Retainage, explained.

What retainage is

Retainage (sometimes called retention) is a percentage of each pay app the owner withholds until the project is substantially or finally complete. The point is to keep the GC financially incentivized to finish punch list, close out warranties, and not walk away once 95% of the money has been paid.

On a $2M commercial project at 10% retainage, the owner is sitting on $200,000 of your money throughout the job. That money is yours — you earned it as the work was completed — but you can't bill it until release.

Where the rate comes from

There is no industry default, and the AIA forms deliberately don't supply one — A201 §9.3.1 says only that the application “shall reflect retainage if provided for in the Contract Documents,” and G702 line 5 ships with the percentages blank. Four things actually set your number:

• Your agreement's retainage article.
• Whether the job is public, where a statute may cap it (below).
• Whether the contract reduces the rate at a stated milestone.
• Whether stored material is retained at the same rate as installed work — G702 splits those into lines 5a and 5b for exactly that reason.

Get all four out of the contract before you bid. Retainage is the difference between a financeable job and a credit line — a 10% retainage on a job with a 3% GC margin is functionally unfinanceable without one.

If you came here for a number, the only ones we will give you are the ones a legislature wrote down. Four we checked against the statute, and notice they don't even agree on which work they govern:

• Texas, public work— 10% under $5 million, 5% at $5 million or more (Gov't Code §2252.032).
• California, public work — 5% (Public Contract Code §7201, SB 293).
• Florida, public work — 5% of each progress payment (§218.735). No cap at all on private work.
• New York, PRIVATE work — a 5% ceiling on contracts of $150,000 or more (General Business Law §§756-a, 756-c).

Everywhere else, on every private job, the number is whatever your contract says — which is why the four questions above are the real answer and a national average would be a worse one. Full detail, including what each statute does and doesn't reach, below.

When it gets released

Retainage comes back in stages, and your contract names them. The two you will meet on a commercial job:

1. Substantial completion — the point at which the owner can occupy or use the work for its intended purpose; A201 §9.8.1 words it almost exactly that way, and punch list is allowed to remain. Whether any retainage releases here, and how much, is a contract term — read your payment article, because this is the release most GCs never bill for.
2. Final completion — the balance releases after punch is closed, the lien releases the Owner designates are in, and the closeout submittals A201 §9.10.2 requires are delivered. Your contract sets the clock.

State law (the part that matters)

Some states cap retainage on private commercial work; others leave the rate entirely to the contract, and a few impose duties that run the other direction. We are not going to tell you how many fall in each camp — that count changes with every legislative session, and a stale number here would be worse than none. Four examples of how far apart the rules sit:

• Texas: No statutory cap on private retainage — but the Property Code runs the other way. §53.101 requires a private owner to reserve 10% of the contract price during the work and for 30 days after it is completed, to protect lien claimants, unless the owner has a statutory payment bond under §53.202. On public work, Government Code §2252.032 caps retainage at 10% under $5 million and 5% at $5 million or more.
• California: SB 293 (2011) capped retention at 5% on public works— Public Contract Code §7201, with a “substantially complex project” exception, for contracts entered into on or after January 1, 2012. Private commercial retention is still purely a contract term.
• New York: A 5% ceiling on private construction contracts of $150,000 or more, under the Prompt Payment Act (General Business Law §§756-a, 756-c), for contracts entered into after November 17, 2023. A later amendment makes a higher figure void, not negotiable — you cannot contract around it.
• Florida: No statutory cap on private retainage. §715.12, the private prompt-payment statute, governs payment timing and interest, not a percentage. On publicwork, §218.735 caps retainage at 5% of each progress payment — it also lets the contract set a lower rate, or reduce the rate on a schedule. If someone tells you Florida public work runs 10% until half-complete and then drops to 5%, that structure is not in the statute; read your own contract's payment article.

This is not legal advice. The answer turns on your state, whether the job is public or private, and your contract date — all three change it. Verify the current statute for your state and project type, or have a construction lawyer in your jurisdiction read the payment article, before you sign.

How retainage shows on the AIA G702

On AIA G702, retainage lives on line 5. The math:

• Line 4: Total Completed & Stored to Date — what you've earned
• Line 5: Retainage — what gets held
• Line 6: Total Earned Less Retainage — what you can bill cumulatively
• Line 7: Less Previous Certificates for Payment — what you've already been paid
• Line 8: Current Payment Due — line 6 − line 7

Line 5 is two sub-lines: retainage on completed work + retainage on stored materials. If your contract has different rates for the two (some do), make sure you're computing them separately. The lender's draw inspector will check.

How to chase retainage release

Released retainage is the highest-margin cash you'll ever bill on a project — your costs are already paid, the full $200K (in the example above) drops to your bottom line. Treat it like a real receivable, not an afterthought.

• File a punch list signoff in writing the day each item is accepted.
• Collect final unconditional lien waiversfrom every sub before submitting the final pay app — owners and lenders will not release retainage until they're comfortable nobody is filing on the property.
• Submit the closeout binder digitally (or build it in neuroBLDR's closeout module) so the owner can't claim it's incomplete.
• Your contract sets the release deadline — find the number of days, calendar it off final completion, and send a written demand the day it passes. Some states also attach interest to late retainage; check whether yours does before you let a slip pass quietly.

How neuroBLDR helps

We track retainage held + released per pay app, per project, so you always know what's outstanding without digging through 14 G702 PDFs — under-released retainage surfaces across every project automatically, so nothing slips between draws.