New York retainage law: 5% cap, 30-day release (2026)
By Sami Chicha, EditorUpdated Checked against primary sources · not yet reviewed by a licensed professionalFact-checked
Quick answer
New York's General Business Law § 756-c lets a private owner retain no more than 5% of the contract sum by mutual agreement, keeps lower tiers at or below the owner's percentage, and requires release within 30 days after final approval, with 1% a month interest if late. Public owners under General Municipal Law § 106-b retain up to 5% of each progress payment, or up to 10% if they do not require both full bonds.
Private work
New York · Private workVerified 2026-09-22
Retainage cap
5%
By mutual agreement an owner may retain no more than 5% of the contract sum; a contractor or subcontractor may also retain no more than 5%, and in no case more than the percentage the owner actually retains.
Deadline
30 days
Final approval of the work under the construction contract.
By mutual agreement of the relevant parties an owner may retain no more than five per centum of the contract sum as retainage. A contractor or subcontractor may also retain no more than five per centum for retainage and in no case shall retainage exceed the actual percentage retained by the owner.
N.Y. Gen. Bus. Law § 756-c (Prompt Payment Act, art. 35-E). · Official text · retrieved 2026-09-22
Public work
New York · Public workVerified 2026-09-22
Retainage cap
5%
A public owner retains not more than 5% of each progress payment, but may retain more than 5% and up to 10% if it does not require the contractor to furnish both a performance bond and a labor and material bond in the full amount of the contract. A contractor may retain the same percentages from subcontractors.
Deadline
Substantial completion: within 45 business days of substantial completion the public owner submits a written punch list, then approves and pays the remaining contract balance less two times the value of any remaining items to be completed; as those items are completed the owner promptly pays for them on requisition.
The public owner shall retain not more than five per centum of each progress payment to the contractor except that the public owner may retain in excess of five per centum but not more than ten per centum of each progress payment to the contractor provided that there are no requirements by the public owner for the contractor to provide a performance bond and a labor and material bond both in the full amount of the contract.
N.Y. Gen. Mun. Law § 106-b. · Official text · retrieved 2026-09-22
Who this applies to
This page covers two New York retainage laws, one for private construction and one for public owners.
The private rule is § 756-c of the General Business Law, part of the Prompt Payment Act in article 35-E [1]. It binds every tier of the chain: an owner retaining from its contractor, and a contractor or subcontractor retaining from the party below it [1].
The public rule is § 106-b of the General Municipal Law, which covers political subdivisions as public owners; a contractor may withhold the same percentages from its subcontractors [2]. Construction contracts of state agencies are not covered on this page.
What the rule says
The private cap is measured against the contract sum and rests on the parties' agreement: by mutual agreement an owner may retain no more than 5% of it, and a contractor or subcontractor may retain no more than 5% and in no case more than the percentage the owner actually retains [1]. Since December 19, 2025, General Business Law § 757(5) makes void and unenforceable any provision in, collateral to or affecting a construction contract that requires retainage above 5% of the contract sum [3][4]. The public cap is measured against each progress payment instead: not more than 5%, rising to at most 10% only where the public owner does not require the contractor to furnish both a performance bond and a labor and material bond in the full amount of the contract [2]. Neither percentage steps down during the job [1][2].
How to comply
Private contracts
Set the retainage clause beside 5% of the contract sum [1]. In a subcontract, set it beside the percentage the owner is actually holding as well [1].
A clause that requires retainage above 5% of the contract sum is void and unenforceable under General Business Law § 757(5) [3][4].
The owner releases retainage to the contractor no later than 30 days after final approval of the work [1].
Interest of 1% per month runs against any owner, contractor or subcontractor that fails to release retainage as required, starting from the date the retention was due and owing [1].
Public contracts
Check whether the public owner requires both a full performance bond and a full labor and material bond. If it does, the ceiling is 5%; if it does not, it can reach 10% [2].
Release comes in stages rather than on one date. Within 45 business days of substantial completion, the public owner submits a written punch list, then approves and pays the remaining contract balance less two times the value of the items still to be completed [2]. As those items are satisfactorily completed or corrected, it pays for them promptly on receipt of a requisition, less any amount needed to satisfy claims, liens or judgments against the contractor that have not been suitably discharged [2].
A public owner other than New York City that does not pay within 30 days of receiving a proper requisition, or within 45 days where an elected official must approve, owes interest at the overpayment rate set by the commissioner of taxation and finance [2].
Down the chain, a contractor that does not pay a subcontractor within 7 calendar days of receiving payment owes interest on that obligation [2].
Both sections are linked under Sources. On a private job the contract and subcontract fix the percentage within the cap; on a public job the bond requirements decide which ceiling applies.
What changed recently
General Business Law § 756-c was amended on November 26, 2023 [1]. Chapter 654 of the Laws of 2025 (A.5405/S.5655), signed December 19, 2025 and effective immediately, added § 757(5) [3]. General Municipal Law § 106-b was last amended on June 18, 2021 [2].
Related
Retainage calculator: runs a single pay application from contract sum to net payment.
: 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.
: Page updated.
: 10 more jurisdictions verified and published, 46 of 51 in all.
: Page published.
: Dataset first published with 36 of 51 jurisdictions verified.
