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Retainage · Texas

Texas retainage law: 10% or 5% public cap, 10% owner reserve (2026)

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

A Texas governmental entity may withhold no more than 10% of the contract price on a public works contract under $5 million, 5% at $5 million or more, and 10% on dam work (Gov't Code § 2252.032), and may not hold retainage once the work is complete. Private contracts set their own retainage rate, but the owner must reserve 10% for lien claimants during the work and for 30 days after completion (Prop. Code § 53.101).

Private work

Texas · Private workVerified 2026-09-22
Retainage cap
Texas does not cap contractual retainage on private work. The statute instead requires the owner to reserve 10% of the contract price (or 10% of the value of work done) as a fund for lien claimants during the work and for 30 days after completion. Subchapter E was rewritten by H.B. 2237 (2021) and is now titled 'Funds Reserved for Benefit of Lien Claimants.'
Deadline
The owner's duty to reserve runs during the progress of the work and for 30 days after the work under the original contract is completed; a claimant must file a lien affidavit on the reserved funds not later than the 30th day after completion, termination, or abandonment (Sec. 53.103).
Statute
Tex. Prop. Code Sec. 53.101.
What the statute says
During the progress of work under an original contract for which a mechanic's lien may be claimed and for 30 days after the work under the contract is completed, the owner shall reserve: (1) 10 percent of the contract price of the work to the owner; or (2) 10 percent of the value of the work...
Tex. Prop. Code Sec. 53.101. · Archived copy of the official text, captured 2025-08-13

Public work

Texas · Public workVerified 2026-09-22
Retainage cap
10%
Two-tier cap set by H.B. 692 (2021): 10% if the public works contract is worth less than $5 million; 5% if it is $5 million or more; 10% for dam construction or maintenance regardless of value. The cap also limits the rate for any single line item in the bid schedule or schedule of values, including materials and equipment delivered on site. Subchapter B does not apply to contracts under $400,000, contracts executed before Aug. 31, 1981, or TxDOT contracts under Transportation Code ch. 223.
Deadline
Completion of the work required under the contract: the entity may not hold retainage after completion, including during the warranty period, and must pay remaining retainage plus interest earned on completion. Retainage may still be withheld on final application only for a bona fide dispute over noncompliant labor, services or materials, or if the surety will not agree to release.
Statute
Tex. Gov't Code Sec. 2252.032.
What the statute says
(1) if the total value of a public works contract is less than $5 million, a governmental entity may not withhold retainage in an amount that exceeds 10 percent of the contract price ... (2) if the total value of a public works contract is $5 million or more, a governmental entity may not withhold retainage in an amount that exceeds five percent of the contract price
Tex. Gov't Code Sec. 2252.032. · Archived copy of the official text, captured 2025-12-18

Who this applies to

Texas handles public and private retainage with two statutes that do different jobs. The Government Code limits what a governmental entity may hold back from a contractor. Texas does not cap contractual retainage on private work at all; the Property Code instead makes the owner set money aside for lien claimants.

Public works. Section 2252.032 of the Government Code sets the limits [2]. Its subchapter does not reach contracts under $400,000, contracts executed before Aug. 31, 1981, or TxDOT contracts under chapter 223 of the Transportation Code [2]. Where it applies, subcontractors may not be held to a higher retainage percentage than the prime contractor [2].

Private work. The duty to reserve attaches to an original contract for which a mechanic's lien may be claimed, and it falls on the owner [1]. The rate of retainage in the contract itself is for the parties to set.

What the rule says

On public work, the ceiling depends on the contract's total value:

The same ceiling applies to each line item in the bid schedule or schedule of values, materials and equipment delivered on site included. The tier does not step down as the job progresses. Instead, the contract must state when the project is substantially complete and when the entity may release retainage on portions that are substantially complete or fully completed and accepted.

On private work, while the job is under way and for 30 days [1] after the work under the original contract is completed, the owner must reserve 10% of the contract price of the work, or 10% of the value of the work [1]. The subchapter holding this rule, Subchapter E, is titled "Funds Reserved for Benefit of Lien Claimants."

How to comply

On a public contract:

  1. Match the contract's total value to its tier, then compare the retainage clause, line items included, with that percentage.
  2. Once the prime contractor has completed the work the contract requires, the entity may not keep withholding retainage, not even during the warranty period, and for the contracts described in subsection (c) it pays the remaining retainage together with the interest earned on it.
  3. On the final application, retainage may still be withheld only for a bona fide dispute over noncompliant labor, services or materials, or where the surety will not agree to the release.
  4. On competitively awarded contracts of $10 million or more [2], and on contracts awarded without competition, the parties may agree to hold retainage in an interest-bearing account; certain water-project entities must deposit retainage above 5% [2] in one.

On a private job, the retainage percentage comes from the contract, and the owner's reserve runs alongside it. A claimant going after the reserved funds must file a lien affidavit on them no later than the 30th day after completion, termination or abandonment (§ 53.103) [1]. Subchapter E carries no interest or penalty; its sanction is lien exposure. An owner who fails to reserve faces a lien on the improvement and the land, in favor of claimants who comply with Subchapter C or E, at least to the extent of the amount that should have been reserved (§ 53.105) [1].

What changed recently

The public tiers come from H.B. 692, which amended § 2252.032 effective June 15, 2021 (Acts 2021, 87th Legislature, Regular Session, chapter 635, section 3) [2]; the section itself was added in 1993 by chapter 268 of the 73rd Legislature [2]. On the private side, H.B. 2237 rewrote Subchapter E, and its section 18 amended § 53.101 effective January 1, 2022 (Acts 2021, chapter 690) [1]. Section 53.101 traces to 1983 (68th Legislature, chapter 576) and was amended in 1989 [1].

Related

Run the numbers for Texas

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. statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm (archived copy, captured 2025-08-13)
  2. statutes.capitol.texas.gov/Docs/GV/htm/GV.2252.htm (archived copy, captured 2025-12-18)

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.