We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Retainage Explained: Key Legal Insights for Construction Contracts
Definition & Meaning
Retainage refers to a portion of the total payment for a construction project that is withheld until the project is deemed substantially complete. This amount is specified in the contract and serves as a financial incentive for contractors to finish the work satisfactorily. Typically, retainage is set at ten percent of the contract price but may be reduced to five percent once the project reaches a certain milestone, such as halfway completion, or based on other agreed-upon arrangements.
Table of content
Legal Use & context
Retainage is primarily used in construction law, where it plays a critical role in ensuring that contractors fulfill their obligations. It is relevant in civil law contexts, particularly in contracts related to construction projects. Users can manage retainage agreements through legal templates provided by services like US Legal Forms, which are drafted by experienced attorneys to ensure compliance with legal standards.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, a contractor working on a commercial building project may have a contract that stipulates a ten percent retainage. Upon reaching the halfway point of construction, the retainage may be reduced to five percent, reflecting the progress made. Another example could involve a residential renovation where the homeowner withholds a portion of the payment until the contractor completes all agreed-upon work satisfactorily (hypothetical example).
State-by-state differences
Examples of state differences (not exhaustive):
State
Retainage Rate
Release Conditions
California
10%
Upon substantial completion
Texas
5% after halfway completion
Final completion and acceptance
Florida
10%
Completion of all work
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Holdback
A portion of payment withheld until certain conditions are met.
Retainage is specifically tied to project completion, while holdbacks may relate to other performance criteria.
Progress Payment
Partial payments made during the course of a project.
Retainage is withheld from progress payments until project completion.
Common misunderstandings
What to do if this term applies to you
If you are involved in a construction project and retainage applies, ensure that your contract clearly outlines the retainage terms. If you are a contractor, keep track of project milestones to understand when retainage may be reduced or released. For assistance, consider using US Legal Forms' templates to create or review your contracts. If your situation is complex, it may be wise to consult a legal professional.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.