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.
Typical rates
- 5% — most public commercial work, federal jobs, well-bonded GCs with strong financials
- 10% — most private commercial, lender- financed jobs, first-time GC relationships
- 10% reduced to 5% at 50% complete — common compromise on AIA contracts; halves the held amount once the project is past the midpoint
- 0% on stored materials — sometimes negotiated when the GC pre-pays a long-lead item
The contract sets the rate. Read the agreement before bidding — a 10% retainage on a job with a 3% GC margin is functionally unfinanceable for most small shops without a credit line.
When it gets released
Two release events on most commercial contracts:
- Substantial completion — typically half of the held retainage is released here. Substantial completion is the point at which the owner can occupy and use the building for its intended purpose. Punch list is allowed to remain.
- Final completion — the rest is released after punch is closed, lien waivers from all subs are filed, the closeout binder is delivered, and the warranty period begins. Usually 30–60 days after substantial.
State law (the part that matters)
Most states cap retainage on private commercial work, but the caps vary widely. A few examples:
- Texas: No statutory cap on private retainage. Owner and contract control. Public retainage (Chapter 2252, Government Code) is capped at 5% if the contract value is over $400,000.
- California: Capped at 5% on most private commercial work after Senate Bill 293 (2011).
- New York: Capped at 5% on private work over $150,000 (Lien Law §756-c, effective for contracts entered into after November 2023).
- Florida: 10% maximum retainage on private work, reduced to 5% at 50% completion (Florida Statute §715.12).
This is not legal advice. Verify the current statute for your state and contract type before signing anything that retains more than 5%. Construction lien lawyers in your jurisdiction will run a 30-min consultation for $0–$200. Cheaper than getting this wrong on a $3M job.
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 usually gives a deadline — 30, 45, or 60 days after final completion. Calendar it. If it slips, send a demand letter. After 60–90 days past contractual release, involve a construction attorney.
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.