Retainage

Retainage (also spelled retention) is a percentage of each progress payment that the owner or GC holds back until the project is substantially complete. Typical retainage rates are 5% to 10% of each pay application. The practice protects the payor from contractor default by keeping leverage to compel completion and correct deficiencies. Many states now regulate retainage rates and release timing by statute. Retainage is a significant cash flow burden for subcontractors and is sometimes a source of dispute at project close-out.