New Jersey retainage law: 30-day private release, 2% public cap (2026)
By Sami Chicha, EditorUpdated Checked against primary sources · not yet reviewed by a licensed professionalFact-checked
Quick answer
New Jersey's Prompt Payment Act (N.J.S.A. 2A:30A-2) sets no cap on the private retainage percentage but makes retainage monies payable to the prime contractor within 30 calendar days of the billing date, with interest at prime plus 1% if late. On local public contracts over $100,000, N.J.S.A. 40A:11-16.3 withholds 2% of each partial payment and releases it within 45 days of the agreed final acceptance date.
Private work
New Jersey · Private workVerified 2026-09-22
Retainage cap
New Jersey's Prompt Payment Act regulates when retainage must be paid but sets no cap on the percentage that may be retained on a private project. 'Billing' is defined to include a 'request for release of retainage'.
Deadline
30 days
Approval and certification of the billing (which includes a request for release of retainage) by the owner or the owner's authorized approving agent; a billing is deemed approved and certified 20 days after the owner receives it unless the owner gives a written statement of the amount withheld and the reason.
If a prime contractor has performed in accordance with the provisions of a contract with the owner and the billing for the work has been approved and certified by the owner or the owner's authorized approving agent, the owner shall pay the amount due ... for each periodic payment, final payment or retainage monies not more than 30 calendar days after the billing date.
For local contracting units, where the contractor has agreed to the withholding of payments under N.J.S.A. 40A:11-16.1, 2% of the amount due on each partial payment is withheld pending completion. Applies to contracts over $100,000 for construction, reconstruction, alteration, repair or maintenance of a building, structure, facility or other improvement (N.J.S.A. 40A:11-16.2).
Deadline
45 days
Acceptance of the work: the final acceptance date agreed upon by the contractor and the contracting unit.
Statute
N.J.S.A. 40A:11-16.3 (Local Public Contracts Law).
What the official source says
2% of the amount due on each partial payment shall be withheld by the contracting unit pending completion of the contract.
This page covers two New Jersey statutes that touch retainage, and a local public job can fall under both.
Private work. The Prompt Payment Act, N.J.S.A. 2A:30A-2, controls when retainage is paid and sets no cap on the percentage retained on a private project [3]. Its payment chain runs from the owner to the prime contractor and on to subcontractors [3].
Local public work. The Local Public Contracts Law, N.J.S.A. 40A:11-16.3, sets the withholding on jobs for local contracting units [1]. It covers contracts over $100,000 for the construction, reconstruction, alteration, repair or maintenance of a building, structure, facility or other improvement [1].
The Prompt Payment Act defines "owner" to include any public or governmental entity, so its interest on late retainage reaches public owners too [3].
What the rule says
New Jersey answers the two retainage questions separately. On private work, the Act puts no ceiling on the percentage and regulates timing: once the prime contractor has performed under the contract and the billing is approved and certified, the owner pays retainage monies no more than 30 calendar days after the billing date [3]. On a local public contract where the contractor has agreed to have payments withheld, the contracting unit keeps 2% of the amount due on each partial payment until completion, with no step-down [1], and releases all of it within 45 days of the final acceptance date agreed with the contractor, provided the contract has been completed as indicated [1].
How to comply
On a private job
The percentage comes from the contract, since the Act sets no cap [3].
A request for release of retainage counts as a billing [3], and the 30 calendar days run from the billing date, which for a periodic billing is the date the contract specifies [3].
A billing is deemed approved and certified 20 days after the owner receives it, unless the owner gives a written statement of the amount withheld and the reason [3].
Paying late makes the delinquent party liable for the amount owed plus interest at the prime rate plus 1%, from the day after the required payment date to the day the payment check is drawn [3]. In a collection action, the prevailing party recovers reasonable costs and attorney fees [3].
Subcontractors must be paid their share within 10 days [3]; the full section is linked under Sources.
On a local public job
Instead of having payments withheld, the contractor may deposit state or municipal bonds or notes; cash that is withheld goes into an interest-bearing account [1].
The 45 days run from the final acceptance date the contractor and the contracting unit agree on, and the release is in full, without further withholding of any amount for any purpose [1].
Section 40A:11-16.3 sets no penalty of its own [1]; interest at prime plus 1% on late retainage monies comes from the Prompt Payment Act [3].
Both clocks start from dates the parties control: the billing date, which the contract sets for periodic billings, and the final acceptance date agreed with the contracting unit.
What changed recently
Section 2A:30A-2 was amended by P.L.2006, c.96, approved September 1, 2006, which amended the original Act, P.L.1991, c.133 [3]. The public withholding rule in N.J.S.A. 40A:11-16.3 traces to L.1979, c. 464, s. 2, with amendments in 1991 (c. 434, s. 2) and 1999 (c. 440, s. 26) [1].
: 1 more jurisdiction verified and published, 47 of 51 in all.
: 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.
: 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.
: 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.
: 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.
: 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.
: 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.
: 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).
: 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.
: 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.
: 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.
: 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.
: 10 more jurisdictions verified and published, 46 of 51 in all.
: Page published.
: Dataset first published with 36 of 51 jurisdictions verified.
