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Retainage · California

California retainage law: 5% cap, public and private (2026)

By Sami Chicha, EditorUpdated Checked against primary sources · not yet reviewed by a licensed professionalFact-checked
Quick answer

California caps retention at 5% of each payment and of the contract price, at every tier: on public works (Pub. Contract Code § 7201, with two exceptions) and, under SB 61, on private contracts entered into on or after January 1, 2026 (Civ. Code § 8811). Public retention is released within 60 days after completion (§ 7107), private within 45 days (Civ. Code § 8812). Late retention costs 2% per month.

Private work

California · Private workVerified 2026-09-23
Retainage cap
5%
Civ. Code § 8811, added by SB 61 (Stats. 2025, ch. 49) for contracts relating to a private work of improvement entered into on or after January 1, 2026 (§ 8811(a)): retention withheld by an owner from the direct contractor, by the direct contractor from any subcontractor, and by a subcontractor from any lower-tier subcontractor shall not exceed 5 percent of the payment, and total retention shall not exceed 5 percent of the contract price (§ 8811(b)(1)(A)-(B)); a lower tier may not be held to a higher percentage than the owner-direct contractor contract specifies (§ 8811(b)(1)(C)). Two exceptions: a subcontractor that, after written notice before or at the bid request that a performance and payment bond is required, fails to furnish one from an admitted surety insurer (§ 8811(b)(2)); and residential projects that are not mixed-use and do not exceed four stories (§ 8811(b)(3)). The prevailing party in an action to enforce § 8811 recovers reasonable attorney's fees (§ 8811(c)). Contracts entered into before January 1, 2026 carry no statutory percentage cap. Civ. Code § 8812(c): in a good faith dispute the owner may withhold from final payment an amount not in excess of 150 percent of the disputed amount; § 8814(c) applies the same 150 percent limit to a direct contractor withholding from a subcontractor. It is against public policy to waive Article 2 (§§ 8810-8822) by contract (§ 8820).
Deadline
45 days
Within 45 days after completion of the work of improvement the owner must pay the retention to the direct contractor. If part of the work will become the property of a public entity, the owner may condition payment of the retention allocable to that part on the public entity's acceptance.
Statute
Cal. Civ. Code § 8811(b)(1) (cap); § 8812 (45-day release).
What the statute says
A retention payment withheld from a payment by an owner from the direct contractor, by the direct contractor from any subcontractor, and by a subcontractor from any subcontractor thereunder, for a private work of improvement, shall not exceed 5 percent of the payment. … In no event shall the total retention proceeds withheld exceed 5 percent of the contract price.
Cal. Civ. Code § 8811(b)(1) (cap); § 8812 (45-day release). · Official text · retrieved 2026-10-17

Public work

California · Public workVerified 2026-09-23
Retainage cap
5%
Pub. Contract Code § 7201(b)(1): retention proceeds withheld by a public entity from the original contractor, by the original contractor from any subcontractor, and by a subcontractor from any lower-tier subcontractor shall not exceed 5 percent of the payment, and total retention shall not exceed 5 percent of the contract price; a lower tier may not be held to a higher percentage than the public entity holds from the original contractor. Two exceptions: (i) a subcontractor that, after pre-bid written notice under § 4108(c), cannot or will not furnish a performance and payment bond (§ 7201(b)(2)); and (ii) projects the awarding entity finds, before bid and with the basis explained in the bid documents, to be 'substantially complex' (§ 7201(b)(3)-(5)). § 7201 applies to contracts entered into on or after January 1, 2012; no party may require another to waive it (§ 7201(c)).
Deadline
60 days
Within 60 days after the date of completion of the work of improvement the retention withheld by the public entity must be released; in a dispute the entity may withhold from final payment not more than 150 percent of the disputed amount. 'Completion' means occupation/beneficial use with cessation of labor, acceptance by the agency, a 100-day cessation of labor beyond the contractor's control, or a 30-day cessation with a recorded notice of cessation or completion (§ 7107(c)). A state agency retaining an amount equal to or less than 125 percent of the estimated value of the remaining work has 90 days (§ 7107(g)).
Statute
Cal. Pub. Contract Code § 7201(b)(1).
What the statute says
The retention proceeds withheld from any payment by a public entity from the original contractor, by the original contractor from any subcontractor, and by a subcontractor from any subcontractor thereunder shall not exceed 5 percent of the payment. In no event shall the total retention proceeds withheld exceed 5 percent of the contract price.
Cal. Pub. Contract Code § 7201(b)(1). · Official text · retrieved 2026-09-23

Who this applies to

California splits retention between two codes, and both reach below the prime contract.

On public works, Public Contract Code § 7201 limits the retention a public entity withholds from the original contractor, that the original contractor withholds from any subcontractor, and that a subcontractor withholds from the tier beneath it [7]. Section 7107 of the same code sets the release rules, and it binds the original contractor as well as the entity [6].

On private works of improvement, Civil Code §§ 8810 to 8822 cover retention an owner withholds from a direct contractor and retention a direct contractor withholds from a subcontractor [1]. Section 8811, added by SB 61, reaches every tier: owner to direct contractor, direct contractor to subcontractor, and subcontractor to the tier below [12].

Neither side can be bargained away. Waiving the private article by contract is against public policy [5], no party may require another to waive § 7201 [7], and an attempted waiver of § 7107 is void [6].

What the rule says

Public retention is capped at 5% of each payment and at 5% of the contract price in total [7], and no lower tier may be held to a higher percentage than the public entity holds from the original contractor. Private retention carries the same 5% limits on contracts entered into on or after January 1, 2026, with the same rule for lower tiers [12]; contracts signed before that date carry no statutory percentage. Both sides also share a deadline, 45 days after completion for a private owner [2] and 60 days for a public entity [6], backed by a 2% monthly charge on late money [4] [6].

How to comply

Public contracts

Private jobs

On a contract entered into on or after January 1, 2026, the statute sets both the percentage and the timing. On an older contract, the contract sets the percentage.

What changed recently

SB 61 (Stats. 2025, ch. 49) added Civil Code § 8811, effective January 1, 2026, which caps private retention at 5% for contracts entered into on or after that date [12]. Before it, private retention had no statutory percentage in California.

The private deadlines in § 8812 were added by SB 189 (Stats. 2010, Ch. 697, § 20), effective January 1, 2011 and operative July 1, 2012 [2]. The 5% public ceiling applies to contracts entered into on or after January 1, 2012 [7].

Related

Run the numbers for California

How retainage is held on each payment and when it comes back: Retainage in construction. Bill it on the pay application template, which carries retainage on work and on stored materials.

Retainage laws: other states

Sources

  1. Cal. Civ. Code § 8810, California Legislative Information (retrieved 2026-09-22)
  2. Cal. Civ. Code § 8812, California Legislative Information (retrieved 2026-09-22)
  3. Cal. Civ. Code § 8814, California Legislative Information (retrieved 2026-09-22)
  4. Cal. Civ. Code § 8818, California Legislative Information (retrieved 2026-09-22)
  5. Cal. Civ. Code § 8820, California Legislative Information (retrieved 2026-09-22)
  6. Cal. Pub. Contract Code § 7107, California Legislative Information (retrieved 2026-09-22)
  7. Cal. Pub. Contract Code § 7201, California Legislative Information (retrieved 2026-09-22)
  8. Cal. Pub. Contract Code § 22300, California Legislative Information (retrieved 2026-09-22)
  9. Cal. Pub. Contract Code § 7201 (retention cap), California Legislative Information (archived copy, captured 2022-02-15)
  10. Cal. Pub. Contract Code § 7107 (release of retention), California Legislative Information (archived copy, captured 2024-01-17)
  11. Cal. Pub. Contract Code § 7201 (live, leginfo.legislature.ca.gov) (retrieved 2026-09-23)
  12. Cal. Civ. Code § 8811 (private works retention cap, SB 61) (live, leginfo.legislature.ca.gov) (retrieved 2026-10-17)

Changelog

  1. : Page updated.
  2. : 1 more jurisdiction verified and published, 47 of 51 in all.
  3. : California private work corrected: Civ. Code § 8811 (SB 61) caps retention at 5% for contracts entered into on or after January 1, 2026; the row had said no cap.
  4. : Missouri private work corrected: Mo. Rev. Stat. §§ 436.300 to 436.336 cap private retainage at 10% and require release within 30 days of substantial completion; the row had said no private retainage rule.
  5. : Tennessee corrected: Tenn. Code Ann. § 66-34-203 caps owner-to-prime retainage at 5% of the contract, on public and private work; escrow applies to prime contracts of $500,000 or more, and the $300-a-day damages do not apply to public owners.
  6. : Idaho private work added: Idaho Code § 29-115 caps private retention at 5% and requires release within 35 days of final completion; the row had left private work out.
  7. : Rhode Island corrected: the 5% cap in R.I. Gen. Laws § 37-12-10.1 also covers private lienable work of $250,000 or more, and a retainage application may be submitted only 60 days after substantial completion unless the contract allows earlier.
  8. : Oklahoma public work corrected: since November 1, 2022, 61 O.S. §§ 113.1 and 226 reduce retainage to 2.5% of the amount earned to date after 50% completion with satisfactory progress, with no bond condition.
  9. : Montana public work corrected: state and local public contracts are capped at 5% under Mont. Code Ann. § 18-2-316, and final payment on building contracts is due within 30 days of final acceptance (§ 18-2-306).
  10. : Delaware public work corrected: 29 Del. C. § 6516(f)(3) requires retainage to be paid within 60 days after completion or notice of completion, with interest available from the 61st day; the row had no release deadline.
  11. : District of Columbia corrected: D.C. Code § 2-203.01 requires a 10% retent on District construction contracts until completion and acceptance, and the Private Contractor and Subcontractor Prompt Payment Act counts retainage as an undisputed amount due on its schedule; both rows had said no statute.
  12. : Colorado private work updated: HB26-1311 lets a contractor or subcontractor tender a retainage bond of up to 5% in lieu of retainage on contracts from August 12, 2026, and the owner must accept a compliant bond.
  13. : Kentucky private work updated: 2025 Ky. Acts ch. 156 raised the KRS 371.160 escrow threshold to $2,000,000 and barred waiving it by contract.
  14. : 10 more jurisdictions verified and published, 46 of 51 in all.
  15. : Page published.
  16. : Dataset first published with 36 of 51 jurisdictions verified.