Retainage laws by state

Three things a retainage statute can do

Retainage law varies more than lien law, but it varies along three axes. A statute can cap the rate an owner or general may hold; it can require a reserve regardless of what the contract says; and it can set a release date measured from completion or acceptance. Some states do all three, many do one, and the contract fills whatever is left.

Below are the two regimes we read directly this session. Where a state is absent, we did not read its statute and will not print a figure — a wrong retainage number is a wrong invoice.

Texas: a statutory reserve, not just a cap

Texas is unusual: the owner does not merely permit retainage, it must reserve. During the progress of work under an original contract for which a mechanic's lien may be claimed, and for 30 days after that work is completed, the owner reserves 10 percent of the contract price — or 10 percent of the value of the work done, measured proportionally.

The reserve exists for claimants, not for the owner's comfort, and there is a route to it: a claimant has a lien on the reserved funds if it sends the notices the chapter requires and files a lien affidavit no later than the 30th day after the earliest of completion, termination or abandonment.

Federal work: a release date, in statute

On a federal contract, the Prompt Payment Act requires a clause for retaining a percentage of progress payments and — critically — provides that retained amounts approved for release must be paid by the date the contract specifies or, in the absence of a specified date, by the 30th day after final acceptance.

That converts “we are still processing closeout” into a question with a date in it. If the contract names no release date, the 30th day after final acceptance is the answer, and interest under the same Act runs after it. Work the figure on the interest calculator.

Where the statute is silent, the clause governs

In states without a cap or a statutory release date, retainage is entirely a creature of the subcontract, and the flow-down clause usually ties your release to the general's release from the owner. That is why a subcontract can leave you waiting on a scope you finished eight months earlier.

• Ask for a stated release date, not “upon final acceptance of the project”.
• Ask for early release on your scope when your scope is complete and accepted.
• Ask for the reduced rate after 50 percent, in writing, at award.
• Check whether your state allows a retainage bond as a substitute.

Then track what is actually outstanding with the retainage calculator so the conversation is about a figure rather than a feeling.