California retainage law: 5% public cap, 60-day release (2026)

By Oussama Chicha, EditorUpdated September 23, 2026Checked against primary sources · not yet reviewed by a licensed professionalFact-checked September 23, 2026

Quick answer

California public works retention may not exceed 5% of any payment or 5% of the contract price, at every tier, subject to two exceptions (Pub. Contract Code § 7201), and is released within 60 days after completion (§ 7107). Private owners have no percentage cap but must pay retention within 45 days after completion of the work of improvement (Civ. Code § 8812). Late retention costs 2% per month on either side.

Private work

California · Private workVerified 2026-09-23

Retainage cap: No statutory percentage cap on retention in private works of improvement. 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. Article 2 (§§ 8810-8822) governs retention withheld by an owner from a direct contractor or by a direct contractor from a subcontractor (§ 8810), and it is against public policy to waive it 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 § 8812.

What the statute says

If an owner withholds a retention from a direct contractor, the owner shall, within 45 days after completion of the work of improvement, pay the retention to the contractor. … If there is a good faith dispute between the owner and direct contractor as to a retention payment due, the owner may withhold from final payment an amount not in excess of 150 percent of the disputed amount.

Cal. Civ. Code § 8812. · Official text · retrieved 2026-09-22

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].

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 has no statutory percentage at all. What the two sides share is 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

Check the percentage. A retention clause above 5% ^[7] needs one of the two exceptions in § 7201: a pre-bid finding by the awarding entity that the project is substantially complex, with the basis explained in the bid documents, or a subcontractor that cannot or will not furnish performance and payment bonds after written pre-bid notice under § 4108(c) ^[7].
Pin down completion. "Completion" means occupation or beneficial use with labor stopped, acceptance by the agency, a 100-day ^[6] stoppage beyond the contractor's control, or a 30-day ^[6] stoppage with a recorded notice of cessation or completion.
Count the days. The entity releases retention within 60 days ^[6] of completion. A state agency retaining no more than 125% ^[6] of the estimated value of the remaining work has 90 days ^[6]. In a dispute, the entity may keep from the final payment up to 150% ^[6] of the disputed amount.
Pass it down. Once the original contractor receives retention, each subcontractor's share is due within 7 days ^[6]. That deadline belongs to the original contractor, not to the entity.
Swap the cash. Section 22300 lets the contractor substitute securities, or an escrow, for retention held in cash ^[8].
If it is late. Improperly withheld retention draws a charge of 2% per month ^[6] in place of interest, and the winner of a collection action recovers attorney's fees and costs.

Private jobs

The contract sets the percentage; the statute sets the timing.

Owner's deadline. Retention is due to the direct contractor within 45 days ^[2] after completion of the work of improvement. Retention on any part that will become a public entity's property may wait for that entity's acceptance.
Subcontractor's share. After the direct contractor is paid, it has 10 days ^[3] to pass each subcontractor its share (a separate pass-down deadline, not the owner's release date).
Disputes. In a good faith dispute the owner may keep from final payment no more than 150% ^[2] of the disputed amount, and a direct contractor withholding from a subcontractor is held to the same 150% ^[3].
Late payment. Wrongfully withheld retention carries a 2% monthly penalty ^[4] in place of interest, plus costs and reasonable attorney's fees for the prevailing party in a collection action.

What changed recently

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].

Retainage calculator: pay-application math at the contract's rate.
Retainage laws by state: California's deadlines next to other states'.