Who this applies to
Everything on this page concerns public work: contracts under Michigan's 1980 PA 524, whose retainage limits appear in MCL 125.1563 [1]. The rules there are written in terms of what a public agency may withhold from its contractor [1].
Private construction is not covered here. For a private Michigan job, the contract is where the retainage percentage and release terms are set out, and a Michigan construction lawyer can say what else might apply to it.
What the rule says
Michigan measures public retainage against progress on site, not against the contract price. While less than half the work is in place, the agency may hold no more than 10% of the dollar value of all work in place [1]. When the work reaches 50% in place, the withholding stops growing: from then on no additional retainage may be withheld [1], unless the public agency determines that the contractor is not making satisfactory progress [1]. What has been held comes back at the end of the job, when the retainage and the interest earned on it are released to the contractor together with the final progress payment [1].
How to comply
Set your contract's retainage terms against the statute point by point.
- The base. The limit is a share of the dollar value of all work in place [1], so compare the contract's retainage clause with that measure as well as with the 10% figure [1].
- The halfway line. Track the point at which the work is 50% in place [1]. Withholding beyond it depends on a determination by the agency that progress is unsatisfactory, so a pay application after that point can be checked for new retainage [1].
- Final payment. Except as section 4(7) and (8) of the Act provides, the retainage and the interest earned on it are released together with the final progress payment [1], so check that both appear on it.
- Disagreements. MCL 125.1564 is the section that deals with resolving disputes over retained funds [2].
Read the contract and the sections listed in the Sources below together before relying on this summary.
Related
- Retainage calculator, to see how much a given rate holds back on each pay application.
- Retainage laws by state, covering the rules in other states.