Sources & Governing Codes
- IBC 2021 Section 1011 Means of Egress & Occupant Load: IBC 2021 Section 1011 Means of Egress & Occupant Load View Standard
- OSHA Standard 1926 Construction Safety Regulations: OSHA Standard 1926 Construction Safety Regulations View Standard
- ADA 2010 Standards for Accessible Design: ADA 2010 Standards for Accessible Design View Standard
Frequently Asked Questions (FAQ)
What is the difference between retention and retainage?
Retention and retainage refer to the same financial mechanism in construction: a percentage of progress payments withheld by the project owner to secure completion. 'Retainage' is the standard terminology in the United States, while 'Retention' is used internationally and under UK/FIDIC frameworks.
When is retention money released on a construction project?
Retention is typically released in two equal stages: 50% upon achieving Substantial Completion (or Taking-Over Certificate), and the remaining 50% upon the expiration of the Defects Liability Period (DLP) or warranty period, after all snagging items are resolved.
Can a general contractor withhold retainage from sub-contractors?
Yes, general contractors routinely withhold retainage from subcontractors, usually matching the rate withheld by the owner. However, many US state prompt payment laws require general contractors to release subcontractor retainage within a set number of days (e.g., 7 to 30 days) after receiving payment from the owner.
Is there a legal cap on retainage percentage in the United States?
Yes, many US states cap retainage by statute. For example, California caps retainage at 5% on public works (PCC §7201) and private commercial projects (Civil Code § 8811 (SB 61)). Texas Property Code §53.101 mandates a 10% reserved fund requirement.
How does FIDIC retention work under international contracts?
Under FIDIC Red Book Sub-Clauses 14.3 and 14.9, the employer withholds a specified percentage (typically 10%) from each Interim Payment Certificate until cumulative retention reaches the Limit of Retention (typically 5% of Contract Price). 50% is released upon Taking-Over, and 50% after the Defects Notification Period.
Can retention be substituted with a retention bond or bank guarantee?
Yes, contractors frequently substitute cash retention with an On-Demand Retention Guarantee or Retention Bond. This allows the contractor to receive 100% of progress payments upfront while giving the owner equivalent financial security from a rated bank or insurer.
What happens to retention money if the owner defaults or goes bankrupt?
If cash retention is held in the owner's general operating account, contractors may become unsecured creditors during insolvency. Consequently, some jurisdictions require owners to deposit retained funds into a separate, interest-bearing escrow account.
Can retainage be held in an interest-bearing escrow account?
Yes, several US state public works statutes and private contracts permit contractors to request that retainage be deposited into an interest-bearing escrow account, with accrued interest payable to the contractor upon final release.
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