Who this applies to
Maryland ties its retainage ceiling to bonding, and it writes separate sections for private and public work.
Private construction
Real Property § 9-304 sets the private rule [1]. It does not apply to a contract under $100,000, or to a project funded wholly or partly by or through the Department of Housing and Community Development [1]. Its 5% limit applies where the contractor has furnished 100% performance security and 100% payment security [1].
Public construction
State Finance and Procurement § 17-110 covers construction contracts awarded by a public body, with the same bonding condition: 100% payment security and 100% performance security [4]. State procurement units and the Maryland Transportation Authority work under a parallel section, § 13-225 [5].
What the rule says
On a private job the ceiling operates twice over. Retention across the whole contract may not exceed 5% of the contract price, and retention from any single payment the owner makes to the contractor may not exceed 5% of that payment [1]. On a public job the test is the percentage the contract itself sets for retainage, which is capped at 5% of the contract's total amount [4]. Neither cap ends an owner's other rights to hold money: a private owner may still withhold amounts beyond retainage for reasonable grounds relating to performance [1], and a public body may still withhold additional amounts it reasonably believes necessary to protect its interest [4].
How to comply
Start with the bonding and, on a private job, the contract price, since the 5% ceiling is written for fully bonded contractors [1]. Then track who owes whom:
- Private owner to contractor, 90 days. Undisputed retention held by an owner must be paid within 90 days after substantial completion [1]. Substantial completion here means whatever the applicable contract or subcontract defines it to be, so that definition decides when the clock starts [1].
- Prime to subcontractor, private work. A prime contractor may not retain a higher percentage from a subcontractor than the owner retains from the prime [1].
- Public body to contractor, 120 days. Any retainage due is released within 120 days after satisfactory completion of the construction contract; where a dispute or contract claim arises over whether completion was satisfactory, the 120 days run from the date it is resolved [4].
- State procurement units. Section 13-225 allows retainage to be placed in an interest-bearing escrow under § 15-108, with the interest paid pro rata [5].
When private retention goes unpaid, there is no fixed statutory interest rate. Under Real Property § 9-303 a court may grant equitable relief for prompt payment of undisputed amounts, a term that expressly includes retention proceeds above the authorized amount, and may award interest from the date the amount was due plus reasonable costs [2]. A finding of bad faith opens the door to reasonable attorney's fees as well [2].
Read the sections listed in the Sources below alongside your contract's retainage and completion clauses before relying on this summary.
Related
- Retainage calculator: the amount held back and the payment due on a pay application.
- Retainage laws by state: how other states set their caps and deadlines.