What is Retainage?

Retainage, as it applies to the construction industry, is a portion of the agreed upon contract price deliberately held back until the work is entirely complete to ensure that contractor or subcontractor fulfills every promise of the agreement. This is usually a specific percentage, most commonly 5 to 10%, of the total cost of the project. The purpose of retainage is to provide an incentive for the contractor or subcontractor to complete the project. It is an important aspect of construction contracts, and its goal is to ensure satisfaction and security in the project, reduce risk, and promote efficiency in work completion. This practice within the industry gives the project owner some assurance that the contractor will complete the job as specified, or compensate for any issues or defects discovered towards the end of the project.