What is Retainage?

Retainage is a common financial practice in the construction industry where a portion of the payment to contractors and subcontractors is held back until the project is completed to the client's satisfaction.

This is a safety net for project owners, ensuring that contractors fulfill their obligations and finish projects according to the agreed standards and timelines.

Why Retainage Matters

Retainage acts as an incentive for contractors to complete projects with the required level of quality. It helps protect the project owner from poor workmanship and contractual non-compliance.

For contractors, while it means a portion of their payment is delayed, it also signifies trust and commitment to completing the project successfully.

How Retainage Works

Typically, retainage amounts to 5-10% of the total contract value. Once the project reaches completion and passes inspection, the withheld amount is paid out.

This practice requires careful contractual agreements and clear communication between all parties to ensure expectations are met and financial transactions are transparent.