Updated September 7, 2026. Retainage is the portion of a construction payment held back until the conditions for release are met. An old contract example using 10% should not be treated as the current rule for a covered New York private construction contract.
Check coverage and contract date first
The private-project Prompt Payment Act applies to contracts within General Business Law § 756, generally involving aggregate project costs of at least $150,000, subject to public-works and residential exclusions. Different rules can govern excluded projects.
Chapter 657 of the Laws of 2023 changed the retainage rule for covered contracts entered into on or after November 17, 2023. Older contracts require review of the applicable statutory version and their terms.
The five-percent ceiling
§ 756-c limits owner retainage to 5% of the contract sum. Contractor and subcontractor retainage may not exceed 5% and may not exceed the owner's actual percentage. If the owner retains 3%, a contractor cannot retain 5% downstream under that provision.
When must retainage be released?
The owner's statutory release deadline is no later than 30 days after final approval of the work. Downstream parties must release the corresponding retainage received. Improperly withheld retainage can accrue interest at 1% per month under § 756-c.
The right to submit a final invoice upon substantial completion under § 756-a is distinct from the retainage-release trigger. Record the contract's completion milestones, approval and receipt of funds.
Review the clause before signing
Check the percentage, calculation, release conditions and treatment of disputed work. § 757 expressly addresses prohibited retainage above the statutory cap.
Kushnick Pallaci PLLC assists with retainage and payment provisions in construction contracts and payment disputes. Keep the contract, approvals and payment ledger available for review.
General information only; project coverage and contract date matter.
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