Updated September 7, 2026. Before negotiating retainage, check the project's statutory coverage, the contract date and the percentage actually being withheld by the owner.
Can the contractor retain more than the owner?
For covered contracts governed by the current General Business Law § 756-c, retainage may not exceed 5%, and downstream retainage may not exceed the owner's actual percentage. For example, if the owner retains 3%, the contractor cannot use a 5% subcontract clause to retain more under that provision.
The five-percent amendment applies to covered contracts entered into on or after November 17, 2023. See the enacted 2023 legislation. § 756 contains the project's cost threshold and exclusions; the rule should not be applied indiscriminately to every residential or public job.
What should a payment review include?
- The agreed retainage percentage and its statutory limit.
- The amount retained upstream and the corresponding downstream calculation.
- The date of final approval and when retainage was received.
- Any separate, documented basis for withholding a disputed amount.
Section 756-c sets the owner's release deadline at no later than 30 days after final approval of the work and provides interest for a failure to release retainage as required. A final invoice at substantial completion and final approval for retainage release are distinct issues.
Kushnick Pallaci PLLC reviews retainage and payment terms in construction contracts. For the broader statutory framework, read our updated Prompt Payment Act guide.
General information only. Review the contract and applicable statutory version for a particular project.
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