Managing Retainage Payments

Posted to LinkedIn 9/15/25

Handling Retainage Payments

Retainage (or retention) is common in construction contracts. It’s meant to protect the party issuing the contract by ensuring work is completed. Fair enough. But depending on which side of the desk you sit, the rules look very different.

Subcontractors:
✅ Never accept a retainage percentage over 10%.
✅ Tie retainage to a completion/inspection milestone (by trade).
❌ Never allow a builder to hold your money until the entire community is complete...or the house sells/closes — yes, I’ve seen this!

General Contractors:
✅ Don’t release final retainage until all inspections are passed and the punch list is 100% complete.
❌ Remember, relationships matter...so do not be so quick to hold up, say your framer's $2800 check, because he needs to return to replace a
one warped 2x4.

Remodelers:
✅ Contractually limit how much a homeowner can retain “to ensure you complete the job.”
✅ Contractually stipulate that all progress payments be tied to project milestones
❌ I’ve seen customers withhold $5k+ final payments over one missing window screen.

👉 The concept of retainage has merit.
👉 But sloppy contract language can cause real pain — and cash flow chaos — if you’re not paying attention.

Looking to tighten up your contracts and protect your business? We can help!