Each month the contractor bills for work in place. The owner pays the bill less a stated percentage. The held amount builds up over the job. The owner releases it near the end, after the work is accepted. Some people call it retention.
Retainage gives the owner security. It covers the cost to finish punch list items and to fix defective work. It also gives the contractor a reason to complete closeout.
How it reaches subcontractors
The general contractor usually holds retainage from each subcontractor. The percentage is often the one the owner holds, but the subcontract decides. A trade that finishes early can wait a long time. Its retainage is often tied to completion of the whole project.
Where to find the terms
- The agreement form and the supplementary conditions in the bid documents.
- The payment procedures section in Division 01.
- The payment article of your subcontract.
What to check
- The percentage held.
- Whether it drops at a stated point in the job.
- Whether it applies to stored materials.
- What triggers release: substantial completion, final completion or something else.
- What closeout documents you must send before release.
- Whether early release is possible for trades that finish early.
What it means for your price and your cash
Retainage does not change what you are owed. It changes when you are paid. You still pay for material and labor on normal terms. On a long job the held amount can be more than your profit. Plan your cash for that gap.
State rules
Many states limit retainage or set release deadlines, most often on public work. Some states have rules for private work too. The rules differ widely.
This article is general information, not legal advice. Check the bid documents, your subcontract and the law in your state.
Bid documents · Updated 11 Nov 2026