Retainage
A slice of each payment held back until the work is accepted.
What it means
Retainage (or retention) is a percentage of each construction progress payment — commonly 5% to 10% — that the paying party withholds until the work, or the whole project, is complete and accepted. It exists to keep leverage for finishing punch-list items and correcting defects. Public projects and some states cap retainage rates or require earlier release; rules vary by state.
Why it matters before you sign
Retainage is your money arriving late by design — know the rate, whether it steps down at milestones, and exactly what triggers its release before pricing the job.
In a contract, it looks like this
The owner will withhold 10% retainage from each progress payment, reducing to 5% after the project reaches fifty percent completion.
This definition is a general, educational explanation — not legal advice. XOsign provides AI-assisted document tools and does not provide legal advice; consider consulting a qualified attorney for guidance on your specific situation. Requirements vary by state.
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