What is retainage in construction?
2026-09-04 · 7 min read
Retainage is the largest sum a subcontractor has earned and cannot spend. Here is how the balance builds, what the law says about getting it back, and the five things worth negotiating before you sign.
Money earned, approved, and not paid
Retainage is a percentage held back from every progress payment until the job closes out. It is not a dispute, not a backcharge, and not a reserve against defects that anyone has actually found. It is a slice of money you have already earned and that the owner or general has already approved, sitting in someone else's account.
The rate is commonly 5 or 10 percent of each progress payment, and it is taken from work completed and stored to date — not from the contract sum. That is why the balance grows every month rather than appearing at the end.
The arithmetic, on one contract
Take the example subcontract used across this site: a contract sum of 148,000.00, billed in four applications, at 5 percent. Every application is short by 5 percent of that period's billing, and by the last one the general is holding 7,400.00 — roughly the margin on the whole job for many trades.
| Application | Billed | Retainage 5% | Net payable |
|---|---|---|---|
| No. 1 | 42,000.00 | 2,100.00 | 39,900.00 |
| No. 2 | 51,000.00 | 2,550.00 | 48,450.00 |
| No. 3 | 38,000.00 | 1,900.00 | 36,100.00 |
| No. 4 (final) | 17,000.00 | 850.00 | 16,150.00 |
| Total | 148,000.00 | 7,400.00 | 140,600.00 |
Work your own numbers on the retainage calculator; it shows both the current application and where the contract lands.
When the law says it must come back
Two rules we read directly this session. In Texas, the owner must reserve 10 percent of the contract price — or 10 percent of the value of the work — during the job and for 30 days after the work is completed, and a claimant reaches those reserved funds by sending the required notices and filing a lien affidavit no later than the 30th day after completion.
On federal contracts, retained amounts must be paid by the date the contract specifies or, if it specifies none, by the 30th day after final acceptance. Both give you something better than an argument about fairness: a date.
Lien deadline
Unpaid retainage is unpaid money, and the lien clock on it usually runs from your last day of work — not from the day the release was due. Do not wait out a late release into an expired deadline.
What is actually negotiable
- A reduced rate after 50 percent completion — 10 percent falling to 5 — is common and often granted.
- Early release of stored-materials retainage, since the material is on site and insured.
- A retainage bond substituting a surety for the cash, where the state allows it.
- Line-item release as scopes complete, rather than one release at the end.
- A date certain for release, written into the subcontract rather than left to “after final acceptance”.
All five are easier to win at award than at closeout. Read the retainage clause before you sign; it is the clause most likely to cost you the job's margin.
Sources
- Tex. Prop. Code § 53.101
Texas requires the owner to reserve 10 percent of the contract price (or 10 percent of the value of the work) during the job and for 30 days after completion — statutory retainage.
Read 2026-09-04
- Tex. Prop. Code § 53.103
A Texas claimant reaches the reserved funds by sending the required notices and filing a lien affidavit no later than the 30th day after the work is completed, the contract terminated, or performance abandoned.
Read 2026-09-04
- 31 U.S.C. § 3903(a)(6)
Retained amounts on a federal contract must be released by the date the contract specifies or, if it specifies none, by the 30th day after final acceptance.
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- FAR 52.232-27(a)
On a federal construction contract, a progress payment is due 14 days after the designated billing office receives a proper payment request; an improper invoice must be returned within 7 days with reasons.
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