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Retainage · Minnesota

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

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

Minnesota caps retainage at 5% on private building and construction contracts (Minn. Stat. § 337.10, subd. 4) and at 5% of each progress payment on public improvement contracts (§ 15.72, subd. 2). Owners and public contracting agencies must release all retainage within 60 days after substantial completion and may not hold it for warranty work; a cut in the owner's rate must be matched for subcontractors.

Private work

Minnesota · Private workVerified 2026-09-22
Retainage cap
5%
'Retainage on a building and construction contract may not exceed five percent.' Nothing requires retainage to be withheld at all, and an owner may reduce or eliminate it if work is progressing satisfactorily, but if the owner reduces its rate the contractor must reduce subcontractor retainage at the same rate. Withholding retainage for warranty work is prohibited. The subdivision does not apply to a public agency as defined in § 15.71, subd. 3, or to contracts for professional services under §§ 326.02–326.15.
Deadline
60 days
All retainage must be released no later than 60 days after substantial completion, with 'substantial completion' determined as provided in § 541.051, subd. 1(a). After substantial completion the owner may still withhold up to 250% of the cost to correct or complete work known at that time (payable within 60 days after that work is completed) plus 1% of contract value or $500, whichever is greater, pending final paperwork (payable within 60 days after the paperwork is submitted).
Statute
Minn. Stat. § 337.10, subd. 4.
What the statute says
Retainage on a building and construction contract may not exceed five percent. An owner or owner's agent may reduce the amount of retainage and may eliminate retainage on any monthly contract payment if, in the owner's opinion, the work is progressing satisfactorily. If the owner reduces the amount of retainage, the contractor must reduce retainage for any subcontractors at the same rate.
Minn. Stat. § 337.10, subd. 4. · Official text · retrieved 2026-09-22

Public work

Minnesota · Public workVerified 2026-09-22
Retainage cap
5%
A public contracting agency 'may reserve as retainage from any progress payment on a public contract for a public improvement an amount not to exceed five percent of the payment', and may reduce or eliminate it if the work is progressing satisfactorily. Withholding retainage for warranty work is prohibited. For federally or state-aided projects the agency need not pay the aided portion until the aid is received.
Deadline
60 days
All retainage must be released no later than 60 days after substantial completion ('substantial completion' per § 541.051, subd. 1(a); for street and highway work including bridges, the date when construction-related traffic devices and ongoing inspections are no longer required). After substantial completion the agency may still withhold up to 250% of the cost to correct or complete known work, plus 1% of contract value or $500, whichever is greater, pending final paperwork, each payable within 60 days.
Statute
Minn. Stat. § 15.72, subd. 2.
What the statute says
A public contracting agency may reserve as retainage from any progress payment on a public contract for a public improvement an amount not to exceed five percent of the payment. A public contracting agency may reduce the amount of the retainage and may eliminate retainage on any monthly contract payment if, in the agency's opinion, the work is progressing satisfactorily.
Minn. Stat. § 15.72, subd. 2. · Official text · retrieved 2026-09-22

Who this applies to

Minnesota writes its retainage rules twice, once for each kind of owner, and keeps the two versions close.

Subcontractors are carried along on both sides. When an owner or agency lowers the retainage it holds, the contractor must lower subcontractor retainage at the same rate [1][2].

What the rule says

The ceiling is 5% on both sides [1][2], though the two statutes word it differently. On a private contract, retainage may not exceed 5% [1]; on a public one, the agency may reserve no more than 5% of each progress payment [2]. On the private side nothing requires retainage to be withheld at all, and the owner may reduce it or drop it from any monthly payment when, in its opinion, the work is progressing satisfactorily [1]. A public agency may likewise reduce or eliminate retainage on any monthly payment when it judges the work to be progressing satisfactorily [2]. Neither kind of owner may withhold retainage for warranty work [1][2]. Release of all retainage is due no later than 60 days after substantial completion, a milestone both statutes take from § 541.051, subd. 1(a) [1][2]. For public street and highway work, bridges included, substantial completion is instead the date when construction-related traffic devices and ongoing inspections are no longer required [2].

How to comply

What can still be held after substantial completion. On a private job the owner may keep up to 250% of the cost to correct or complete work known at that time, payable within 60 days after that work is completed [1]. It may also keep 1% of the contract value or $500, whichever is greater, until the final paperwork arrives, payable within 60 days after the paperwork is submitted [1]. A public agency has the same two carve-outs, each payable within 60 days [2].

Passing money down on a private job. Retainage owed to a subcontractor must reach it within ten days of the contractor being paid [1]. Undisputed amounts paid late anywhere in the prime-to-subcontractor chain, retainage included, carry interest of 1.5% per month [1]. On an unpaid balance of $100 or more, the minimum monthly penalty is $10 [1]. A claimant who prevails recovers costs and attorney fees, and a party whose undisputed payment has not arrived within ten days may suspend work [1]. That interest rule runs down the chain only; § 337.10 names no rate for an owner who is late releasing retainage to the prime contractor [1].

Aided public projects. On a project with federal or state aid, the agency need not pay the aided portion until the aid is received [2].

Compare these points with the retainage, completion and closeout clauses of your contract, and read both sections in the Sources below before relying on this summary.

What changed recently

Section 337.10's history runs from 1997 c 127 s 1 through 1Sp2019 c 7 art 9 s 13 [1]. Section 15.72 dates from 1980 c 464 s 2 and was changed by 1Sp2019 c 7 art 9 s 1 and 2023 c 53 art 7 s 3 [2]. Minnesota's Revisor of Statutes also marks § 15.72 as affected by law enacted in the 2026 Regular Session, which added a subdivision 1a (2026 c 90 s 1) [2]. Read the current section, including that subdivision, before relying on the public rule described here.

Related

Run the numbers for Minnesota

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. Minn. Stat. § 337.10, Building and construction contracts; prohibited provisions (2025 Minnesota Statutes, Office of the Revisor of Statutes) (retrieved 2026-09-22)
  2. Minn. Stat. § 15.72, Progress payments on public contracts; retainage (2025 Minnesota Statutes, Office of the Revisor of Statutes) (retrieved 2026-09-22)

Changelog

  1. : 1 more jurisdiction verified and published, 47 of 51 in all.
  2. : 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.
  3. : 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.
  4. : 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.
  5. : 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.
  6. : 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.
  7. : 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.
  8. : 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).
  9. : 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.
  10. : 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.
  11. : 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.
  12. : 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.
  13. : 10 more jurisdictions verified and published, 46 of 51 in all.
  14. : Page published.
  15. : Dataset first published with 36 of 51 jurisdictions verified.