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Retainage · Tennessee

Tennessee retainage law: 5% cap, 90-day release, escrow (2026)

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

Tennessee caps retainage at 5% of the contract, owner to prime (Tenn. Code Ann. § 66-34-203) and prime to remote contractor (§ 66-34-303), on public and private jobs alike. The owner releases it within 90 days after completion of the work or substantial completion of the project, whichever is first (§ 66-34-103(b)), the prime pays remote contractors within 10 days, and retained funds sit in interest-bearing escrow.

Private work

Tennessee · Private workVerified 2026-09-22
Retainage cap
5%
Tenn. Code Ann. § 66-34-203, as rewritten by 2020 Public Chapter 749 § 20: the owner may withhold a reasonable amount of retainage as specified in the written contract with the prime contractor, as long as the retainage amount does not exceed five percent (5%) of the amount of the contract. § 66-34-303 (PC 749 § 25) sets the same 5% limit between a prime contractor and a remote contractor. The ninety-day release rule of § 66-34-103(b) binds the owner 'whether public or private'. Section 66-34-104(a) requires retained funds to be deposited in a separate, interest-bearing escrow account with a third party; the section applies when the prime contract is $500,000 or more (§ 66-34-104(h)) and cannot be waived by contract (§ 66-34-104(i)). The act applies to contracts entered into, amended or renewed on or after July 1, 2020 (PC 749 § 42).
Deadline
90 days
Completion of the work, or substantial completion of the project, whichever occurs first.
Statute
Tenn. Code Ann. §§ 66-34-203 (owner to prime, 5%), 66-34-303 (prime to remote, 5%), 66-34-103(b) (90-day release) and 66-34-104 (escrow), as amended by 2020 Tenn. Pub. Acts ch. 749.
What the statute says
(b) The owner, whether public or private, shall release and pay all retainages for work completed pursuant to the terms of any contract to the prime contractor within ninety (90) days after completion of the work or within ninety (90) days after substantial completion of the project for work completed, whichever occurs first.
Tenn. Code Ann. §§ 66-34-203 (owner to prime, 5%), 66-34-303 (prime to remote, 5%), 66-34-103(b) (90-day release) and 66-34-104 (escrow), as amended by 2020 Tenn. Pub. Acts ch. 749. · Archived copy of the official text, captured 2026-05-13

Public work

Tennessee · Public workVerified 2026-09-22
Retainage cap
5%
Tenn. Code Ann. § 66-34-203, as rewritten by 2020 Public Chapter 749 § 20: the owner may withhold a reasonable amount of retainage as specified in the written contract with the prime contractor, as long as the retainage amount does not exceed five percent (5%) of the amount of the contract. § 66-34-303 (PC 749 § 25) sets the same 5% limit between a prime contractor and a remote contractor. The ninety-day release rule of § 66-34-103(b) binds the owner 'whether public or private'. Section 66-34-104(a) requires retained funds to be deposited in a separate, interest-bearing escrow account with a third party; the section applies when the prime contract is $500,000 or more (§ 66-34-104(h)) and cannot be waived by contract (§ 66-34-104(i)). The act applies to contracts entered into, amended or renewed on or after July 1, 2020 (PC 749 § 42). The $300-a-day damages (§ 66-34-104(c)) and the misdemeanor (§ 66-34-103(e)) do not apply to the state, counties, municipalities, school and education boards or other subdivisions of the state (§ 66-34-104(g); § 66-34-103(e)(4)).
Deadline
90 days
Completion of the work, or substantial completion of the project, whichever occurs first.
Statute
Tenn. Code Ann. §§ 66-34-203 (owner to prime, 5%), 66-34-303 (prime to remote, 5%), 66-34-103(b) (90-day release) and 66-34-104 (escrow), as amended by 2020 Tenn. Pub. Acts ch. 749.
What the statute says
(b) The owner, whether public or private, shall release and pay all retainages for work completed pursuant to the terms of any contract to the prime contractor within ninety (90) days after completion of the work or within ninety (90) days after substantial completion of the project for work completed, whichever occurs first.
Tenn. Code Ann. §§ 66-34-203 (owner to prime, 5%), 66-34-303 (prime to remote, 5%), 66-34-103(b) (90-day release) and 66-34-104 (escrow), as amended by 2020 Tenn. Pub. Acts ch. 749. · Archived copy of the official text, captured 2026-05-13

Who this applies to

Whether the project is public or private makes no difference to the owner's duty in Tennessee. Section 66-34-103(b) is addressed to the owner "whether public or private" [1], which puts a public job and a private one on the same release schedule. The private and public sides of the rule carry identical terms: the same 90-day [1] release, the same 10-day [1] pass-down, the same 5% [1] ceiling at each tier and the same escrow requirement. The one difference is the price of skipping escrow, which public owners do not pay (see below).

Tennessee's retainage rules come in three parts:

What the rule says

Two events can start the owner's clock: completion of the work, and substantial completion of the project for the work completed. Whichever occurs first, the owner then has 90 days [1] to release and pay the prime all retainage for work completed under the contract. The prime's deadline is keyed to cash rather than to the job: its 10 days [1] begin when the owner's retainage payment is received, not at completion.

Tennessee also regulates where the money sits while it is held. Under § 66-34-104, retained funds must be deposited in a separate escrow account that bears interest and is held by a third party [1]. That section applies when the prime contract is $500,000 or more, whatever the size of the subcontracts, and it cannot be waived by contract [1]. On private work, a failure to deposit has a daily price, set out below.

How to comply

  1. Read the release clause in the prime contract against the 90-day [1] limit, and identify which triggering event, completion of the work or substantial completion of the project, will come first on your job.
  2. At both levels, owner to prime and prime to subcontractor, compare the stated retainage percentage with 5% [1] of the contract amount.
  3. For a remote contractor waiting on retainage, the date that matters is the day the prime receives the owner's payment; the prime's 10 days [1] run from there.
  4. On a prime contract of $500,000 or more [1], ask how retained funds are being held. A party that fails to deposit them in the required interest-bearing escrow account owes the owner of the funds $300 per day as damages under § 66-34-104(c) [1], and the failure is also a Class A misdemeanor [1]. Neither applies to the state, counties, municipalities, school and education boards or other subdivisions of the state [1].

The contract, the amended code sections and a lawyer familiar with them are the final word on how these deadlines apply to a particular job.

What changed recently

In 2020, the 111th General Assembly passed Public Chapter 749 [1], which amended sections 66-34-103, 66-34-104, 66-34-203 and 66-34-303 of the Tennessee Code [1]. The 5% ceilings sit in § 66-34-203 (owner to prime) and § 66-34-303 (prime to remote contractor), and the 90-day release and the escrow requirement in the other two sections [1]. The act took effect July 1, 2020 and applies to contracts entered into, amended or renewed on or after that date [1].

Related

Run the numbers for Tennessee

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. 2020 Tenn. Pub. Acts ch. 749 (Public Chapter 749), amending Tenn. Code Ann. §§ 66-34-103, 66-34-104, 66-34-303, Tennessee Secretary of State official act PDF (archived copy, captured 2026-05-13)

Changelog

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