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Retainage
Practical Law Glossary Item 8-562-3551 (Approx. 3 pages)
Glossary
Retainage
A percentage of the contract amount due a contractor, construction manager, or design-builder (builder) withheld by the owner from a payment application to ensure the builder's complete performance of the contract scope of work including:
- Performing all punch list items.
- Remedying any defective or deficient work.
Retainage is also generally withheld by a builder from monies due its subcontractors in the same percentage.
Retainage is customarily released to the builder at certification of final completion, although other contractual options include:
- Release of a portion of the retainage on substantial completion or other contractual milestone.
- Holding back a portion of the retainage until the expiration of all warranty periods.
- Earlier release of retainage for a subcontractor whose work is completed early in the project, such as a demolition subcontractor.
Counsel should verify whether there are statutes in the applicable jurisdiction governing the release of retainage, particularly for public owners.