GC track retainage?

Keep retainage out of your regular receivables and payables. In an r/Accounting thread on construction accounting setup (opens in a new tab), contractors' accountants agreed on the basics: book retainage receivable and retainage payable in their own accounts, separate from regular revenue and AP.

Then reconcile every billing cycle. One reply in that thread laid out the check that catches most errors: per job, the retainage receivable on your books should equal the retainage on your latest pay application to the owner, and retainage payable should equal the total retainage on your subs' latest pay apps. When those numbers drift, a release was booked but never billed, or a rate changed and nobody noticed.

A simple retainage tracker has one row per contract (prime or sub) with:

• the retainage rate, and any reduction point (for example, at 50% complete),
• retainage held to date, matched to the latest pay app,
• the release trigger in the contract (substantial completion, final acceptance, or sub-scope completion),
• the closeout items that release depends on, such as punch list sign-off, warranties and final lien waivers,
• and the date you expect to bill it.

If your pay applications keep coming back over retainage math that doesn't tie, our pay application guide covers how retainage shows up on each billing.

#When is retainage released?

Usually when the contract's release trigger is met and the closeout paperwork is in. State laws often then set a deadline. California's Civil Code 8812 (opens in a new tab) gives private owners 45 days after completion to pay retention. Nebraska's statute 45-1203 (opens in a new tab) requires release within 45 days of substantial completion and requires the contractor to pay a sub's retainage within ten days after receiving it.

Release also usually means paper changes hands. Final payment, including retainage, is normally exchanged for final lien waivers. Our guide to conditional vs unconditional lien waivers explains why progress waivers often don't cover retainage and which final forms to collect.

#Why does retainage get stuck, and how do you get it released faster?

The common reasons are pay-if-paid clauses, a project-wide closeout that depends on every trade finishing, and requests nobody owns. In a 2026 r/Construction thread titled "Retainage $ stuck in the abyss" (opens in a new tab), a sub described waiting about six months on retainage for scope that was 99% complete. Another reply said early-trade retainage can sit for years on large multifamily jobs.

A GC in that thread gave the most practical advice. A vague "can I get my retainage released" goes nowhere. What works is a specific request: ask for substantial completion of your scope in writing, attach the punch sign-off, ask for retainage to be billed on the next owner application, and put a date in the email.

As the GC, you can make this easier on both sides of the contract:

1. Negotiate scope-level or early-trade release in the prime contract, so you can pay out subs who finish in month three.
2. Bill retainage as soon as it's due. Put the release on the next pay application instead of waiting for a separate closeout invoice.
3. Collect closeout items as you go. Warranties, O&M manuals and as-builts collected at the end are what drag release out.
4. Pass it through on time. Many states set a short window, often around ten days, to pay subs once you've received their retainage.

#Where CooperBuild AI fits

The hard part of retainage isn't the math. It's keeping prime and sub contracts, pay apps, closeout items and your books in sync over a job that runs for a year or more. That's the same copy-and-rebuild problem we describe in the Procore + Excel + QuickBooks stack.

CooperBuild AI keeps estimating, the job, subcontracts, vendor payments and billing in one workspace, so retainage on your pay apps comes from the same records as your contracts. Assistants do the paperwork, and you approve every change before anything goes out.

If retainage is tying up cash you can't see clearly, start a 14-day free trial, no credit card needed, and run next month's billing on one live job.

This article is general information, not legal advice. Retainage and prompt payment rules vary by state and change over time.

#FAQ

#What is retainage in construction?

Retainage is a portion of each progress payment, usually 5% to 10%, that the owner holds back from the contractor and the contractor holds back from subs until the work is complete and accepted.

#What is the typical retainage percentage?

Usually 5% to 10% of each progress payment. Many states cap public-project retainage at 5%, and some states, including New York and California, now cap many private projects at 5% too.

#Can a general contractor withhold more retainage from a subcontractor than the owner withholds?

It depends on the state and the contract. California, New York and Georgia limit a GC's retainage on a sub's work to the rate the owner holds from the GC.

#When does retainage have to be released?

When the contract's release trigger is met, usually substantial or final completion, plus any state deadline. California gives private owners 45 days after completion, and New York requires release within 30 days after final approval of the work.

#Should retainage be booked in a separate account?

Yes. Keep retainage receivable and retainage payable in their own accounts and reconcile them to your latest pay applications every billing cycle.