Who this applies to
Virginia sets a retainage limit for public construction and leaves private construction to the parties.
Public projects. Section 2.2-4333 reaches any public contract for construction that pays in installments based on an estimated percentage of completion [1]. Subcontracts on public projects are held to the same limit as the prime contract.
Section 2.2-4334 adds an escrow option for some local-government work [2]. When a local-government contract of $200,000 or more [2] is for highways, roads, streets, bridges, parking lots, demolition, clearing, grading, excavating, paving, pile driving, drainage structures, or water, gas and sewer lines and pumping stations, the bid proposal must offer an escrow-account procedure for the retainage.
Private projects. No statewide statute fixes a retainage percentage or a release date for private construction in Virginia, so the contract controls both. Section 11-4.6, the 2022 "SB 550" payment-terms law, stays out of the question in so many words: its 60-day payment requirement neither applies to nor prohibits retainage provisions in a construction contract [3].
What the rule says
Section 2.2-4333 starts from the payment side [1]. When a progress payment falls due, the contractor must receive at least 95% of the earned sum [1], which means no more than 5% [1] may be retained, and the statute gives the purpose of that holdback as ensuring faithful performance of the contract. The section sets no separate deadline for giving it back; it says only that all amounts withheld may be included in the final payment.
For private work, what matters about § 11-4.6 is what it leaves out [3]. Interest penalties under § 2.2-4355 apply to late payment of invoiced amounts under § 11-4.6 [3], but the subsection that sets those payment terms is carved out from retainage, so the penalties do not reach retainage.
How to comply
For a public contract:
- Hold the contract's retainage clause up against the statute: at least 95% [1] of each earned sum paid when due, no more than 5% [1] held back. A subcontract on the same project gets the same treatment.
- Look to the contract's final-payment terms for timing, since the statute allows withheld amounts to be folded into the final payment and names no separate release date.
- On a local-government contract of $200,000 or more [2] for the listed road, site and utility work, the bid proposal must include the escrow-account option, and the escrow agreement is due within 15 calendar days after notification [2].
For a private contract, the retainage clause is the rule that applies. Its percentage and its release terms are whatever the parties wrote, and the payment-terms penalty in § 11-4.6 does not reach retainage [3].
What changed recently
Section 2.2-4333 began as § 11-56, enacted in 1982 (chapter 647), and was recodified into the Virginia Public Procurement Act in 2001 (chapter 844) [1]. Section 11-4.6's history is more recent and more crowded: 2020 (chapter 1038), a 2021 special session (chapter 511), 2022 (chapters 726, 727 and 771), 2023 (chapters 675 and 676) and 2026 (chapter 1040) [3].
Related
- Retainage calculator: see what a public holdback comes to on a given payment.
- Retainage laws by state: how Virginia's public limit compares with other states' caps and release rules.