Retainage is a percentage of each progress payment, commonly five to ten percent, withheld by the owner until a project reaches substantial completion.
Owners use retainage as leverage to ensure contractors finish punch list items and correct defects.
What Does Retainage Typically Involve?
- A set percentage withheld from each payment
- Release tied to substantial or final completion
- Punch list resolution before final release
- Terms specified in the construction contract
Why Is Retainage Important?
On a home addition, an owner might withhold ten percent of each payment, releasing the full retained amount only once the punch list is cleared and final inspection passes. Contractors factor retainage into their cash flow planning throughout a project, since it represents money earned but not yet received.
Retainage vs. Progress Payment
A progress payment is money released to a contractor as work is completed; retainage is the portion of those payments deliberately held back until the very end. The two work together throughout a project’s payment schedule.